Firms are moving away from a "box ticking" mentality when it comes to risk technology
Chartis's RiskTech 100 highlights a revolution in the financial services industry as finance and risk converge. Banks are tipped to spend more than USD 23 billion on compliance in 2013.
Following the 2008 financial crisis, managing risk has become a major priority for a number of firms. Historically, however, the focus on risk management, particularly among financial services firms was largely driven by regulation.
While the industry now faces a "tsunami" of regulation on both sides of the Atlantic, Peyman Mestchian, managing partner of Chartis Research, says there is a quiet revolution taking place in the financial services industry, as the disciplines of risk and finance converge. So while once upon a time the chief risk officer (CRO) may not had a seat at the executive table, now Mestchian, says there is better alignment between the CFO and CRO, which is leading to a re-think of organisational structures, business processes and underlying technology architectures.
He points to a trend towards "value-based compliance" moving away from the traditional "box ticking" mentality. However, Mestchian says technology does not come cheap. Chartis estimates that in the financial services sector alone organisations will spend more than USD 23 billion in 2013. Much of the expenditure is driven by the proliferation of regulations such as Dodd- Frank, Basel II, Basel III and Solvency II. Different risk disciplines (market, credit, liquidity, operational risk) are also becoming more integrated as firms are encouraged to take a more "enterprise-wide" approach to risk management .
When it comes to the leading vendors in the risk management space, Chartis announced its annual RiskTech100® rankings. The top five places are occupied by IBM, SunGard, SAS, Oracle and Moody’s Analytics. Geographically, the list of top risk technology vendors is dominated by the US, with 50 companies, followed by the UK with 18 companies, France with seven and Canada with four.
Given the spate of consolidation in the risk management space in the last 18 to 24 months (Sophis being acquired by Misys, BAE System's acquisition of Norkom Technologies and IBM's acquisition of Algorithmics), Chartis predicts that more small-to-medium-sized risk management vendors will be acquired in the next few years as larger vendors look to plug gaps in their offering to provide firms with a more complete picture of risk.
For more information on the RiskTech100® click here.