In the immediate aftermath of the financial crisis, as regulators focused their attention on a culture of poor risk management practices that were at the heart of the global economic meltdown, Wall Street firms sought to appease hawk-eyed industry watchdogs and investors – as well as comply with new regulations – by sharply increasing their spend on risk management technologies.
But as the memory of the financial crisis begins to wane and firms’ new, improved risk management practices become operational, worldwide IT risk spending is slowing at a faster rate than previously expected.
This year, overall worldwide IT spending in risk technologies and services is expected to grow at a compound annual growth rate (CAGR) of 5.45%, lower than previous forecasts, according to a new IDC Financial Insights report “Pivot Table: Worldwide IT Spending 2013-2017 – Worldwide Risk IT Spending Guide, 1H13.”
Based on the new research, total Risk IT spending is still forecast to exceed $80B by 2017 and continues to outpace growth in overall IT spending while representing 15%-17% of overall IT spending on average. However, several factors have contributed to the lower forecast rate, IDC noted. First, global macroeconomic factors have dampened forecasts and are contributing to lower overall IT spending across the financial services market.
Further, many of the large enterprise-wide risk projects of the post-financial crisis era between 2009 and 2012 are now largely operational or in a mid-stage of implementation.
Lastly, it is clear that rather than spending on risk IT, firms have gone back to dedicating their resources to initiatives that generate business productivity gains, optimize IT infrastructure, and the integration of 3rd platform technologies in front, middle, and back office operations, IDC noted.
“Many spending hot spots remain through all global regions including credit analytics, compliance and ERM in APAC region, fraud, financial crime management, and information security services and software in North America and across European firms, and others,” said Michael Versace, lead author of the report and IDC Financial Insights global research director.
“At the same time, executives continue to look for risk technology investment value over the long term by establishing a standard for building risk management into all strategic, business IT, and operation IT initiatives, versus being reactive or bolting on initiatives after the fact,” he noted.
While risk budgets are diminishing, firms still need to make sure they stay competitive and more risk aware: as such, IDC Financial Insights emphasizes the importance of strengthening the analytic backbone of the risk function including financial crime management, operational control, cyber security, and critical infrastructure protection.
“In addition, CROs and CIOs cannot take their eyes off of regulatory compliance obligations, growing the risk management talent pool, and leveraging risk management opportunities that come from the expanded use of big data, mobile, and the capabilities,” IDC said in a statement.