June 28, 2010

Wall Street firms are expected to ramp up spending on analytics over the next year with an eye on better risk management and compliance, according to a survey conducted by IBM and the Securities Industry and Financial Markets Association.

Faced with a new era of tighter financial regulation in the aftermath of the 2008 financial collapse, firms are investing in new technology to sharpen systemic risk strategies as they prepare to meet the government’s demands for greater transparency, the survey said.

According to the research, 55 percent of the respondents revealed that systemic risk is the key driver of their information technology investments. And 37 percent ranked risk analytics for compliance as their top analytics investment priority, beating out analytics for client segmentation and external fraud.

The survey projected that more than 90 percent of Wall Street firms plan to increase their spending on analytics over the next year. Meanwhile, as concerns about the 2008 financial collapse abate, firms are turning their attention to the use of IT to promote organizational sustainability, the survey added.

“Coming out of the largest financial crisis in modern day history, there has never been a more important time for firms to capitalize on technology investments to make sense of data and gain a more sophisticated understanding of risks,” Shanker Ramamurthy, the general manager of IBM’s financial services division said in a statement.

Faced with a lack of IT staff in addition to high implementation costs, firms have increasingly been turning to cloud computing services, with 61 percent expected to beef up their investments in that area over the next year, the survey said. The survey also found that firms are most likely to outsource compliance reporting and analytics for risk.

“Having the right technology in place is more essential than ever in efforts to monitor risk across firms and ensure regulators can identify and address potential problems before they escalate,” SIFMA managing director Tom Price said in a statement.

IBM and SIFMA surveyed approximately 250 business and IT Wall Street professionals, including investment bankers and broker dealers.

As the Senior Editor of Advanced Trading, Justin Grant plays a key role in steering the magazine's coverage of the latest issues affecting the buy-side trading community. Since joining Advanced ...