In a survey of risk managers at large (tier 1 and tier 2) banks released today, more than 40% of respondents indicated their bank will materially increase spending on risk in 2010. IDC analysts who conducted the survey say that while positive, this number suggests that risk is paramount, but overall capital is still precious. As a result, senior risk managers will struggle to fulfill the need to improve processes that include data, analytics, and reporting to meet increased regulatory requirements while dealing with limited investment capital.
"In the aftermath of the financial crisis and recession of 2008 and 2009, risk managers are facing a new reality of issues, ranging from disparate databases to new regulatory demands in a tighter credit market," said Dana Wiklund, research director, IDC Financial Insights’ Global Risk Management practice. "There is now a universal focus on enterprise risk management because of higher levels of business model oversight by regulators and investors. There is also increased stress on operational processes that deal with technology, compliance, and data security. Over the next couple of years, banks will need financial technology tools that widen their view of risk and risk interdependencies."
The study also found the following:
• Enterprise risk management is now getting more attention from internal (boards) and external (regulators) parties than ever before.
• The overall economy still has question marks, which is increasing the pressure on consumers and commercial customers to make payments — stress on delinquency is still front and center.
• With the focus on speed, accuracy, and efficiency, cloud or hosted risk management solutions are gaining more and more consideration by financial institutions. When asked about whether the institution is looking to replace in-house solutions with hosted solutions over the next 12 months, 25% of respondents gave an affirmative answer.
• According to the survey results, 58% of respondents are concerned about increased levels of systematic risks over the next 12 months.
"There is still an air of risk apprehension among risk professionals that is driven by a global economy that is struggling out of recession," Wiklund said. "While regulatory pressure is increasing and the overall risk environment is still tenuous, this survey shows that financial institutions will proceed cautiously with investment in FinTech solutions through 2010 into 2011."