Financial industry’s investments in risk management growing: IDC

• To spend US$6bil+ on credit risk management software, IT services in 2014
• Investments to grow at 3yr CAGR of 9% through 2018

THE global financial industry will spend US$6.57 billion on software and IT services for credit risk management in 2014, representing 17.9% of the total investments on all risk management software and services spending, according to IDC Financial Insights.
 
While the recent years of financial stress and uneven markets have delayed the growth in technology budgets, risk and compliance continue as priority, with credit risk analytics and infrastructure investments growing at above average rates, the research and analyst firm said.
 
In a new report entitled IDC MarketScape: Worldwide Credit Risk Analytics Solution Vendor Assessment 2014, IDC Financial Insights said it expects this figure to expand on a three-year compound average growth rate (CAGR) of 9% through to 2018.
 
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The study found that specific credit risk investments are being directed at:

• Architecting enterprise analytics across credit product, portfolio, and regulatory capital functions;

• Creating more effective credit operations and underwriting methodologies;

• Improving credit capacity and debt collection capabilities;

• Supporting stress testing and capital reporting;

• Providing more granular client profitability assessment; and

• Enhancing decision making in areas such as pricing and capital allocation.

As discussed in the report, key decision imperatives for credit risk investments have moved beyond capital reporting and compliance.
 
Today and in the future, institutions look to these solutions as front-to-back office analytics infrastructure, supporting retail, commercial, treasury, and financial performance needs of the institutions, and delivering efficiencies and bottom-line business benefits to pan-enterprise functions.
 
Market leaders in banking are increasingly investing in these technologies as a first step in core banking modernisation to better price products, assess credit exposures more proactively, and align bank relationships more closely with the credit appetite of customers, IDC Financial Insights said.
 
According to Li-May Chew and Michael Versace, part of the Worldwide Risk Management Strategies team at IDC Financial Insights, “Credit risk is the largest, most elementary risk faced by the international financial industry.
 
“Leading financial institutions have made measurable headway in laying the foundation for a robust credit risk management system following lessons learned from the global financial crisis,” they said.
 
To assist these institutions in selecting the most appropriate credit risk analytics vendor, the report evaluates nine speciality vendors offering products and services within this solutions market.
 
Vendors featured in this report are: FICO, Fiserv, IBM Risk Analytics, Misys, Moody’s Analytics, Oracle, SAP, SAS Institute, and SunGard.
 
The IDC Financial Insights report identified SAS Institute and SAP as leaders in the Worldwide Credit Risk Analytics Solution market.
 
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