Tightened regulations, market volatility and heightened exposure are forcing financial services companies to place increased focus on risk management, industry experts said yesterday.
In 2003, 42 per cent of large financial services providers plan to spend between $500,000 and $2.5m (£314,000 and £1.57m) on IT for risk management, accounting for up to 9.2 per cent of the average 2003 IT budget, according to the latest survey from Gartner.
"The elements of risk management have always been a concern for financial institutions," said Vincent Oliva, vice president and research director at the analyst company.
"But during the past few years risk and risk management have become even more serious and complex issues, and now have much greater visibility and priority within the organisation.
"Since ineffective risk management can have a serious negative impact on a financial institution's bottom line, it is now a critical all-encompassing concern for the financial services industry."
Gartner's research shows that primary responsibilities for risk management strategies in 2003 have shifted from individual departments to the corporate level.
A centralised approach to the management of risk data and associated technologies has been transferred to top executives for the consistent and cost-effective IT support of risk initiatives.
"This new enterprise-wide view of risk management will dramatically affect the technical environment in financial services as organisations face enormous demands to deliver the necessary support," explained Oliva.
"Risk management initiatives will burden traditional financial services IT architectures, resulting in the risk management infrastructure being one of the top three IT investment priorities for financial services providers through 2005."
The intensified concern with risk and the implementation of enterprise-level approaches to risk management are being driven by three critical interlocking factors, according to Gartner:
- Key legislative and regulatory initiatives that place liability for financial loss resulting in systems failure with financial service providers.
- Increasing development of more complex internal and external interdependencies, such as new business partnering models.
- Market volatility, with turbulence in worldwide financial markets.
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