The newfound emphasis on risk management companies were forced to exhibit in 2009 will continue in the present year, a new report by Framingham, Mass.-based research and advisory firm Financial Insights finds.
“The realization for 2009 was that global enterprise risk management failed in many ways, and the epiphany for 2010 is that global financial institutions have to fundamentally address all types of risk,” the report, Worldwide Risk Management 2010 Top 10 Predictions: The Road to Financial Services Recovery Runs Through Improved Risk Management, states. “The critical task for risk managers in 2010 is to balance internal and external volatility through measuring it, testing it, and stress testing it. Risk managers must also be able to articulate those results to investors and regulators.”
Foremost among the predictions in the report, is that there will be two or three acquisitions of independent risk management vendors by larger rivals in 2010.
“The financial services software industry will continue its consolidation of independent software vendors supporting integrated risk management,” the reports states. “2008 and 2009 saw acquisitions of business intelligence vendors Cognos and SPSS by IBM as well as SAP's acquisition of Business Objects; look for two to three additional deals as major integrated risk management solutions vendors like IBM, Oracle, and SAP look to add additional capabilities to their portfolios in business intelligence, operations risk, and compliance.”
In addition to consolidation in the vendor space, the report foresees financial institutions consolidating reporting risk information into data warehouses.
“As capital remains tightly allocated and new customer growth slows dramatically, institutions will have to "get smarter" with the data they have. Major projects will kick off during the year to create single versions of truth about a customer across a number of information aspects. While storage and processing costs have come down, disparate data resources within financial institutions will become consolidated wherever possible.”
Another forecast for 2010 is that financial institutions will raise the level of influence and oversight of their chief risk officers (CROs). “Institutions will be asked to demonstrate the level of involvement in strategic decision making that the CRO is influencing and involved in,” the report predicts.