Upping the Ante in Next-Generation Risk Solutions

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2 October 2011

New Rules, Higher Stakes


Recent mergers and acquisitions in the risk solutions market could accelerate the way firms architect, integrate, and deliver solutions.

Technology investments in risk systems are undergoing a sea change. In the last decade, the solutions market has been shaped by a risk-centric regulatory agenda which has aggressive deadlines and onerous scope. At the same time, the new reality is that financial institutions and investment firms need to deal with rapidly changing and “transferable” risks, investor sensitivity, herd trading behaviors, and significant market movements. Volatile energy and commodity prices, sovereign debt, political unrest, and natural disasters like earthquakes all underscore how the pace, scale, and impact of risks are increasing.

In this report, Upping the Ante in Next-Generation Risk Solutions: New Rules, Higher Stakes, Celent examines developments in the risk solution vendor market. In recent years, M&A activity has accelerated due to robust growth in demand, while competitors have raised their game.

Established providers have begun to focus on the risk management space in a concerted manner, one case in point being IBM’s announcement that it is acquiring Algorithmics. Celent believes that deals like these create the potential for a disruptive acceleration in the way firms architect, integrate, and deliver solutions to address risk management challenges.

“As firms and governments chart strategies to tackle unresolved issues from the financial crisis and the threat of an impending one, the stakes are higher than ever,” says Cubillas Ding, Research Director at Celent and author of the report. “The nature of buying risk solutions is changing. This new normal means that the traditional incongruity between market-facing units, risk, treasury, and finance functions will no longer suffice. Risk taking, risk control, and risk mitigation activities will need to be more orchestrated.”

This report brings to the forefront the relationship between recent developments in the risk solution market and the eventual playing out of onerous financial services industry reforms and risk management practices. It analyzes consolidation dynamics and technology innovations that will shape risk technology requirements, and examines what they will mean for vendors and financial institutions in the coming years.