Operational risk tech market booming
(Source: Riskmanagementmagazine.com.au - 13 June 2006)
UK analyst Chartis Research found that the global operational risk market will see compound growth of around $213 million, growing to $287 million by 2010. Much of the expansion is expected to be driven by the need to replace ageing systems and by the increasing sophistication of risk in emerging markets.
The global market for operational risk technology will be worth close to $2 billion by 2010 but will be unable to support the current number of market players, according to recent research.
“The growth in the operational risk management market is fuelled by replacement spending and new demand from the insurance and fund management sectors,” said Helen Townsley, director of research at Chartis. “We are also seeing increased demand from emerging markets such as Asia-Pacific, Middle East and Eastern Europe.”
Not surprisingly, the Basel II Accord and the US Sarbanes-Oxley Act are driving take-up of operational risk technology and the use of operational risk management consulting services, a sector that is expected to grow by more than 10 per cent annually. Chartis said systems vendors and integrators will increasingly also provide consulting services and will claim greater revenues as a result.
However, Chartis warned that even the expanded market will be unable to support the current number of vendors. While some consolidation has already taken place in the operational risk management software market, more is to come and several vendors are expected to suffer cash flow and sustainability problems, Chartis said.
SAS was the top-rated operational risk software provider, but several other vendors, including New Zealand’s Methodware, which was also recently ranked highly in the Basel II market by research firm Gartner, fared well.
According to the Gartner research, the market for Basel II software remains relatively immature, with many vendors professing to offer either some or all necessary product components. Although Basel II deadlines are looming – the Australian Prudential Regulation Authority begins advanced approach accreditation in early 2006 – Gartner warned banks and financial services providers not to rely on vendor offerings that do not have market acceptance and demonstrable results from live installations.
