Small OR vendors doomed says latest Chartis report
(source: OpRisk & Compliance – 1 June 2006)
LONDON – The days of the niche operational risk management (ORM) component vendors are numbered, with their place set to be taken by integrated solution vendors, according to the Operational Risk Management Systems 2006 report from Chartis.
In the course of the last year, the number of component vendors exiting the market like JP Morgan's Horizon, or been acquired by bigger players, such as Financial Objects takeover of Raft, has increased dramatically. The Chartis report notes that the heightened activity is 'typical of a fragmented and maturing software sector' and that 'several of the niche players have struggled to grow and break out of their geographical or functional niches.'
"We were surprised by the number of acquisitions and exits that we saw in the last 12 months since, although we expected lots of activity, we didn't predict the jostling for position we witnessed, nor so much volatility within the market. We may have expected to witness this kind of activity over two or three years rather than in the space of 12 months," said Simon Turner, senior analyst at Chartis.
The analysis also revealed some interesting insights into confidence among operational risk managers and ORM firms. 45% of respondents to Chartis' questions expect their ORM team to expand over the course of the next 12 months with 65% anticipating an increase in their ORM budget, for both internal and external expenditure, in the next year. Interestingly, just 35% believe they will experience an increase in operational risk losses as a result of ORM systems and procedures in 2006.
