Financial institutions have raised their level of awareness about the need for holistic risk management and the impact of Basel II. The graph shows TowerGroup estimates for ongoing investments in risk management technology across the industry that will reach $21bn globally in 2006.
Enterprise risk management technology hinges on a cohesive set of data management, analytics and reporting capabilities. Leading institutions are managing credit, market and operational risk proactively and holistically to qualify for the lowest regulatory capital requirements.
TowerGroup sees strong business potential in advanced, bottom-up approaches to operational risk. In such advanced methods, the challenge is to enrich operational data by capturing the appropriate event and loss categories for each transaction directly at the source.
Beyond a compliance purpose, institutions may receive even larger benefits by cutting down losses across the enterprise. These developments explain the double-digit growth in operational risk technology that are highlighted in the inset.
