November 8, 2013 - In 2014, financial institutions globally will invest $28.1bn in risk IT; rising 13% by 2015 to $31.8bn, according to research from Chartis.

Risk governance and integration are the top IT investment priority, says Chartis. Between 2014 and 2015, spending on risk governance and integration will increase by 17% from $10.9bn to $12.7bn, representing the leading investment priority for financial institutions. Financial crime risk management is also a key destination for IT spending, with expenditure forecast to grow by 13% from 2014 to 2015.

The increasing complexity of deployments ensures that professional services and maintenance will still constitute strong revenue streams for vendors and service providers, but the rate of increase is unlikely to be maintained. Chartis forecasts that the competition to secure software and services contracts will become increasingly challenging for vendors.

Looking at the results from a geographical perspective, Chartis finds North American institutions are increasing spending fastest. Between 2014 and 2015, firms in North America will increase their expenditure on risk IT by 16%, says the firm. Those in Europe will increase spending by 12%, and those in APAC by 10%.

This growth in spending among North American firms is higher across almost all risk categories. For example, spending on risk governance and integration will grow by 21%, compared with 12% and 10% in Europe and Apac respectively. The only exception is ALM/Liquidity, says Chartis, where firms in Europe will increase spending by 16% between 2014 and 2015, compared with 10% in North America and 5% in Apac over the same period.

The study shows Tier 3 firms are investing the most in risk IT, but rate of growth is highest in Tier 1 institutions. In 2015, Tier 3 firms will spend $13.2bn on risk IT, compared with $10.1bn among Tier 2 firms, and $8.4bn at Tier 1 firms. Growth in spending, however, is highest among Tier 1 firms. Between 2014 and 2015, they will increase spending by 24%, compared with 9% for Tier 2 and 10% for Tier 3 firms.

Risk data management is the fastest-growing area of spending by technology type, says Chartis. Between 2014 and 2015, financial institutions will increase spending on risk data management by 17% from $7.5bn to $8.9bn. In absolute terms, however, spending on risk analytics will remain considerably higher. Between 2014 and 2015, spending on risk analytics will grow by 12% from $10.7bn to $12bn.

Firms continue to spend most on internal technology project, which will rise 18% to $15.4bn from 2014 to 2015. However, firms are also looking for external assistance in developing their risk technology capabilities, states the report. Spending on external software will increase between 2014 and 2015 by 8% to $8bn and spending on external services is forecast to grow by 11% over the same time to $5.9bn.