In businesses, IT has evolved as a central component of business operations. Today, data loss, corruption, inaccessibility, system failures, and infrastructure failure can severely affect the functioning of a business. The IT risks can be broadly classified into three categories: data-driven risk, business-driven risk, and event-driven risk.
The Banking sector faces different sorts of risk such as credit risk, operational risk, market risk, ALM and liquidity risk, financial crime and risk management, and risk governance an integration because of the challenging economic environment.
The uncertainty of the market has forced banks to invest in the technological advancements of their companies in order to mitigate risks and reduce the cost of operations. This also helps to anticipate risk beforehand and increase the overall productivity of the business.
In 2013, the Global Risk IT and Services Market in the Banking sector held a market share of 14.2 percent, accounting for US$30.53 billion.
Banking institutions are continuously investing in the adoption of IT-based solutions, focusing on those that can deliver value to their clients and the organizations. IT-based technologies in the Banking sector reduce costs and improve efficiency. The demand for IT-based solutions in the Banking sector is increasing because of the growing need to meet risk and compliance, core and infrastructure modernization, security, and customer experience.
TechNavio analysts have identified three key trends in banking that are driving adoption of risk IT and services:
Rigorous Regulatory Environment
The stringent rules and regulations are forcing organizations to turn to IT-based solutions to reduce risks and improve the way they operate. This becomes especially real in the Financial Services sector with the ever-increasing rules and compliance issues.
Other sectors such as the Environment and Energy sectors are also facing an increasing number of regulations. The anti-bribery and corruption laws, data protection and IT regulations, and the new IFRS accounting standards are examples of the increasing number of rules and regulations with which an enterprise has to comply. The stringent regulatory environment has resulted in the increased demand in the Global Risk IT and Services market in the Banking sector.
Increasing Requirement for Internal Governance
In the current scenario, there is an increase in the media focus on corporate activities and, hence, there is a growing interest in the internal governance undertaken by firms. With the media constantly shifting its focus to companies that fail to conceal their sensitive information, firms are continuously attempting to find quicker ways of conducting business.
Therefore, there is a growing need for effective governance. Firms are shifting toward adopting effective governance in order to ensure that the compliance aligns with the corporate strategy contributing to the growth of the Global Risk and IT Services market in the Banking sector.
Reduction in Overall Cost and Improved Efficiency
In the current financial environment, businesses seek to adopt comprehensive solutions that are capable of tackling risk and compliance issues across the enterprise. By having a well-planned and targeted strategy, organizations will be able to carry out the root cause analysis of a problem and, hence, gain an understanding of the very core of that problem that will reduce the risk of any uncertainty. This means that risk IT and services solutions can deliver cost savings and improve efficiency, as well as helping the client to attain ROI.
