Finance firms increase IT spending on risk management

One-third suggested that their budgets have increased in 2008

US banks are investing in risk management

Despite recent cost cutting and staff reductions, US banks and broker dealers plan to increase their IT spending with a focus on outsourcing and risk management systems.

A survey by the Securities Industry and Financial Markets Association (Sifma) from IBM asked firms to contrast their IT budgets from 2007 and 2008.

The majority of IT budgets were expected to remain the same or increase budgets going into 2009.

Firms are specifically looking at technology purchases that increase their risk modelling capabilities for greater risk management, she said. Sixty-seven per cent of respondents cited risk transparency as a regulatory action that will have a “profound” effect on IT spending.

“Although the majority of survey respondents believe the sub-prime crisis was caused by factors unrelated to technology, this crisis is serving as a catalyst to increase the amount of money invested in technology for risk management initiatives," said Randy Snook, managing director at Sifma. "The anticipated technology investments are one of several important building blocks necessary to mitigate the financial impact of future disruptions."

Smaller firms intend to be particular aggressive, according to the study, with half anticipating increased IT budgets in 2009 against only eight per cent who anticipated a fall.

Of 500 financial sector IT professionals that responded to the survey, around 200 were from financial services firms with the rest from technology vendors, consultancies and infrastructure companies.