Competition from within the industry and a more complex financial environment now outweigh regulatory factors as key considerations for risk management at large financial institutions in China, according to a survey* by analyst firm, Celent, sponsored by SunGard.
Celent conducted in-depth interviews with risk managers from large Chinese banks, securities firms and asset management companies. The survey revealed that only 11% of large financial institutions believed that their existing systems could meet their risk management needs.
The key findings of the survey include:
• 100% of risk managers interviewed recognize the need to improve functionality of their existing risk management IT systems.
• The need to improve risk systems was followed by the need to improve business processes and adopting a new risk management framework such as Basel III or Solvency II.
• Operational risk and market risk were revealed to be major areas of investment for financial institutions. 38% of firms surveyed were focused on enhancing operational risk, while 30% placed priority of strengthening their management of market risk.
The survey additionally revealed that financial institutions' investment in risk management was determined by challenges in their respective verticals:
• Banks are well capitalized but deregulation and increased exposure to global market forces will drive risk management upgrades.
• Risk management capabilities amongst asset management firms were highly varied and would need integrated, multi-asset portfolio and risk management technologies to cope with investor sophistication and a broad range of financial products.
• Recent regulations have broadened the scope of business for securities firms, who now have to enhance their risk management capabilities in order to keep tabs on increasing overseas business and more complex products.
Neil Katkov, senior vice president, Asia, for Celent said, "The survey, sponsored by SunGard, found that, in order to compete effectively on the global stage -- and against both foreign and domestic competitors in China -- financial institutions need to enhance their risk management capabilities by improving their enterprise-wide analysis of risk management data, improve their technology, build on new frameworks such as Basel III and improve their business processes."
Richard Zhu, chief operating officer of SunGard China, said, "China's economic growth has slowed and growth in Europe remains weak. In addition, Chinese risk managers are navigating domestic deregulation, increased trade volumes and trade complexity and expanding business demands. They need to ensure that the risk position is accurately measured, communicated and understood throughout the organization."
To listen to Celent's Zhang Hua and SunGard's Matthew Chen discuss the findings (available in mandarin with an English transcript) and to download the full report, please visit the SunGard website here.
*Celent conducted a survey of China's largest banks, asset managers and securities firms between February - April 2012