Here is the article rewritten in markdown format:
Brazil’s Financial Institutions Prepare for Risk Management Overhaul
Rio de Janeiro - In response to an increasingly uncertain market, Brazil’s financial services industry is expected to invest heavily in risk management technology over the next year. According to a new report from Celent, a leading provider of research and advisory services for the financial services industry, IT spending on risk management is projected to reach US$1.3 billion by 2017, growing at a compound annual growth rate (CAGR) of 7.2%.
Regulatory Pressures Drive Demand for Advanced Risk Management Capabilities
The report analyzed the demand and supply dynamics that characterize risk management technology investments in Brazil. It found that regulatory pressures and business factors are driving the evolution of more advanced risk management capabilities.
“Brazil’s financial services market is moving from a growth market into one where real prospects will be harder to come by,” said Cubillas Ding, research director with Celent’s Securities & Investments practice and coauthor of the report. “This will require Brazilian financial institutions to build upon the right foundations to sustain a growth path, manage risk judiciously, and, especially for ambitious local champions, to lay sustainable foundations to play on the world stage.”
Key Factors Driving Demand for Risk Management Technology
According to Celent, demand for risk management technology is expected to be shaped by several key factors, including:
- Consolidated risk data infrastructures: The need for financial institutions to consolidate and standardize their risk data infrastructure.
- Upgrades for internal risk models: Financial institutions will need to upgrade their internal risk models to better manage risk in an increasingly complex market.
- Basel III liquidity risk reporting and ICAAP processes: The implementation of Basel III liquidity risk reporting and Internal Capital Adequacy Assessment Process (ICAAP) requirements will drive demand for advanced risk management capabilities.
- Advanced real-time credit decision-making/scoring: Financial institutions will need to implement advanced real-time credit decision-making and scoring systems to better manage risk and improve customer experience.
- Enterprise-wide stress-testing: The need for financial institutions to conduct enterprise-wide stress testing to better understand their risk exposure.
Opportunities and Challenges Ahead
Despite near-term headwinds, Brazil still promises attractive long-term opportunities for investors, financial institutions, and service providers. However, there are important hurdles to overcome in order to weather the storm-like conditions ahead.
“Financial institutions will need to drive greater IT efficiencies, invest in next-generation risk IT infrastructures, and step up from a compliance mindset to demonstrate value for the business in their risk management activities,” said Dennis Kong, an analyst with Celent’s Securities & Investments practice and coauthor of the report.
Service Providers Must Demonstrate Value
For service providers, localization of product and implementation capabilities, a nuanced approach to address client pain points in Brazil, and cost-effective delivery models are important factors to demonstrate value.
By understanding these trends and challenges, financial institutions and service providers can better position themselves for success in Brazil’s rapidly evolving risk management landscape.