Risk Analytics Market

Market Overview

The global risk analytics market size was valued at USD 34,639.55 million in 2022. It is estimated to reach USD 1,46,415.18 million by 2031, growing at a CAGR of 17.37% during the forecast period (2023–2031). Digital management strategy is expected to help organizations focus on the security, safety, privacy, and data management of the enterprises, enabling businesses to manage risk to turn vast amounts of data into actionable intelligence, resulting in the IoT landscape driving the adoption of risk analytics.

Risk analytics forecasts future risks in an organization and manages risks using several tools and technologies. In addition, risk analytics helps organizations handle the challenges they can face in the future and plan accordingly to improve their business performance. Furthermore, risk analytics uses machine learning algorithms to analyze high-risk customers and reduce charge-off losses by screening for risky deals. Risk analytics helps organizations increase their capabilities in recognizing real-time risk and efficiently improve decision-making. It assists the organization in examining, consolidating, and illustrating the significance of the resources allocated to risk.

Market Dynamics

Global Risk Analytics Market Drivers:

Increasing Utilization of Risk Analytics in Financial Institutions

The significance of risk analytics in financial and banking institutions has grown due to the escalating occurrences of fraud, money laundering, and terrorist operations. Moreover, implementing risk analytics in financial institutions enhances their understanding, reinforces the know your employee (KYE) process by technological intervention, and safeguards against unauthorized monitoring and surveillance of transactions. According to a survey in 2017-2018 by CRP in India, financial fraud has increased by 13-15% in the areas of Assam, Bihar, Odisha, Gujarat, and Haryana districts, owing to which many financial institutions have started adopting risk analytics in large numbers for avoiding such kinds of risk and fraudulent activity.

Moreover, different government regulations imposed on financial institutions have increased the adoption of risk analytics. The EU’s General Data Protection Regulation (GDPR) 2018, for instance, set a new obligation on all financial institutions with EU citizen data to secure consumer consent for its use, among other requirements. As a result, adopting risk analytics in financial institutions drives the market's growth.

Growth of IoT Landscape

Internet of Things (IoT) has been one of the most valuable innovations in the last decades, leading to billions of IoT-based devices across the globe, which is further predicted to grow significantly in the upcoming years. The data analysis and processing should be more secure and sophisticated as the IoT landscape evolves and becomes more complex. Due to devices in the IoT ecosystem, everyday computing technologies cannot secure these organizations from different business risks. Also, processing a large amount of data is a challenge for enterprises.

Furthermore, companies are implementing digital management strategies for mitigating risk and optimizing IoT capabilities. Digital management strategy is expected to help organizations focus on enterprises' security, safety, privacy, and data management, enabling businesses to manage risk and turn vast amounts of data into actionable intelligence. As a result, growth in the IoT landscape drives the adoption of risk analytics.

Global Risk Analytics Market Restraint:

High Complexity and Cost in Installation and Configuration of the Software

The high cost of risk analytics and the complexity of installation and configuration of the software hinder the market's growth. Risk analytics consists of different modules used to identify the risk. This module allows other customization techniques for various organizations to fit the organization's exact needs. This customization increases the cost of implementation of the software. Furthermore, the software requires annual maintenance costs, fixing bugs, and fees for continual product use. Moreover, the complex nature of the software and the difficulty in installing and configuring it hamper the market's growth.

Global Risk Analytics Market Opportunities:

Increase in Demand from Emerging Economies

Emerging economies face significant vulnerabilities to cyber-attacks, fraud, money laundering, terrorist operations, and data theft. Therefore, there has been a rise in the adoption of risk analytics in the developing economies. Furthermore, many developing economies' large external foreign currency debt makes them susceptible to changes in interest rates, international exchange rates, and currency attacks. This increases the adoption of risk analytics in these countries. Moreover, developing economies have increased their IT and digitization expenditures, leading to increased security concerns, data theft, and various cyber-attacks. Thus, risk analytics helps minimize risks such as cyber-attacks, financial fraud, and data theft, providing a lucrative opportunity for the risk analytics market.

Regional Analysis

North America Dominates the Global Market

Based on region, the global risk analytics market is bifurcated into North America, Europe, Asia-Pacific, Latin America, and the Middle East and Africa.

North America is the most significant global risk analytics market shareholder and is estimated to grow at a CAGR of 14.1% over the forecast period. The major factors that boost the growth of the risk analytics market in this region include increased online transaction risks and recent money laundering cases. In addition, an increase in cyber-attacks, financial theft, and data theft is expected to provide lucrative opportunities for the market. North America is considered the hub of banks and various financial institutions. The region is expected to experience growth owing to an increase in the large amount of data, which creates many business risks. Moreover, various new and more stringent regulatory compliances imposed by the government in North America have increased the demand for risk analytics solutions in the financial industry. For instance, the government in North America has imposed regulations on the banking industry, which guides their compliance strategy and reduces the risk of financial crimes.

Furthermore, more companies in this region adopt emerging technologies such as big data, cloud computing, and others, creating different associated risks for which the organization is still being prepared. According to a study, around 66% of the IT industry has adopted different new technologies. However, they need to assess the risks of these new technologies, which will further increase the adoption rate. In addition, the top ten risks in the North American region are cyber-attacks and data breaches, damage to reputations, economic slowdowns, failure to innovate, business interruption, failure to attract or retain top talent, increase in competition, regulatory changes, supply chain failures, and accelerated rate of change in market factors. Furthermore, adopting new technology has led to the rise of various cyber-attack risks, financial fraud risks, and data theft in this region, which is expected to provide a lucrative opportunity for the risk analytics market in North America.

Europe is anticipated to exhibit a CAGR of 17.3% over the forecast period. The European region has witnessed significant growth, owing to the increase in stringent rules and regulations imposed by the governments of European countries. In addition, various government regulations and laws are expected to create lucrative opportunities for the market. The top ten risks in the European region are accelerated rates of change in market factors, slow recovery, commodity price risk, damage to the brand, business interruption, increase in competition, cash flow, data breaches, cyber-attacks, failure to innovate, and legislative changes. Moreover, banks and financial institutions have been using risk analytics to handle millions of credit card transactions across the region. The development in the financial industry and high IT spending in the EU region have been major factors that drive the growth of the risk analytics market.

Asia-Pacific is an emerging market expected to hold a significant market share in the upcoming years. China, India, and Japan are some of the major countries that drive the growth of the risk analytics market in the region. The Asian financial sector has been one of the fastest-growing industries, accounting for around 40% of the global banking and insurance market capitalization. The rise in mobile and credit card transactions in China and India has created several financial risks, which are being reduced by risk analytics solutions, thus driving the growth of the risk analytics market. Furthermore, different rules and regulations imposed by the government in other Asian countries drive the growth of risk analytics.

In LAMEA, most organizations in Mexico have been adopting risk analytics to minimize corporate risk and compliance risk, through which the market is expected to establish a high interest in risk analytics solutions. The risk analytics market in LAMEA exhibits slower growth than in other regions. Growth in the capital market and banking sector in LAMEA countries such as UAE, Brazil, and Mexico and an increase in IT spending in the segment drive the market growth in the region. In addition, LAMEA has shown steady growth in adopting risk analytics solutions across different industry verticals such as government, retail, and healthcare.

Moreover, government data security regulations also play an essential role in the growth of the risk analytics market in LAMEA. For instance, the Brazilian Congress approved the Brazilian Data Protection Law (LGPD), establishing a detailed rule for collecting, processing, using, and storing personal data in Brazil. Such regulatory compliances have motivated organizations to adopt efficient risk analytics to meet these requirements.

Segmental Analysis

The global risk analytics market is bifurcated into components, deployment mode, organization size, application, and industry vertical.

Based on components, the global risk analytics market is bifurcated into software and services.

The solution segment dominates the global market and is projected to exhibit a CAGR of 15.7% over the forecast period. Risk analytics monitors, identifies, and access different enterprise risk types. These solutions are used by banks and financial institutions, IT and telecom, manufacturing, energy and utilities, and others for identifying different types of risks, such as financial fraud, data theft, identity theft, and cyber-attacks. This solution monitors and flags large-scale suspect activities, which may involve data breaches and other business risks. In addition, the ability to identify, monitor, evaluate, and access different types of risks facilitates several businesses and other organizations to adopt risk analytics solutions.

Furthermore, key market players are introducing new features integrated with their risk analytics solution, which is expected to provide lucrative opportunities for the market. For instance, Deloitte has launched an AI-based risk analytics solution, which uses cognitive technologies to analyze and identify different risks. The rise in such innovations is expected to create lucrative opportunities for the market during the forecast period.

Based on deployment mode, the global risk analytics market is bifurcated into on-premise and cloud.

The on-premise segment is the leading force in the global market and is expected to demonstrate a CAGR of 15.5% over the projected period. The on-premise deployment approach for risk analytics solutions allows for software installation and the execution of applications on systems located within an organization's premises rather than on a remote facility like server space or the cloud. Including advanced security measures in these solutions makes them highly desirable for implementation in major financial institutions and other companies. On-premise solutions are recognized for superior server maintenance, and their continuous system enables implementation of this risk analytics software.

Furthermore, the on-premises deployment strategy is highly advantageous for large firms due to its substantial implementation costs, necessitating the acquisition of interconnected computers and software for system management. The on-premise deployment approach for risk analytics allows for the installation of software and the execution of applications on systems located within the organization's premises instead of relying on remote facilities such as server space or the cloud. In addition, superior data security compared to cloud-based solutions encourages its adoption among enterprises. Furthermore, the prevalent utilization of the multi-tenant model carries the inherent danger of data breach, leading to potential data misuse or manipulation.

Based on organization size, the global risk analytics market is bifurcated into large, small and medium enterprises.

The large enterprises segment owns the global market and is predicted to exhibit a CAGR of 15.1% over the forecast period. Large enterprises have increased their concerns and focus on risk analytics, especially to identify, assess, and manage risk effectively, for which organizations need a transparent enterprise risk analytics solution. Furthermore, the growth in data in large enterprises and the increase in the need to keep a central repository in the organization drive the development of the risk analytics market among large enterprises. In addition, increased human error, compliance failure, and system downtime in many large enterprises are the major factors driving market growth.

Moreover, large organizations have increased the use of Bring Your Own Device (BOYD) and cloud computing, which has increased the number of cyber-attacks in recent years. In addition, large enterprises are mainly adopting digitization, which creates risks such as financial fraud, information theft, and various cyber-attacks. This leads to an increase in the adoption of risk analytics solutions. According to a study, banking and financial institutions are the fastest-growing industries due to the large volume of transactions in these organizations, making them highly vulnerable to cyberattacks. This has intensified the risks and threats posed to banking industries, which creates a lucrative opportunity for risk analytics solutions among large enterprises.

Based on application, the global risk analytics market is bifurcated into strategic, financial, operational, and compliance risks.

The operational risks segment holds a significant global market share and is predicted to exhibit a CAGR of 15.7% over the forecast period. Operational risk is a natural process that can affect the organization's safety, performance, and perceived values. It can be caused by the utility or through an act that impacts it directly or indirectly. In addition, various organizations are adopting operational risk to enhance business operations' reliability and improve risk management operations' efficiencies. Furthermore, numerous benefits associated with operational risk, such as early identification of unlawful activities and reduction in potential damage from future risks, are the major factors driving the market's growth.

Based on industry verticals, the global risk analytics market is segmented into BFSI, IT and telecom, retail, healthcare, energy and utilities, manufacturing, government and defense, and others.

The BFSI segment dominates the global market and is predicted to exhibit a CAGR of 13.7% during the forecast period. The banking and insurance industry is considered one of the significant users of risk analytics solutions, owing to the increase in different types of risks in this sector. These risks include credit risk, liquidity risk, money laundering terrorist financing, risk compliance of bank’s operations, foreign exchange risk, interest rate risk, and other market risk. This provides a lucrative opportunity for the market growth. Several banks and FinTech institutions are focused on mitigating different types of risk to grow and sustain in the market, which is managed through adopting risk analytics solutions.

In addition, cyber security threats, data privacy, compliance, changes in customer expectations, and third-party risks are significant factors driving the adoption of risk analytics solutions in the BFSI industry. According to a survey conducted by Expert Systems, 44% of the financial institution and banking sectors plan to implement or upgrade/expand their existing risk analytics solution, owing to increase in the operational risk, liquidity risks, and non-performing assets and credit risk, which is anticipated to drive the market growth Moreover, 69% of the executives are not confident regarding their current risk analytics policies due to its limitations to meet future risks, which is shifting their attention toward adoption of advanced solutions, such as AI-based risk-management software, which is expected to create opportunities for the risk analytics solution in the BFSI industry.

Recent Developments

• May 2023- IBM bought RiskLens, a risk measurement and reporting tool supplier.
• June 2023- Google Cloud announced the broad release of its Risk Analytics Suite, a package of tools for business risk management.