A robust integrated risk management approach is becoming critical for businesses of all sizes and sectors. Increased cyber risks, rising demands on governance, and growing FinTech reliance are just some factors spurring growth for integrated risk management services.
Predicted Market Growth for Integrated Risk Management
Estimates of the market growth for integrated risk management are substantial. Gartner estimated year-over-year growth from 2014 through 2016 at around 17% in 2017, predicting continued growth of 13.4% through 2020. Growth predictions are even more favorable for the look forward through 2027. The integrated risk management market size is expected to grow at a rate of 18.7% CAGR, reaching $28.87 billion in value by 2021. That is an increase of more than $20 billion in less than a decade.
Key Factors for the Growth of Integrated Risk Management
IRM approaches are complex, and they address numerous challenges and threats. However, a few factors stand out as being significant drivers in the growth of IRM markets.
A Rise in Data Breaches
Data breach numbers continue to rise, with record-setting numbers in 2021. According to the Identity Theft Resource Center 2021 report, data breaches jumped 68% from 2020 to 2021, driving the number to the highest total on record in any year. Data attacks will not suddenly decline in the future, and the demand for proactive defenses against cyberattacks drives tech-related growth in risk management markets.
New Regulatory Frameworks and Integrated Risk Management
The National Institute of Standards and Technology and the U.S. Securities and Exchange Commission are just two organizations advising increased regulatory strategy to support risk management — particularly when it comes to digital security or finances. For example, the SEC proposed rules require advisors and funds to disclose cybersecurity risks publicly. Previously, most frameworks required public disclosure when a major breach occurred. Still, this new language might put the onus on businesses to proactively alert stakeholders of all types to potential issues and weak spots in security.
IoT and FinTech Challenges
Of course, those risks do exist for all organizations. No modern business is without some connection to the internet, and an Internet-of-Things world that relies heavily on integration and data creates risk channels.
For example, financial processes of all types rely on digital processes. Increasing numbers of people turn to online and mobile banking, managing their accounts and depositing checks from smartphones. That represents a multitude of channels, people, and processes that could leave a bank and its customers at greater risk of experiencing data breaches, fraud, or other issues.
The risks increase as IoT connects and networks more touchpoints. For example, if someone sets up automatic bill pay via a checking account, they link those bill accounts to their bank account. Or, if someone signs up for a service that reports rent and utility payments to credit bureaus to boost their credit score, they often have to integrate their bank account as well.
For individuals and businesses alike, increasing connections goes hand-in-hand with increased risk.
Industries Driving the Growth of Integrated Risk Management
No one is immune to risk. More than 40% of data breaches involve small and midsize businesses. These attacks span all industries, though hacks in 2021 were up in the following industries by extreme amounts year-over-year:
- Education and research saw a 75% increase in attacks
- Healthcare experienced a 71% increase in attacks
- Internet service providers and managed service providers saw 67% more attacks
- The communication sector experienced a 51% increase in attacks
- Government and military organizations saw an increase of 47%
Some organizations specifically driving the growth of integrated risk management solutions and markets are found in sectors like banking, healthcare, and IT. sectors
Financial services have always demanded intentional, high-level security. Safeguarding accounts and assets for customers — whether the public or businesses — is critical to the services provided in the banking sector. However, this protection is becoming more complex and difficult to provide as services go increasingly digital. Banks and other financial institutions are turning to corporate best practices and risk management solutions to meet the challenge.
In 1996, the U.S. government passed the Health Insurance Portability and Accountability Act. HIPAA demanded processes that allowed patients to access their medical records appropriately and have the ability to “transport” them to other providers when switching doctors or working with care teams. The act is just one of the many rules and regulations governing how patient data must be handled and shoring up requirements for confidentiality.
Yet healthcare has the same challenges found in banking. Sensitive data is increasingly required across many channels, including inpatient portals and apps. As a result, organizations within the sector are spending on security and risk management solutions to help accomplish business and patient-facing goals while standing firm on data security.
The push for integrated risk management from the IT sector is two-prong. First, some companies offer technical solutions for other businesses, such as banking, healthcare, and retail apps that involve the use of confidential information. These companies drive demand for IRM solutions in the same way businesses in other industries do.
Second, some companies work to provide IRM services to others. These companies create products that solve common risk problems, increasing the amount and value of the solutions on the market.
Integrated risk management is a vast and growing field — one that’s essential to success across all sectors.