Basel II and IT security

Security:

Datamonitor
Market Study January 2005

Introduction

Throughout the last 18 months, many enterprise IT security solution providers have increasingly cited regulatory compliance as one of the key drivers for their solutions. Within Europe, Basel II has been highlighted as the most important regulation among Financial Services Institutions (FSIs). This brief looks at why Basel II may increase expenditure on IT security and how best to exploit this opportunity.

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Scope of this report

Identifies areas where Basel II will affect IT security spending among FSI, and gives action points for enterprise IT security solution providers.
Looks at the overall operational risk spending (Basel II and SOX) of US vs. Europe from 2002-2006, and identifies other regulations that concern operational risk.
Identifies areas that most enterprise IT security solutions will help FSIs reduce their operational risk.

Research and analysis highlights

Datamonitor believes that most enterprise IT security solutions will help FSIs reduce their operational risk provided that the solutions are correctly integrated, configured, maintained and managed. Datamonitor expects the focus to be on a few areas: Monitoring, detection and surveillance, information management and data security, and risk assessment solutions.

Datamonitor estimates suggest that FSI IT security spending represents between 24-26% of all enterprise IT security spending and that legislation and regulations such as Sarbanes Oxley, Gram Leach Bliley and Basel II will continue to drive a strong uptake of IT security solutions among FSIs.

Key reasons to read this report

Investigates ways in which solution providers can position their offerings as an integral part of the overall Basel II compliance framework.
Investigates other factors that will increase operational risk expenditure among FSIs in other regions such as the US.
Provides easy-to-understand steps for risk management where successful solution providers can build a framework that FSIs understand and position offerings.

Reference Code: BFTC1057

ABOUT DATAMONITOR	2
ACTION POINTS	4
Outline of the brief	4
4 key things you need to know about how Basel II will affect IT security spending among FSIs	4
Action point: Solution providers must be able to position their offerings as an integral part of the overall Basel II compliance framework	5
Action Point: Solution providers must assist FSIs in creating effective risk management lifecycles and in doing so demonstrate their understanding of what is required to meet regulatory compliance	7
Action Point: Solution providers must understand which elements of their products and services portfolio meet the client's specific needs	9
How enterprise IT security solutions can help	10
Action point: While the majority of Basel II spending will be seen in Europe, other operational risk activities will make the US a more lucrative market	13
SOX and operational risk	13
Other regulations	14
Conclusions	16
APPENDIX	17
Future readings	17
SPP writing team	17
How to contact experts in your industry	18
List of Tables
Table 1: Overall operational risk (Basel II and SOX) - US vs Europe, 2002-2006	14
List of Figures
Figure 1: The three 'pillars' of Basel II compliance	6
Figure 2: Operational risk management lifecycle	7
Figure 3: Operational risk - opportunities for technology	11
Figure 4: Overall operational risk spending (Basel II and SOX) - US vs Europe, 2002-2006 ($m)	14

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