Risk Management Consultancy

1. Research Summary
Risk Management Consulting Marketplace 2008–2011
Key Trends, Profiles and Forecasts Contact: Bob Sutherland +1-603-924-6390
ext. 667
By: John Farrell, Senior Analyst – Kennedy Information
Jess Scheer, Associate Director – Kennedy Information
Damien Blenkinsopp, Senior Analyst – Kennedy Information
Derek Smith, Director, Research – Kennedy Information
Market Trends Overview
In a fast-paced, global economy, client organizations are struggling to reduce the threat of risks related to
everything from corporate governance, regulatory compliance, and economic factors, to increased
competition, technological change, as well as man-made/natural disasters, which can all impact bottom-line
performance. Moreover, our accelerated business climate is transforming risk management from a periodic
exercise in financial reporting to an ongoing endeavor that measures and analyzes many complex business
issues, especially as companies expand into new businesses and geographies. Accordingly, the demand for
risk management consulting services is growing rapidly. In fact, this consulting segment generated nearly
$29 billion in revenues in 2007 and is expected to grow at a compound annual growth rate of more than 17%
through 2011 – about twice as fast as the overall consulting market.
Risk Management Consulting Market (Size and Growth 2007–2011)
$60
CAGR 17.2%
$40
$20
$0
2007 2008 2009 2010 2011
Source: Kennedy Information, Risk Management Consulting Marketplace 2008–2011
Risk Management Consulting Marketplace 2008–2011: Key Trends, Profiles and Forecasts cuts through
the ambiguity that is often associated with risk as a management discipline by clearly defining the specific
segments of the risk consulting market. The research provides detailed information and analysis on the global
risk consulting market, including sizing, forecasting, and analysis for each risk consulting segment. The
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2. _________________Research Summary: Risk Management Consulting Marketplace 2008–2011
research also provides an in-depth assessment of the risk consulting landscape, key market trends, and major
opportunities. In addition, detailed profiles of some of the world’s top risk consulting practices highlight the
strengths and weakness of each firm’s offering, based on market approach, service type, and geography.
“The speed of change is clearly accelerating and companies are looking to be more flexible.
Risks are heightening in relationship to products, country operations and partnerships. In
this market, companies need to proactively merge strategic decisions and risk management
over time. They must keep changing ahead of the curve.”
Walt Shill
Managing Director, Strategy practice
Accenture
Risk Consulting Opportunities
Despite the fact that every company is potentially vulnerable to some kind of risk, one of the key
opportunities for risk consulting work is the wave of regulations tying personal accountability to corporate
governance. While Sarbanes-Oxley holds C-level executives personally liable for the validity of financial
statements – compelling organizations to closely monitor financial metrics in relation to a wide variety of
operational, strategic, competitive, and economic risks across the enterprise – risk is also an emerging issue
for an increasing number of client industries, especially those facing ever-stricter workforce and
environmental regulations, stiffer competition, or rapid technological change. In addition, for those
expanding overseas, globalization creates a wide variety of geopolitical risks.
A key trend creating solid consulting opportunities in the risk market is the data suggesting that many large
corporations are not prepared to effectively deal with risk. Many lack formal risk management programs,
most do not look at how previous risk events may have impacted past performance, and few create risk-
adjusted forecasts and plans. Consulting firms with a clear understanding of these trends are in a strong
position to help clients identify, prioritize, control, and mitigate risk on an ongoing and long-term basis.
Kennedy’s analysis in this research discusses these drivers to identify the firms in the strongest position to
deliver against their risk-based consulting needs.
Risk consulting provides particularly broad-based opportunities because:
• Risks are easily understood but complicated to resolve internally.
• Liabilities affect companies of all sizes, shapes, and geographies.
• Solutions require organization-specific planning and customization.
Key Risk Consulting Market Drivers
• Corporate governance • Disasters (man-made and natural)
• Government regulations • Legal/compliance liabilities
• Globalization • Insurance requirements
• Financial trends • Technological advancements
• Economic crises • Data security/privacy issues
• Increased competition • Ratings agency assessments
• Environmental issues • Emerging role of chief risk officer
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3. _________________Research Summary: Risk Management Consulting Marketplace 2008–2011
Risk Consulting Landscape
There are many types of service providers that refer to their firms as risk consultants, risk advisors, or risk
experts. These include insurance advisors, actuaries, insurance brokers, risk modelers, strategy consultants,
auditors, business continuity specialists, and security experts. For the purposes of this research and a more
logical market taxonomy, risk consulting practices are those defined by Kennedy as having a specialization
in risk-related assessment and process implementation. These firms provide specific types of risk consulting
services based on a prior expertise, or have incorporated risk-related services into established practice areas.
Provider ecosystem
While the Big Four firms dominate the risk consulting market in terms of depth, breadth of offerings and
revenues, the marketplace has produced a critical mass of risk consulting providers that provide a well-
defined mix of risk consulting specialties and expertise.
Kennedy segments the market into nine major practice areas, consisting of:
• Core enterprise risk • Economic risk
• Financial risk • Competitive/strategic risk
• Operational risk • Litigation risk
• Information and IT-related risk • Catastrophic risk
• Regulatory compliance risk
Moreover, the main risk consulting provider types include Business Advisory Services and IT consulting,
which comprise about three-quarters of the market, as well as extended insurance & insurance advisory
practices, pure plays, strategy firms, OM consultancies, and others.
Risk Consulting Market by Provider Type (2007)
Emergency Planners/ Extended Risk
Workplace Modelers
Safety Strategy/OM
Pure Plays
Extended
Insurance &
Insurance
Advisory
Business IT Consulting
Advisory
Services
Source: Kennedy Information, Risk Management Consulting Marketplace 2008–2011
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transmitted by any means, electronic or mechanical, without prior written permission of
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4. _________________Research Summary: Risk Management Consulting Marketplace 2008–2011
Risk consulting practices profiled in this research include:
• ABN AMRO Bank N.V.
• Grant Thornton International
• ABS Group
• IBM Global Business Services
• Accenture
• Jefferson Wells International
• Aon
• KPMG International
• CBIZ, Inc.
• Oliver Wyman
• Control Risks Group
• Protiviti
• Deloitte Touche Tohmatsu
• PricewaterhouseCoopers
• Ernst & Young
• Towers Perrin/Tillinghast
Following the Executive Summary and Introduction, the remainder of the research is organized as follows.
SECTION III — MARKET TRENDS, DRIVERS, AND INHIBITORS looks at the market trends and other
factors affecting demand for risk consulting services.
SECTION IV — RISK CONSULTING MARKET DATA AND FORECASTS details the size of the global
risk consulting services market and its projected growth. This section slices the market for type of
risk consulting service (i.e., segment), by industry and region.
SECTION V — RISK CONSULTING LANDSCAPE presents in-depth analysis of the position of the
leading risk consulting players in the market and discusses the implications their strategies have on
the future of the market.
SECTION VI — PROFILES OF SELECT RISK CONSULTING PRACTICES profiles leading risk
consulting service providers featured in this research.
SECTION VII — METHODOLOGY includes additional information about Kennedy Information’s
research process and resources utilized to create this research.
TABLE OF CONTENTS v
Table of Contents ....................................................................................................v
Table of Figures ..................................................................................................... ix
I. Executive Summary ...................................................................................11
A. Risk Market Definitions ............................................................................................ 13
B. Risk Market Dynamics.............................................................................................. 15
II. Introduction ................................................................................................21
A. Aim of this Report..................................................................................................... 21
B. Defining the Risk Consulting Market ....................................................................... 22
1. Scope of the Risk Consulting Market ................................................................... 25
2. Risk Consultants in Relation to Other Risk Service Providers ............................. 27
3. Risk Consulting Service Market Segments ........................................................... 30
4. Risk Consulting in the Context of Consulting Service Lines................................ 34
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5. _________________Research Summary: Risk Management Consulting Marketplace 2008–2011
III. Market Trends, Drivers and Inhibitors ...................................................37
A. Historical Perspective on Risk Services.................................................................... 37
1. Spread of Risk Analysis Across Industry Sectors ................................................. 38
2. Expansion of Risk Specialty Practices in Response to Unique Risk Factors........ 38
3. Rise of Enterprise Risk Management.................................................................... 41
4. COSO Standards as a Catalyst .............................................................................. 42
B. Risk Dynamics Affecting Client Organizations ........................................................ 43
1. Timeline Factor ..................................................................................................... 47
2. Enterprise vs. Business Function Context............................................................. 48
3. Risk Process Lifecycle .......................................................................................... 48
4. Range of Actions to Address Risks....................................................................... 49
5. Key Stakeholders and Business Roles Associated With Risk............................... 52
6. Core Value of Risk Consultants ............................................................................ 54
C. Converging Market Drivers Emphasizing Enterprise Risk Requirements................ 58
1. Market Complexity ............................................................................................... 58
2. Globalization ......................................................................................................... 59
3. Geopolitical Dynamics .......................................................................................... 59
4. Financial Crises ..................................................................................................... 59
5. Bursting Technology Bubble of 2000/2001 .......................................................... 60
6. Enactment of Sweeping Government Regulations Across the Globe ................... 61
7. Direction of the Basel Accord Revisions .............................................................. 65
8. Variations on State and Local Government Oversight.......................................... 66
9. Ratings Agencies................................................................................................... 66
10. Financial Volatility ............................................................................................. 67
11. Volatility in Gas Prices and Transport Costs ...................................................... 67
12. Rising Volume of Litigation ............................................................................... 68
13. Acts of Terrorism ................................................................................................ 68
14. Global Climate Changes and Higher Costs of Natural Disasters ........................ 69
15. Health Threats/Pandemics................................................................................... 69
16. High Cost of Insurance ....................................................................................... 69
17. Political Risk ....................................................................................................... 69
18. IT Advances and Expanding Data Storage ......................................................... 70
19. Increasing Expectations for Disclosing Risks ..................................................... 70
20. Science of Business Management With Risk Discipline .................................... 70
21. Expectations of Corporate Boards ...................................................................... 71
22. Heightened Exposure From Associations, Forums and University Programs .... 71
D. Current Market and Future Outlook for Risk Consulting ......................................... 72
1. Emerging Role of Chief Risk Officer ................................................................... 72
2. What’s Keeping Executives Up at Night? ............................................................ 74
E. Future Outlook .......................................................................................................... 75
1. Serving New Industry Segments ........................................................................... 75
2. Advancing Risk Processes and Measurement ....................................................... 76
3. Growing Stakeholder Pressure to Disclose Risk Details ...................................... 76
4. Accelerating Decision Timeframes ....................................................................... 77
5. Implementing Supporting Technology ................................................................. 77
6. Role of Government .............................................................................................. 78
7. Integrating Risk With Corporate Value Ratings ................................................... 79
8. Long-Term Challenges and Unknowns ................................................................ 79
IV. Risk Consulting Market Data and Forecasts ..........................................81
A. Core and Secondary Risk Consulting Market Size and Forecasts ............................ 81
B. Trends in Risk Consulting Market Segments............................................................ 85
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6. _________________Research Summary: Risk Management Consulting Marketplace 2008–2011
1. Financial Risk Consulting ..................................................................................... 85
2. Operational Risk Consulting ................................................................................. 86
3. Information and Information Technology Risk Consulting .................................. 89
4. Regulatory Compliance Risk Consulting .............................................................. 91
5. Economic Risk Consulting.................................................................................... 91
6. Competitive/Strategic Risk Consulting ................................................................. 92
7. Litigation Risk Consulting .................................................................................... 93
8. Catastrophic Risk Consulting................................................................................ 93
C. Demand by Client Industry Sector ............................................................................ 95
1. Financial Services ................................................................................................. 98
2. Energy & Chemicals ........................................................................................... 101
3. Healthcare ........................................................................................................... 101
4. Utilities ................................................................................................................ 102
5. Transportation ..................................................................................................... 103
6. Public Sector ....................................................................................................... 103
7. High Tech............................................................................................................ 105
8. Industrial Manufacturing..................................................................................... 106
9. Consumer Packaged Goods ................................................................................ 106
10. Communications & Media ................................................................................ 107
11. Retail & Leisure ................................................................................................ 107
12. Business Services .............................................................................................. 108
D. Market Demand by Global Region ......................................................................... 108
1. North America..................................................................................................... 110
2. Europe, Middle East, Africa ............................................................................... 111
3. Asia Pacific ......................................................................................................... 112
4. Latin America ..................................................................................................... 114
V. Risk Consulting Landscape .....................................................................115
A. Opportunities and Challenges for Risk Consultants ............................................... 115
B. The Leading Risk Consulting Practices .................................................................. 116
C. Risk Consulting Provider Categories ...................................................................... 121
1. Business Advisory Services Firms ...................................................................... 124
2. IT Consulting Firms ............................................................................................ 124
3. Extended Insurance & Insurance Advisory Firms .............................................. 125
4. Risk-Focused Consulting Pure Plays .................................................................. 125
5. Strategy Firms ..................................................................................................... 126
6. Extended Risk Modelers ..................................................................................... 126
7. Emergency Planning & Workplace Safety ......................................................... 126
D. Competitive Dynamics ............................................................................................ 126
1. Differentiation ..................................................................................................... 126
2. Business Model Adaptation ................................................................................ 129
3. Consolidation ...................................................................................................... 129
VI. Profiles of Select Risk Consulting Practices ..........................................133
Overview of Risk Consulting Practice Profiles .............................................................. 133
ABN AMRO Bank N.V. ................................................................................................. 135
ABS Group ..................................................................................................................... 138
Accenture ........................................................................................................................ 142
Aon ................................................................................................................................. 145
CBIZ, Inc. ....................................................................................................................... 149
Control Risks Group ....................................................................................................... 152
Deloitte Touche Tohmatsu.............................................................................................. 156
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7. _________________Research Summary: Risk Management Consulting Marketplace 2008–2011
Ernst & Young ................................................................................................................ 160
Grant Thornton International .......................................................................................... 163
IBM Global Business Services ....................................................................................... 166
Jefferson Wells International .......................................................................................... 169
KPMG International ....................................................................................................... 173
Oliver Wyman................................................................................................................. 177
Protiviti ........................................................................................................................... 181
PricewaterhouseCoopers ................................................................................................. 185
Towers Perrin/Tillinghast ............................................................................................... 189
VII. Methodology .............................................................................................193
About Kennedy Information ..............................................................................195
Consulting Market Intelligence .........................................................................197
A. Consulting Service Line Series ................................................................................ 197
B. Industry Practices Series .......................................................................................... 197
C. Firm Management Series ......................................................................................... 198
D. Geographic/Regional Market Series ........................................................................ 198
The Authors .........................................................................................................201
TABLE OF FIGURES
Figure 1. Global Risk Consulting Market Size and Growth, 2006-2011 ................................................. 11
Figure 2. Risk Exposure and Preparedness by Company Size ................................................................ 13
Figure 3. Segmenting the Reach of Risk Consulting Services................................................................. 14
Figure 4. Global Risk Consulting Market Size and Growth by Subsegment ($ Millions) ...................... 15
Figure 5. Maturity of Risk Process Usage Across Industry Sector .......................................................... 16
Figure 6. Share of the 2007 Risk Consulting Market by Provider Type.................................................. 17
Figure 7. Ranking of Firms With the Largest Risk Consulting Capabilities ........................................... 18
Figure 8. Depth/Breadth/Size Comparisons of Leading Risk Practices .................................................. 19
Figure 9. Segmenting the Reach of Risk Consulting Services................................................................. 26
Figure 10. Professional Service Categories Related to Risk .................................................................... 28
Figure 11. The Value of Risk Modelers and Actuaries............................................................................ 29
Figure 12. Segments of the Risk Management Consulting Market Defined ........................................... 31
Figure 13. Taxonomy Alignment of Top Global Risks ........................................................................... 34
Figure 14. Risk Consulting Segment Overlap by Consulting Service Line ............................................. 34
Figure 15. Risk Consulting Practice Emphasis by Decade ...................................................................... 39
Figure 16. Dimensions of Risk Variables and Dynamics ........................................................................ 43
Figure 17. Risk Categories by Controllability and Location, Relative to the Organization .................... 47
Figure 18. Risk Process Lifecycle ........................................................................................................... 49
Figure 19. Choosing Business Actions Based on Risk Dynamics ........................................................... 51
Figure 20. Risk Management Organizational Leaders and Supporting Service Providers ...................... 53
Figure 21. Professional Services Provider Categories in Relation to Risk Tolerance ............................. 55
Figure 22. Addressing Risk Considering Time and Consequence Dynamics.......................................... 56
Figure 23. Risk Consulting Role as Empowering Management Risk Controls ....................................... 58
Figure 24. Leading Global Regulatory Acts and Oversight Programs .................................................... 62
Figure 25. Adjusted Dow Jones Industrial Average, 10-Year Trendline ................................................. 67
Figure 26. Domestic Crude Oil Prices, 10-Year Trendline...................................................................... 68
Figure 27. Risk Reporting Technologies Enhancing Enterprise Communication ................................... 78
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8. _________________Research Summary: Risk Management Consulting Marketplace 2008–2011
Figure 28. Breakdown of the Global Risk Consulting Core and Second-Tier Market Size .................... 82
Figure 29. Global Risk Consulting Market Size, Core Risk vs. Second-Tier Risk ................................. 83
Figure 30. Core Risk Consulting Grows Faster Than Second-Tier Specialty Risk Consulting............... 84
Figure 31. 2007 Global Risk Consulting Market Share by Subsegment ................................................. 85
Figure 32. Global Risk Consulting Market Size and Growth by Subsegment ($ Millions) .................... 86
Figure 33. Political Risk Consultants Have an Opportunity to Further Penetrate Market ....................... 89
Figure 34. Maturity of Risk Process Usage Across Industry Sectors ...................................................... 96
Figure 35. Global Risk Consulting Market Forecast by Client Industry Sector ...................................... 97
Figure 36. Global Risk Consulting Market by Client Industry Growth Rate, CAGR 2006-2011 ........... 98
Figure 37. Global Risk Consulting Market Size and Growth by Client Industry ($ Millions) .............. 100
Figure 38. GAO High Risk List for 2007 .............................................................................................. 104
Figure 39. Global Risk Consulting Market Size and Growth by Geographic Region ($ Millions) ....... 109
Figure 40. Ranking of Firms With the Largest Risk Consulting Capabilities* ..................................... 117
Figure 41. Strength Comparison of Leading Firms by Risk Subsegment.............................................. 118
Figure 42. Comparison of Leading Firms by Area of Focus ................................................................. 120
Figure 43. Depth/Breadth/Size Comparisons Leading Risk Practices .................................................. 121
Figure 44. Summary of Risk Consulting Provider Categories............................................................... 122
Figure 45. Market Positioning of Risk Consulting Provider Categories................................................ 123
Figure 46. Market Positioning of Leading Risk Consulting Practices ................................................... 124
Figure 47. The Primary Elements of Risk Consulting Strengths ........................................................... 128
Figure 48. Examples of Recent Risk Management Business Combinations ......................................... 130
Consulting Market Intelligence
Kennedy Information offers a complete portfolio of market intelligence research and services for consultants,
consulting firms, and their clients. Kennedy’s research provides key trends and insights, market forecasts,
and profiles of leading firms. For details on custom research, analyst time, advisory services, or any of the
research described here, contact Bob Sutherland at rsutherland@kennedyinfo.com or +1.603.924.6390 ext.
667.
Consulting Service Line Series
• Global Consulting Marketplace 2007 - 2010
• Strategy Consulting Marketplace
o Financial Strategy Consulting Marketplace
o Marketing and Branding Strategy Consulting Marketplace
• Business Advisory Services
o Risk Management Consulting Marketplace
o Merger, Acquisition and Divestiture Advisory Marketplace
o Business Forensics and Litigation Advisory Marketplace
o Performance Improvement and Organizational Effectiveness Advisory Marketplace
• Operations Management Consulting Marketplace
o Supply Chain Management Consulting Marketplace
o Consulting Around BPO and Transformation
o Customer Relationship Management Consulting Marketplace
• HR Consulting Marketplace
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9. _________________Research Summary: Risk Management Consulting Marketplace 2008–2011
o HR Outsourcing Marketplace
o Talent Management, Consulting and Outsourcing
• IT Consulting Marketplace
o IT Strategy and Planning Consulting Marketplace
o Global Outsourcing Marketplace
o Alliances in Consulting, IT and Business Services
Industry Practices Series
• Financial Services Consulting Marketplace (Banking, Capital Markets and Insurance)
• Healthcare Consulting Marketplace (Life Sciences, Provider, Payer, Government)
• Public Sector Consulting Marketplace
• Consumer Packaged Goods and Retail Consulting Marketplace
• Communications and Media Consulting Markets
• High Tech Consulting Marketplace
Firm Management Series
• Fees, Utilization and Key Metrics in Consulting
• Compensation in Consulting: Benchmarks, Trends and Forecasts of the Profession
• Benchmarks in Consulting: Financial and Operational Metrics
• Consulting Client Satisfaction: Leading Firms’ Performance, Reputation and Brand
Awareness
Geographic/Regional Market Series
• Asia Pacific Consulting Marketplace
• Western Europe Consulting Marketplace
• Eastern Europe Consulting Marketplace (Russia, Ukraine and the Baltics)
• UK and Ireland Consulting Marketplace
• Consulting Opportunities in Germany, Austria and Switzerland
• Consulting Opportunities in France and Belgium
• Latin America Consulting Marketplace
• Canada Consulting Marketplace
Contact: Bob Sutherland
Kennedy Information, Inc.
Peterborough, New Hampshire, USA
T: +1.603.924.6390 ext. 667
E: rsutherland@kennedyinfo.com
© 2008 KENNEDY INFORMATION, INC. Notice: No part of this publication may be reproduced, stored in a retrieval system or
transmitted by any means, electronic or mechanical, without prior written permission of
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