The Big Four firms collectively account for nearly two-thirds of the global risk consulting market and could expand that footprint if they acquire more cybersecurity firms, suggests a new report.
The report, from Source Information Services, found the global market for risk consulting has risen by over $1 billion (9 percent) to just under $14 billion in 2014. Risk consulting in financial services dominates the market, accounting for $5 billion, or about 35 percent of the total.
Regulation and compliance work have driven much of the growth to date, according to the report, but cybersecurity is likely to have a significant impact in the near future. Big Four firms perform the majority of global risk consulting, accounting for 61 percent of the market. However, the report warns the Big Four could miss out on the next stage of growth if they don’t react to the growing demand for cybersecurity expertise.
“Big Four firms aren’t seen by clients to have the specialist expertise required to capitalise on this wave of increased investment in cybersecurity,” said Source founder Dr. Fiona Czerniawska, who authored the report. “These firms now have a limited window of opportunity to either recruit or acquire organizations with these skills. Despite recent growth, the global risk consulting market is at a crossroads. Our research shows increasing polarization between low cost’ and high value’ parts of the market will create new challenges for consulting firms across the board.”
Regulatory-related risk consulting work falls into the low-value part of the market, according to the report, as clients turn to consultants for cost-effective support when they can’t handle the workload themselves.
In contrast, cyber risk falls into the high-value end of the market as it is relatively new territory for most organizations. The consulting market for cyber risk is smaller than for regulatory-related work, but the report suggests it will grow more quickly as organizations rely more on consultants to help them.
The increasing number of risk-related initiatives has led to a dramatic rise in the use of consultants. In 2013, only 27 percent of organizations said their investment in risk-related areas would drive up their use of consultants. Today, that figure has nearly doubled to 50 percent. This trend holds across most parts of the private sector. However, public sector managers still focus on saving money and thus are more likely to rely on in-house resources to do this type of work.
“What all of these developments are pointing to is two distinct markets for risk consulting,” said Czerniawska. “There are plenty of firms at the moment that think that it’s possible to play in both. We suspect they may have to choose.”
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