GEOPOLITICAL risks & trade tensions rank as the greatest threat to global financial stability in 2020, according to a new survey published December 11 by The Depository Trust & Clearing Corporation (DTCC), a provider of post-trade market infrastructure for the global financial services industry. This is the first time in the survey’s seven-year history that cyber risk has been surpassed as the top risk.
First launched in 2013, the DTCC Systemic Risk Barometer Survey serves as an annual pulse check to monitor existing and emerging risks that may impact the safety, resiliency and stability of the global financial system. It is designed to help identify trends and foster industry-wide dialogue on potential threats to financial stability.
Twenty-three per cent of respondents cited geopolitical risks & trade tensions as the top risk overall, with over half of them (59%) citing it as a top 5 risk for next year. Respondents cited concerns about potential impacts on macroeconomic conditions and growth as well as heightened market volatility.
Cyber risk was cited as the top risk by 22% of respondents, with 63% citing it as a top 5 risk. Many respondents commented that cyber risk is a growing and persistent threat.
In addition to cyber risk and geopolitical risks & trade tensions, a US economic slowdown (44% of respondents), Brexit (43% of respondents) and an Asia economic slowdown (30% of respondents) rounded out the top 5 risks to the industry.
In fact, the US economic slowdown and Asia economic slowdown were among the largest percentage advancers in this year’s survey, as the industry cites increasing concerns of headwinds to global growth.
“The survey results show that, while cyber risk continues to remain top of mind across the industry, shifts in the geopolitical and macroeconomic landscape are becoming an increasingly important cause of concern for the financial services industry,” states Michael Leibrock, DTCC’s chief systemic risk officer. “It is critical that firms continue to enhance their risk management capabilities to support the identification, assessment and aggregation of their external risks and exposures.”
Respondents were also asked to provide their perspectives on investments to enhance operations and business resilience for 2020, in line with the increased industry and regulatory focus on this topic. Nearly 75% of respondents noted that their firms plan to increase investments in support of resilience.
DTCC conducts its Systemic Risk Barometer Survey across the global financial services industry each year, with its last survey, the 2019 Risk Forecast, published in December 2018.