A survey on risk trends impacting the financial services industry finds that 61% of risk managers believe the probability of a high-impact event in the global financial system has increased during the past six months.
The finding comes in The Depository Trust & Clearing Corporation’s (DTCC) latest systemic risk barometer survey, which reports that the threat of a cyberattack is the key driver behind the increased concern among risk managers. The survey was completed by around 400 DTCC clients across the global financial services industry in September and October 2015.
As with the previous survey – conducted in the first quarter of 2015 – cyber risk remained the number one concern globally, with 70% of all respondents citing it as a top five risk. In North America, concerns were even higher with 77% identifying cyber security as a top five concern.
“Cyber risks appear to be multiplying while controls to address these risks may not be able to keep up with the continually escalating threats,” commented one survey respondent. This concern over the frequency and ability to manage attacks was shared by many others.
“When it comes to fighting cyber risk specifically, we’re seeing a lot of market participants collaborating to a greater degree than in the past,” said Mark Clancy, chief executive (CEO) of Soltra, a joint venture between DTCC and the Financial Services Information Sharing and Analysis Center (FS-ISAC).
“More and more firms are aware of how information sharing can help prevent and minimize incidents while making it more expensive for hackers to be successful. This is one area where resources are being allocated,”
Forty-five per cent of respondents across functional departments believe the probability of a high-impact event in the global financial system has increased during the past six months, an increase of 16 percentage points since the Q1 2015 survey. When asked which risks contributed to this concern, respondents said that cyber risk, geopolitical risk and the impact of new regulations added most to fears of a high-impact event.
Geopolitical risk and the impact of new regulations were identified as the second and third highest risks globally, cited by 50% and 41% of all respondents, respectively. European-based respondents tended to rank geopolitical risk highest, while respondents located in the Asia-Pacific (APAC) region or working for APAC firms expressed particular concerns over an economic slowdown outside of the European Union/US.
Many respondents also commented on concerns related to market liquidity. “The volatility will be exacerbated by the lack of liquidity in the markets caused by over-regulation…,” noted one.
In response to these threats, 72% of all respondents indicated their firms have increased the amount of resources dedicated to identifying, monitoring and mitigating systemic risks over the past year – continuing a strong trend identified in previous surveys.
The latest survey also revealed that more firms are becoming aware of interconnectedness risk and how the failure of one firm can ripple through the global economy. “Interconnectedness is only as good as the weakest link. Failure has the risk of becoming a house of cards,” remarked one respondent.
Far and away, the largest financial market on the planet is the foreign exchange currencies market, where on average individuals and organisations trade more than $5 trillion daily. In the FX world, the ability to master the market isn't considered a luxury for treasury officers–it's a necessity.
Using data for predictive analytics is the future of banking success, argued Jean-Laurent Bonnafé, CEO of BNP Paribas, in his session on how the bank is reinventing its approach to innovate with and for corporates.
The EU and US’ shift in accounting standards may bring balance sheet losses and increase credit risk, according to James Elder, director of risk services at Standard & Poor’s (S&P) Global.
Sibos 2017 day two highlights: Brexit and banking, and why ‘data is the new oil’ in financial services
How nation first politics can impact global financial organisations It’s clear that data and regulation are the two key topics that are ... read more