Even before last week’s political strife in the UK over Brexit, big global investors were concerned about the growing systemic risks, according to the latest international risk survey by DTCC, the post-trade infrastructure provider.
The slower-than-expected negotiating progress between the UK and European Union and the ongoing uncertainty of the outcome has positioned Brexit as a top systemic risk concern for 2019. But cybersecurity and other geopolitical risks around the globe continue to dominate the risk landscape. Excessive global debt is also cited as a growing concern.
The survey published by DTCC (the Depository Trust & Clearing Corporation) the post-trade market infrastructure for the global financial services industry. Close to half of respondents (49 per cent) cited concerns around the significant risks attributed to Brexit as one of the top five risks for industry in the coming year.
As the March 2019 Brexit date approaches, and now with British Prime Minister, Theresa May, facing more political hurdles, the Brexit ranking represents an 11 per cent increase over last year’s survey results, the survey report says, making it the most significant year-over-year change in the findings.
As with previous surveys, cyber risk remained the number one threat to the financial industry, with more than a third of respondents (37 per cent) citing it as the most significant risk and 69 per cent, ranking it within the top five. In addition:
- Geopolitical risk, including risks in areas such as the Middle East, China and in emerging markets, maintained its position as the second most frequently cited threat to the industry, with 55 per cent of respondents including it in their top five risks for 2019.
- Excessive global debt rose in importance and was cited by 28 per cent of respondents within their top five risks. Respondents highlighted the impact of global growth on increased debt levels as well as how changes in central bank monetary policies and quantitative easing programs could affect large debt balances.
- Fintech risk, along with the potential impact of economic slowdowns across all regions, also increased in importance with respondents.
Michael Leibrock, DTCC chief systemic risk officer, said: “The broad perspective of these survey results shows that while economic indicators continue to appear strong, pockets of weakness are starting to appear across numerous components of the financial system as geographic flash points continue to materialise and intensify.
“It is critical that firms continue to remain vigilant to anticipate and prepare for not only these emerging risks, but the potential cascading effects that may arise from an increasingly interconnected financial system.”
DTCC has conducted ‘Systemic Risk Barometer Surveys’ across the global financial services industry since 2013, with the last survey published in December 2017. In 2017, DTCC processed securities transactions with a total value of US$1.61 quadrillion (a ‘quadrillion’ is a thousand trillion) in 131 countries.
Greg Bright is publisher of Investor Strategy News (Australia)