For the first time since inception in 2013, the Depository Trust & Clearing Corporation (DTCC) Systemic Risk Barometer Survey is flashing geopolitics above cyber-security as the number one danger to global financial stability.
According to the annual DTCC risk survey, 23 per cent of respondents across the global financial services industry rated geopolitical risk as the greatest threat heading into 2020.
Cyber-security, which has topped the DTCC survey charts since 2013, was ranked just below geopolitics with 22 per cent rating it the most significant risk to financial stability.
In a statement, Michael Leibrock, DTCC chief systemic risk officer, said: “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.”
Geopolitics also drew almost equal with cyber-security in the top five risk rankings in the DTCC survey. Close to 60 per cent of respondents rated geopolitics among the top five risks for 2020 compared to 63 per cent for cyber-security: the respective rankings were 55 per cent and 69 per cent in the 2019 survey.
However, the threat of a US economic slowdown was the biggest-mover in the risk worries year-on-year with 44 per cent of those surveyed putting it among the top five versus just 22 per cent in the previous study.
The remaining top five stress-out factors include Brexit, slated by 43 per cent of respondents (down from 49 per cent last year) and an Asian economic slump (30 per cent compared to 26 per cent in 2019).
Outside the big five concerns, US monetary policy, sudden market dislocation and funding liquidity all jumped in the DTCC worry-index over the 12-month period. At the same time, respondents ranked regulation, market liquidity and excessive global debt as less-concerning than last year.
Fintech also dropped away as a threat to global financial stability with just 10 per cent of those surveyed worried about the sector compared to 20 per cent in 2019.
About three-quarters of firms in the DTCC study plan to increase investment in operational resilience next year, the report says.
Andrew Gray, DTCC group chief risk officer, said in a release that today “industry and regulators are placing a premium on operational resilience and continuity of critical business services as the nature of risk has evolved and the landscape has become more complex and challenging”.
“Disruptions will occur and as a result, risk managers must approach resilience more holistically in order to gain a deeper understanding of their organization and its myriad of interdependencies,” Gray said.
DTCC specialises in “post-trade market infrastructure”, processing securities transactions to the tune of US$1.85 quadrillion in 2018 while supplying custody and asset servicing on US$52.2 trillion held across 170 jurisdictions.