Investment Operations

Geopolitical Risks & Trade Tensions Surge as Top Risk to Industry

DTCC Chief Systemic Risk Officer Michael Leibrock

Geopolitical risks & trade tensions rank as the greatest threat to global financial stability in 2020, according to a new survey published by The Depository Trust & Clearing Corporation (DTCC). This is the first time in the survey’s seven-year history that cyber risk has been surpassed as the top risk.

23% 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 U.S. 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 U.S. 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,” stated 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,” added Leibrock.

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.

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