New York/London/Hong Kong/Singapore, 1 December, 2015 – A new survey on risk trends impacting the financial services industry revealed 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, according to The Depository Trust & Clearing Corporation’s (DTCC) latest Systemic Risk Barometer Survey. The survey found that the threat of a cyber attack is the key driver behind the increased concern among risk managers.
As with the previous survey conducted in Q1 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. Added one respondent, “Cyber risks appear to be multiplying while controls to address these risks may not be able to keep up with the continually escalating threats.” This concern over the frequency and ability to manage attacks was a common theme among respondents.
“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. 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,” said Mark Clancy, CEO of Soltra, a joint venture between DTCC and the Financial Services Information Sharing and Analysis Center (FS-ISAC).
CONCERNS BEYOND CYBER
More broadly, almost half of all respondents (45%) 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 last survey was conducted earlier this year. 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 APAC region or working for APAC firms expressed particular concerns over an economic slowdown outside of the E.U./U.S. 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 a respondent.
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.
Interestingly, the survey 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.
“The survey is an important tool for identifying current market concerns. I think it’s also a great reminder of the ever expanding list of complex risks companies have to manage,” said Michael Leibrock, Managing Director and Chief Systemic Risk Officer at DTCC. “It’s a challenge for many, and we’re committed to partnering with the industry to help mitigate risk whenever we can.”
The Systemic Risk Barometer Survey was completed by approximately 400 DTCC clients and a broad range of international participants across the global financial services industry in September and October 2015.
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With over 40 years of experience, DTCC is the premier post-trade market infrastructure for the global financial services industry. From operating facilities, data centers and offices in 16 countries, DTCC, through its subsidiaries, automates, centralizes, and standardizes the post-trade processing of financial transactions, mitigating risk, increasing transparency and driving efficiency for thousands of broker/dealers, custodian banks and asset managers worldwide. User owned and industry governed, the firm simplifies the complexities of clearing, settlement, asset servicing, data management and information services across asset classes, bringing increased security and soundness to the financial markets. In 2014, DTCC’s subsidiaries processed securities transactions valued at approximately US$1.6 quadrillion. Its depository provides custody and asset servicing for securities issues from over 130 countries and territories valued at US$64 trillion. DTCC’s global trade repository maintains approximately 40 million open OTC positions and processes roughly 280 million messages a week. To learn more, please visit www.dtcc.com or follow us on Twitter @The_DTCC.
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