DTCC Connection

Dec 05, 2016 • DTCC Connection

Assessing the Impact of Geopolitical Risk

By Theresa Paraschac

Marcel Lettre
Marcel Lettre, Under Secretary of Defense for Intelligence at the U.S. Department of Defense

The increasing impact of geopolitical threats on global financial markets was a focus of discussion during the DTCC Client Risk Forum held in New York on November 15.

Marcel Lettre, Under Secretary of Defense for Intelligence at the U.S. Department of Defense and DTCC’s Mark Wetjen, Managing Director and Head of Global Public Policy, highlighted emerging threats and a range of potential risk across global markets. DTCC’s recent Systemic Risk Barometer echoed a similar message, with more than 80% of respondents identifying broad geopolitical risk as a key concern.

As the top civilian intelligence advisor, Under Secretary Lettre assists the Secretary of Defense in assessing risk, shaping counsel provided to the U.S. Administration and applying intelligence gathered to impact the Department’s operations around the globe. He highlighted six areas of risk that motivate his approach and counsel to U.S. Defense Secretary Carter: (1) the ISIL campaign and risk of counter terrorism; (2) the role of Russia and an increasing concern regarding aggressive activity; (3) cyber security; (4) the importance of stability in the Asia Pacific region; (5) the proliferation of weapons of mass destruction; and (6) the continued pursuit of security and stability in Afghanistan.

Wetjen and Lettre discussed the potential impact recent events – including Brexit and the U.S. Elections – could have on areas of risk and the Department’s continued monitoring of events and trends. The Under Secretary explained that the intelligence community approaches risk through both the collection of secrets in addition to insight provided by expert communities. The changing nature of data availability, collection and the ability to draw insight was identified as a recent trend for both the private sector as well as the government.

When asked if the Department was surprised by recent events, Lettre responded that the intelligence community is often surprised. “In the case of these trends we are seeing, it is difficult at the end of the day to have the data available, and assess and analyze it in a real time way with a high enough confidence to be able to identify trends. For intelligence and other sectors as well, that leads to recognition that some amount of uncertainty will be present, and to risk mitigation strategies that acknowledge that uncertainty.”

Mark Wetjen
Mark Wetjen, DTCC’s Managing Director and Head of Global Public Policy

Discussing the potential for future change in U.S. strategy, Lettre explained that in some regions, a retrenchment may occur due to uncertainty and in other regions, a redoubling of activity could result. “A vein of uncertainty is something that we believe will characterize the coming months,” said Under Secretary Lettre.

Cyber Attacks a Concern

The impact of cyber attacks and the industry and government’s ability to deter and respond was also a key topic of discussion. “As that threat evolves, it does require a much more fundamental look at questions of the effectiveness of our deterrence, how we can quickly and with high confidence characterize attacks, and probably most importantly, at the speed of cyber react to and mitigate against damage…and pursue the resilience necessary to be able to operate through and…bring back our systems up online and keep critical infrastructure,” stated the Under Secretary. Coordinated efforts among the Department of Homeland Security, the Federal Bureau of Investigation, the National Security Administration and U.S. Cyber Command are underway to build out capabilities to allow enhanced deterrence, response and risk mitigation of cyber attacks, he explained.

Following up on the discussion regarding cyber capabilities, Wetjen raised the question of whether increased policy maker activity is needed to improve information sharing. Lettre responded that while information sharing is key, recent unauthorized disclosures have raised questions and complicated the ability of government and private sector to collaborate in identifying solutions. “The capabilities that are resident in entities like the FBI, the National Security Agency and the Department of Homeland Security in being able to scan for inbound cyber threats that are advanced and technologically sophisticated is unparalleled due to the level of U.S. government investment over years that has gone into building those indications and warning capabilities,” he explained. “We need to find a way to have that capability protect the nation and government in a way that also protects the industry.”

Under Secretary Lettre concluded the discussion by reiterating the need for collaboration and maintaining stringent risk controls. He explained that if you are in the risk mitigation business, “…it is very reasonable to make assumptions that something big will happen and continuously be scanning to understand where those risks and shocks can have the greatest effects and building strategies and capabilities to prevent and deter in the first place, and mitigate and build resilience when they do happen.”

dtccdotcom