The threat is particularly acute for the financial industry, the DTCC said, due to the interconnected nature of global markets. One respondent said: “A cyber attack against a key market participant could precipitate systemic risk and de-stabilize markets.”
Investment in cyber capabilities continues to grow
Investment in and development of systemic risk capabilities has continued within the financial sector the survey found. About 66% of those surveyed said they have increased the amount of resources dedicated to identifying, monitoring, and mitigating systemic risk over the last 12 months. Additionally, 61% indicated their firm’s ability to identify, assess and manage both current and emerging systemic risks remains in progress.
Michael Leibrock, managing director and chief systemic risk officer at DTCC said: “The results from DTCC’s most recent survey have shown that the financial system, broadly speaking, continues to be increasingly interconnected, with new risks emerging and affecting the overall level and nature of systemic risk. While it can be difficult to predict with certainty when and how these newly emerging risks will impact the financial system, it is crucially important that firms continue to focus on implementing tools to detect and identify them as early as possible.”
Geo-political risks add to uncertainty
Broad geopolitical risks also emerged as a top risk facing the global financial system, according to the survey. Uncertainties around the election of the new US President and the UK’s exit from the EU were mentioned by respondents as well as instability in the Middle East, the impact of the ongoing refugee crisis across Europe, and the influence of Russia and China on global relations and the world economy. Respondents highlighted the unpredictable nature of world events, citing the potential for sudden escalation that could cause global market volatility and instability.
Leibrock said: “While cyber threats and geopolitical concerns are distinct risk categories, they can also converge and materialise in combination with each other. Several respondents rightfully point to the growing incidence and sophistication of state-sponsored cyber attacks as a particularly worrisome trend that is emerging at the intersection of both areas of risk.”
DTCC has been conducting Systemic Risk Barometer Surveys since 2013. The most recent survey was completed by DTCC clients and a range of participants across the global financial services industry in the third quarter of 2016.