The global economy remains in a fragile state. The ongoing uncertainties of Brexit may hang low in the minds of business leaders with European footprints. For those in Asia, North Korea’s on-going weapons tests coupled with perceived expansionism by China are not helping ease the concerns of executives in the financial services industry. One respondent to the annual DTCC Systemic Risk Barometer Survey (completed in Q3 2017) cited that “firms are making investments in safeguarding system access and part of that investment is the consideration of cyber insurance with their portfolio of risk mitigation strategies.” BY THE NUMBERS Cyber concerns Cyber security risks continue at the top of the business agenda of leadership at financial services, according to 36% of respondents to the annual DTCC Systemic Risk Barometer Survey. Overall 78% of respondents put cyber risks within their top 5 concerns – a 7% increase from the last survey. “Cyber risk continues to intensify across all sectors of the financial ecosystem and it’s becoming increasingly clear that no area is immune to this threat. As a result, it is critical that firms prepare response plans, maintain playbooks and practice cyber-attack simulations as key components of their risk management efforts,” stated Michael Leibrock, DTCC’s Chief Systemic Risk Officer. Fintech: a destabilizing factor in 2018? A new factor in the 2017 survey is Fintech risk reflecting feedback from 15% respondents who viewed Fintechs as having an important impact to the business. While Fintech is generally recognized as holding great promise, these results demonstrate a growing awareness of potential emerging risks, highlighting the need to evaluate both risks and rewards associated with Fintech initiatives. As one respondent said, “The evolution of Fintech has outpaced the ability of the financial services industry to adapt to such rapid changes. The risks potentially posed by Fintech could have substantial impacts on the financial services industry and regulators will need to enhance their oversight capabilities for this emerging area.” Although a majority of respondents do not believe a destabilizing event will occur in 2018, they project a continued increase in spending over the next twelve months on identifying, monitoring and mitigating systemic risks, a continuation of the trend from previous surveys. “Firms realize that managing risks and enhancing resilience requires continued vigilance, as well as additional investments. That realization is evident by the projected uptick in spending on risk monitoring and mitigation,” Leibrock said.
The swift evolution of the fintech sector has led to it potentially posing a systemic risk to the financial industry, according to the annual Systemic Risk Barometer survey by trade record-keeping and reporting services repository DTCC. It found 36% of respondents saw fintech as a source of financial sector risk, despite the industry showing great promise, while one survey participant warned that regulators would need to "enhance their oversight capabilities". Most respondents foresaw increased spending to mitigate fintech risks.