Michael Leibrock, Chief Systemic Risk Officer at The Depository Trust & Clearing Corporation (DTCC) sat down with Focus recently to discuss the results from DTCC’s Q3 2017 Systemic Risk Barometer Survey.
Michael, please tell us about the DTCC Systemic Risk Barometer.
The DTCC Systemic Risk Barometer survey is a semi-annual pulse check that monitors emerging trends on significant risks that may impact the safety, resiliency and stability of the global financial system. It is designed to help identify trends and foster industry-wide dialogue on potential threats to financial stability. DTCC has conducted Systemic Risk Barometer Surveys across the global financial services industry on a semi-annual basis since 2013.
What were the some of the key findings from the recent Systemic Risk Barometer Survey?
While the survey results were broadly aligned and consistent with expectations and industry focus areas, there were a number of new findings.
Given the geopolitical instability around the world, geopolitical risk jumped 17% - the largest percentage increase of all risks included in the current survey. Geopolitical risk ranks as the number two overall risk behind cyber risk, with slightly over 20% of respondents citing geopolitical risk as the top overall risk.
On the topic of cyber risk, threats continue to intensify across all sectors of the financial ecosystem and it’s becoming increasingly clear that no firm or segment is immune to this threat. It came as no surprise that cyber risk was identified as the top overall threat to the broader economy by more than a third (36%) of respondents. In response to this ever-growing threat, industry participants are continuing to prepare, with one respondent noting 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.
Fintech risk was a new category in the recent survey. What did the survey results reveal regarding fintech risk?
Yes, fintech risk was included in the survey for the first time and it was acknowledged as a significant source of risk by 15% of respondents. While fintech is generally recognised as holding great promise, many fintech offerings are still nascent, making it difficult to assess their impact on financial stability. However, the survey results demonstrate a growing awareness of potential emerging risks, highlighting the need to evaluate both risks and rewards associated with fintech initiatives.
We recently addressed fintech’s potential impact on financial stability in our recent white paper, Fintech and Financial Stability – Exploring How Technological Innovations Could Impact the Safety & Security of Global Markets. In the paper, we provide a framework of nine key factors to assess when considering fintech’s impact of financial stability.
How will DTCC utilise the results from the DTCC Systemic Risk Barometer Survey?
DTCC utilises these survey results to benchmark our risk management framework and industry initiatives versus the risks that have been prioritised by our clients. DTCC shares the results of these surveys with the industry in order to promote transparency, foster collaboration, exchange best practices and risk mitigation strategies on the collective challenges impacting the financial services industry.