Michael Leibrock DTCC
(Michael Leibrock, Managing Director in DTCC’s Financial and Operational Risk Management division)

Geopolitical risks push aside cyber-worries for 2023

War and trade tensions trump cyber-fears for 2023, according to the Depository Trust & Clearing Corporation’s (DTCC) annual Systemic Risk Barometer Survey.

Almost 70% of respondents cited geopolitical risks and trade tensions as a top threat (up from 49% last year), with inflation (61%) a close second, (up from 34% last year). Respondents cited unknowns around how long inflationary pressures may last, as well as the impact of monetary policy and supply chains as key reasons behind their concerns.

Cyber Risk was cited by 47% of respondents as a top 3 risk (a decrease from 59% last year), followed by the threat of a US economic slowdown (40% vs 17% last year) and Federal Reserve monetary policy (35% vs 28% last year) to round out the top five spots.

(Source: DTCC Systemic Risk Barometer Survey )

“The dramatic increase in concerns around geopolitical risks and trade tensions, inflation and US economic slowdown reinforce how quickly the threat landscape evolves and the importance of regularly monitoring the external environment to gain intelligence into potential shocks to market stability,” said Michael Leibrock, Managing Director in DTCC’s Financial and Operational Risk Management division.

“As a result, firms must continually review their risk management practices and procedures, conduct scenario planning exercises and ensure their operating structure is nimble to protect themselves and the broader industry.”

In other year-on-year changes, funding liquidity risk was not one of the top risk concerns identified by respondents, but did rise to 12% from 9% year-on-year.

Based on feedback received, DTCC identified some noteworthy regional differences. In relative terms, North American respondents are more concerned with Cyber Risk, U.S. Economic Slowdown and U.S. Political Uncertainty. Meanwhile, respondents outside of North America are more concerned, also in relative terms, with Asia Economic Slowdown, Climate Change and Housing Markets.

The DTCC poll of the global financial services industry has been running since 2013, and serves as an annual pulse check to monitor existing and emerging risks that may impact the safety, resiliency and stability of the global financial system.