The Depository Trust & Clearing Corporation (DTCC) has published its annual Systemic Risk Barometer Survey. The results should come as no surprise.
According to DTCC:
- 68% of survey respondents cited Geopolitical Risks & Trade Tensions as a top threat, up from 49% last year
- 61% of survey respondents identified Inflation as a top threat, up from 34% last year
- 47% of respondents ranked Cyber Risk as a top risk, a decrease from 59% last year, driven by the growing sophistication of threat actors, the proliferation of new technology adoption and an increasingly interconnected marketplace.
Notably, most respondents gave COVID-19 a pass as it has moved from global pandemic to an annoyance (except perhaps in China).
The geopolitical risks start in Ukraine and then move to China. As Russia slowly loses the war they started, the risk is rising for a potential escalation – perhaps with tactical nukes, or maybe some sort of leadership change in Moscow. Who knows what type of leader will replace Putin, but you can guarantee they will not be a pushover. And a change in leadership can have repercussions elsewhere.
As for China, the tensions continue to inch upward regarding Taiwan. China continues to test Taiwanese airspace while asserting the island is just an extension of the mainland. If China makes a move, there is a good chance the US will step in. Then, all bets are off.
The inflation + rising rates tune has been ongoing and will eventually end. The question is when.
Michael Leibrock, Chief Systemic Risk Officer at DTCC, said the increase in geopolitical consners shows how quickly the threat landscape can evolve.
“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.”