Cyber risk remains to threat to financial markets

Cyber risk remains the top threat to the global financial markets in 2020, right next the COVID-19 pandemic and geopolitical tensions, according to the survey by The Depository Trust and Clearing Corporation (DTCC).

In particular, respondents highlighted the increased sophistication of attacks as well as the industry’s growing digital footprint as key drivers of this continued area of risk, with 24% of respondents having said that cyber risk was their top overall concern and a further 59% cited it as one of the top five risks.

Additionally, a number of respondents believed the pandemic would continue to impact industry by disrupting supply chains and driving market volatility, followed by increased concerns related to maintaining effective cybersecurity practices in a remote work environment.

At the same time, geopolitical and trade tensions were a significant risk for nearly half of the survey’s respondents (49%), with many citing concerns over the potential for growing state-sponsored cyber attacks.

“The survey shows that cyber risk is pervasive; it’s striking to see its impact extend across multiple top threat areas,” Michael Leibrock, DTCC chief systemic risk officer, said.

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“When describing the pandemic, risk managers stated that it left the industry more vulnerable to cyber crime. As a result of this and other drivers, it is critically important that firms continue to bolster their response plans, practice simulations, and frequently review their cybersecurity and risk management practices to assess whether they’re staying on top of this evolving threat.”

Also, two risks saw significant increases in this year’s survey and these were climate change and inflation, with 38% of respondents saw climate change as a top five risk, up from 20% last year, while inflation was identified by 34% of respondents, up from just 7% last year.

Additionally, some respondents expressed concern that we could be at a “tipping point” with climate change – and that it would remain to be seen whether global economies would address it proactively or reactively.

As far as the inflation risk was concerned, 77% of respondents said they expected inflation to be equal to or higher than current levels a year from now, with some citing the belief that inflation did not appear to be transitory, and that it may slow down the economy as it weighed on purchasing power.

However, 63% of respondents said they were concerned that interest rates would be kept low for too long, creating continued inflationary pressure and/or asset bubbles.