DTCC issued its annual Systemic Risk Barometer Survey results, which identified geopolitical risks, inflation, and US political uncertainty, with emphasis on the 2024 US election, as the most significant threats to the financial services industry in the upcoming year.
Geopolitical risk was cited by 81% of respondents as the top risk for 2024, increasing from 68% last year. This is the second year in a row that it’s been ranked as the top risk, as global tensions and conflicts continue to impact markets.
Inflation was identified as the second most significant risk to the financial services industry, with 55% of respondents naming it as a top threat. Inflation decreased from 61% last year, with some respondents indicating that they expect inflation to be lower one year from now alongside decreases in consumer demand and economic activity.
“The notable and sustained rise in concerns around geopolitical risks can be directly attributed to the uncertainty created by the uptick in international tensions and conflicts. At the same time, inflation remains a challenging issue that continues to impact the risk landscape,” said Timothy Cuddihy, managing director and Group chief risk officer at DTCC, in a statement. “Firms must regularly review and evolve their risk management practices as the risk landscape shifts by conducting scenario planning exercises, implementing new, modernized recovery and resilience capabilities, and continuing to train their employees on the threat landscape.”
In addition to concerns over geopolitical risk and inflation, 51% of respondents ranked US Political Uncertainty/2024 US Presidential Election as a top risk. This topic was the top advancer this year, increasing from 21% last year, as respondents consider the impact of upcoming elections on market conditions and the industry.
Cyber risk closely followed at 50%, as respondents continue to express concerns around the threat landscape. Cyber risk has been identified as a top-five risk to the industry every year since the survey’s inception in 2013.
The two most “underestimated” risks for 2024 were sudden dislocation in financial markets and disruption, cited by 35% of respondents, as well as failure of key market participants, at 31%.
In addition to these areas, concerns around commercial real estate came through loudly in the responses, with many respondents noting low occupancy rates and post-Covid location strategies as key drivers of this growing area of risk.
“Our annual Systemic Risk Barometer continues to provide important insight to our firm, our clients and the industry by identifying the top risks to the financial markets for the coming year. Importantly, it also helps to increase dialogue on the potential impact of these risks to financial stability,” said Michael Leibrock, managing director and chief systemic risk officer at DTCC.