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DTCC survey reveals risk mitigation priorities

27 March 2014

Concerns over systemic risk event decline

Read more: DTCC Michael Leibrock

Despite an apparent ease in fears of a systemic risk event occuring in the next 12 months, a survey conducted by The Depository Trust & Clearing Corporation (DTCC) reveals that the vast majority of financial firms have increased spending on systemic risk mitigation.

The DTCC Systemic Risk Barometer analyses information provided by 218 respondents, including broker/dealers, banks, service bureaus, mutual fund companies, hedge funds and insurance companies. This year, the survey was further extended to regulators, academics and members of research organisations globally.

Only 9% of this year’s survey respondents (compared to 37% in 2013) said they believed the occurrence of a high impact market event in the next year was 'likely’.

"Even though concerns about a near-term destabilising market event appear to be abating, it is gratifying to see that this has apparently not translated into complacency and that the industry is becoming more diligent about protecting itself from such occurrences," said Michael Leibrock, DTCC chief systemic risk officer.

"Of the individuals we polled, 70% reported that their firms had committed more resources to systemic risk management activities over the past 12 months."

Respondents once again ranked the 'impact of new regulations’ and 'cyber security’ as the first and second most relevant risks to their firms. The third, fourth and fifth most relevant risks were 'a significant business continuity event’; 'disruption or failure of a key market participant’; and 'a major compliance or governance event’. These did not change materially from the 2013 survey.

When asked to rank the top risks relevant to the broader economy, the findings were similar with cyber security ranked first, followed by the impact of new regulations; a US recession; disruption or failure of a key market participant; and liquidity risk – an option added in this year’s survey.

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