The level of risk facing capital markets has increased significantly over the past six months with over two thirds of the 86 respondents reporting growing threat levels to their business, according to the latest KRM 22 capital markets risk sentiment index, compiled by Acuiti.
The index is a measure of how senior executives perceive a variety of risks facing their business, how prepared they are to deal with them and where firms are investing in risk management
The report found that the two greatest risks facing the industry remained cyber and market and they have been exacerbated by the Russian invasion of Ukraine which was just happening when when results were being compiled.
The conflict also saw geopolitical and counterparty risks as well as reputational damage move up the chart while regulatory monitoring and reporting also moved higher for banks due to the plethora of sanctions that the West has imposed on Russian individuals and entities.
The report also noted that market risk increased significantly for brokers and the buy-side and retained its position as the top concern for proprietary trading firms
As to their level of preparedness, the biggest mismatch between the extent of the risk and the ability to mitigate it was seen in counterparty risk, which has increased sharply in terms of the threat posed, as well as cyber risk.
Conversely, they said they were more able to deal with risks that have seen significant technology investment over the past decade, such as market risk and abuse. Despite this, less than half of respondents felt fully able to deal with the challenges posed by market risk.
They also pointed to the fallout from Brexit and climate risk as the risks they felt least able to handle although that was changing on the Brexit front.
In terms of top investment priorities, the main ones for banks are market, Â regulatory and operational risks while brokers are targeting cyber. operational and technology risks.
Meanwhile the buy-side plan to spend money mitigating market, liquidity and  cyber risks.
©Markets Media Europe 2022
[divider_to_top]
