Market risk has become the top concern of senior capital market executives, surpassing cyber risk for the first time, according to the latest KRM22 Capital Markets Risk Sentiment Index (CMRSI).
The report, compiled by management intelligence provider Acuiti, 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.
It is not a surprising result as markets have been shaken by the UK’s so called mini budget, the ongoing Russian was in Ukraine and rising inflation and interest rates.
Despite Prime Minister Liz Truss’ defence of her economic policies and the Bank of England intervention, investors remain worried. about the UK as well as global growth.
The FTSE is down 1.1% while the Stoxx Europe 600 index fell a smiliar amount. Meanwhile, sterling fell again to $1.0776 while the the euro is at $0.9642, as the U.S. dollar remains strong.
“Ongoing volatility across capital markets has resulted in a major increase in the risk of serious market dislocation,” says Will Mitting, founder and managing director of Acuiti.
He adds, “Significantly the H2 2022 Capital Markets Risk Sentiment Index also finds that senior executives feel less able to mitigate the threat of market risk as concerns about this factor grow.”
The survey also found that concerns over counterparty risk had increased – rising to third in the index – as margin calls and sharp market moves in the wake of war in Ukraine and rising inflation increased pressure on companies’ ability to navigate markets. This time last year, counterparty risk was the 6th biggest concern.
The risk of fallout from Brexit has also risen up the index to 9th from 16th this time last year and 13th in H1 2022 as the process to select a new lead of the Conservative Party in the UK raised renewed threats to diverge from MiFID II and other EU rules.
The overall levels of risk reported by firms has continued to increase over the past six months with 65% of respondents reporting a jump in overall risk levels and 14% reporting a significant rise.
This compares with just 31% reporting increases in risk this time last year but follows a similarly sharp hike in risk levels reported in the H1 2022 survey, which coincided with the Russian invasion of Ukraine.
