Firms across capital markets are managing significantly elevated levels of risk following the Russian invasion of Ukraine with cyber risk, market risk and reputational risk rising up the list of concerns for executives.
According to the latest KRM22 Capital Markets Risk Sentiment Index, a measure of how senior executives across the globe perceive various risk factors facing their business, 73% of respondents said that the risk level facing their business had increased over the past six months. This compares with 40% pointing to an increase in risk in H2 2021.
Cyber risk, market risk, reputational risk and counterparty risk were the top four risks cited by respondents. Of those, reputational risk and counterparty risk have risen up the agenda and, while cyber risk and market risk remain the top two concerns, the level of perceived risk has increased significantly.
The Risk Index is calculated by a survey of senior capital markets executives who rate how they perceive various risks facing their business. Each respondent is asked to rate a series of risk metrics from low to critical. A score is then calculated for each risk metric by multiplying each response by -0.5 for a low risk, 1 for medium, 2 for high and 3 for critical.
The latest Risk Sentiment Index found that the perceived threat of a cyber-attack had shot up from a score of 139 in H2 2021 to 160 this report. Reputational risk had increased from a score of 90 to 118 and counterparty risk from 97 to 110, increasing 5 places in the overall index.
The increase in reputational risk was the biggest riser overall, driven by a marked increase among banks and brokers and stemming from concerns over dealings in Russia in the wake of the imposition of sanctions following the invasion of Ukraine. The increase in cyber risk also emanates from concerns over retaliations from Russian hackers.
For the buy-side, market risk shot up the agenda rising to the top of the list of concerns from 4th place last report with a score increasing from 90 to 155 among these firms.
Falling down the list of concerns were compliance readiness for new regulations, where the score fell from 108 to 102, internal technology risk, which dropped from 102 to 98 and market abuse, which saw the sharpest fall from 93 to 76.
Download your free copy of KRM22 Capital Markets Risk Sentiment Index at https://www.acuiti.io/capital-markets-risk-index-h1-2022/