Clearwater Analytics: Asset managers report sharp rise in risk of all kinds
A comprehensive global study commissioned by Clearwater Analytics, which surveyed 250 senior executives at fund managers across the U.S, Europe and the Asia-Pacific region, finds rising credit and liquidity risks across nearly every category firms track.
Market risk has increased for 80% of asset managers over the past year, the largest rise of any risk category in the study, with 34% describing the increase as dramatic. Around three-quarters (77%) of respondents say credit risk has increased, with 51% saying it has done so dramatically.
Some 71% of asset managers have experienced increases in liquidity risk, and 36% say those increases have been dramatic. Meanwhile, 71% say concentration risk has increased with 29% saying it has been dramatic.
Looking across their operations, nearly three-quarters (73%) of asset managers say technology and cyber risk has increased, with half saying it has done so dramatically. Business continuity risk has increased for 80% of firms, with 32% calling the increase dramatic. People and process failures, such as errors in trade execution or inadequate internal controls, have increased for 75% of firms, with 24% calling the increase dramatic.
Reputational risk, meaning damage to a firm's brand from negative media, legal disputes, or poor performance that drives investor outflows, has increased for 69% of firms over the past 12 months, with 44% calling the increase dramatic.
ESG risk, meaning potential losses from investments failing to meet environmental, social, or governance standards, has increased for 77% of firms, with 31% calling the increase dramatic.
Competition risk, meaning the risk of losing market share to competitors due to poor performance or high fees, has increased for 72% of firms, with 24% calling the increase dramatic.
When asked which risks pose the greatest concern to asset managers over the next 12 months, almost two-thirds (62%) of research participants say technology/cyber risk. The next highest risk was liquidity risk (47%) closely followed by credit risk (46%). More than a third (37%) identified concentration risk as the biggest threat in the coming year, while 35% say people and process failures and 28% say market risk.
