“Some 79% of global risk managers place a high probability that European sovereign crisis will have a meaningful impact on the integrity of the U.S. financial system, with 58% of risk managers indicating a high level of concern about the capitalization of U.S. financial institutions.” –From the latest quarterly Risk Index report compiled by the Global Association of Risk Professionals
Truckers well understand the slumping global economy – particularly here in the U.S. – poses growing risks to their operations, though freight volumes are still doing well, so far, which is keeping America’s transportation sector on far better footing than other industries.
Still, viewed from a global perspective, economic risks are rising across the board – and no one knows that better than risk managers themselves; those professional worriers who try figure out just how close to the edge of economic trouble the world is at any given moment.
According to the latest quarterly data released by the Global Association of Risk Professionals (known as “GARP,” believe it or not … strange ... I seem to remember Robin Williams playing a character with that same name in a movie back in the 1980s …) lingering structural imbalances and doubts about economic growth and financial system health are creating a negative shift in the outlook among risk managers worldwide.
GARP’s “Risk Index,” which monitors current global perceptions of risk factors capable of triggering a systemic risk crisis in the U.S., jumped more than 2.5 points to 110.5 in the second quarter this year, closing in on the historical high reached in the third quarter of 2010. Perceived risk associated with macro-indicators (up 9.26%), banking health (up 8.65%), credit spreads (up 4.85%) and financial leverage (up 3.48%) all contributed to the increase, the group noted.
Among macro-economic indicators, anxieties about the U.S. current account deficit increased 11%, and risk managers expressed a strong view that U.S economic growth is stalling. Concerns about U.S. banking fundamentals were reflected in the Risk Index, with nearly 58% of risk managers indicating a high level of concern about the capitalization of U.S. financial institutions.
Unresolved sovereign debt issues abroad also continued to the uptick in risk perceptions, with 79% of global risk managers surveyed now placing a high probability that the sovereign crisis in Europe will have meaningful impact on the integrity of the U.S. financial system. That’s a 16% increase from quarter to quarter, GARP noted.
Risk managers domiciled in Hong Kong, China, and South Korea also appear to be more concerned about the prospects for US systemic risk then their global counterparts, noted Chris Donohue, managing director for GARP’s research center.
“The divergence in risk perceptions by geography is an interesting trend we have observed in the survey recently,” he said. “Risk managers in Hong Kong, South Korea and China may be more attuned to structural imbalances abroad that could create a systemic risk threat in the U.S.”
In one positive sign, at least, GARP’s Risk Index found a 13% decline in risk managers ranking commodities in the two riskiest categories – a significant reversal from the previous Risk Index analysis, Donohue said.
“The improvement in perceptions associated with energy commodities likely stems from a combination of factors that have helped create a slow steady decline in oil prices,” he explained. “The perceived threat of slowing global economic growth is likely forcing a re-evaluation of global oil demand.”
That’s something at least, but it would be a poor trade indeed to get the cost of oil to drop (and thus spark a decline in diesel fuel prices) if it results from further economic malaise, both here in the U.S. and across the world.