It’s all looking a bit hairy and bear-like going into 2023. The looming recessions in many major markets are making a lot of people in a lot of places very nervous. On the investment side, markets have been volatile since the pandemic and it doesn’t look like the next 12 months will be any different. Crypto winter has morphed into the crypto ice age as more and more regulatory enforcement actions are taken. Risks of all kinds abound, so how can firms better avoid the bear traps in the bear market?
I’ll be discussing exactly that with a panel of experts next week (you can register here for the Wall Street Horizon event if you’d like to listen in), but I’ll give you a quick preview. Market risk topped the list of concerns for 2023 of global respondents to a survey conducted by Bloomberg in December and it’s easy to see why after three years of black swan after black swan. We’re not out of the woods globally when it comes to the pandemic and the Russia-Ukraine crisis unfortunately rages on. Geopolitical tensions are at an elevated level globally and many in the market continue to watch China carefully for how relations with China, the US and the rest of the world will develop.
Unsurprisingly, all of these geopolitical risks have resulted in heightened cyber-warfare and as Firebrand highlights in its recent report on the trends to watch in 2023, cyber-crime innovation continues apace. It’s increasingly well-funded and well-organised, after all. The ongoing Ukraine crisis has increased activities such as hacktivism and nation state coordination of attacks, as well as destructive attacks focused on disruption rather than theft. Moreover, in addition to ransomware-as-a-service, the broader hacker-as-a-service has grown in prominence throughout the year, according to the European Union Agency for Cybersecurity’s (ENISA) Threat Landscape 2022 report. This further builds on the professionalisation of cybercrime noted in last year’s report and the coordination of different categories of cybercriminal for specific goals.
Cybercrime isn’t limited to hacking; the deliberate spreading of misinformation is a huge problem for market participants. This is especially problematic as trading based on sentiment analysis has increased over the years. Innovators may talk about the value of positive disruption but the real innovation is happening around market disruption of the most negative kind. How can firms plough through the increasing morass of data to make sense of the signals? Social platforms and once reliable news sources must all be heavily scrutinised.
Another significant risk we’ll likely be touching upon during the webinar is the ongoing regulatory crackdown on greenwashing. The environmental, social and governance (ESG) universe has evolved rapidly over the last few years and 2022 saw many more actions taken by regulators such as the Securities and Exchange Commission (SEC) and the Australian Securities and Investments Commission (ASIC) to address greenwashing. Extremely large fines were levied by the SEC and these are likely top of mind for firms this year. The fines are also the tip of the iceberg when it comes to the reputational hit of being caught for greenwashing, which in turn, impact’s your own firm’s ESG score as well as its share price.
These are only a handful of the bear traps awaiting as we head into the global recession, do listen in to the session if you’d like to hear the full list!