April 23, 2024
Finance

Why worry? Top finance executives on the year’s biggest risks


Last year was battered by the same headwinds that led many to christen 2022 the year of the ‘permacrisis’.

Inflation, rising interest rates and geopolitical tensions continued to hit economies around the world and affect financial services in Europe. Investment banks made their deepest job cuts since 2008, culling thousands of roles as trading fees flatlined and an expected rebound in dealmaking never materialised.

Fund managers and law firms followed suit, while Big Four accountancy firms pulled the trigger after staff turnover plummeted and revenue stalled. While worries remained about Russia’s invasion of Ukraine, Israel’s war with Hamas started in October, presenting the world with another brutal conflict. Will 2024 bring more of the same? Or will this year see a new set of threats?

David Hunt, CEO, PGIM

“Most of the major risks we’ve seen over the past five or six years, such as the pandemic, two wars, oil-price shocks and inflation, have been much more idiosyncratic in nature, coming from a wide variety of sources, and are actually more important than the traditional business-cycle risks that have historically been seen. So the big risk is that portfolios are constructed solely for the old world of business cycles rather than the new world of more idiosyncratic geopolitical and national security volatility.”

Bob Diamond, ex-Barclays boss and CEO of Atlas Merchant Capital

“The most obvious risks would be around rates and the economy. The Fed appears to have engineered a soft landing but surprise to the upside on inflation would reshape the view of rates and portend poorly for economic performance. Beyond that, the other major area of concern would be around political risk, with elections due in the US, UK and elsewhere.”

Clare Woodman, head of Emea, Morgan Stanley

“Despite the recent encouraging headline inflation figures and analyst expectations of interest rate cuts in 2024, any sign of resurgent inflation could see central banks raising base rates or keeping rates higher for longer. Higher interest rates would then continue to weigh on borrowing, with knock‑on effects on advisory deal flow, underwriting and the industry and economy more broadly.”

Farmida Bi, Emea chair, Norton Rose Fulbright

“The world has been buffeted by geopolitical events in recent years and this is likely to continue in 2024 when half the world’s population will go to the polls.

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“The results may impact markets worldwide and all businesses need to be prepared for that.”

Bea Martin, president of Emea, UBS

“We expect 2024 to be marked by continued economic uncertainty and geopolitical instability. These geopolitical risks not only impact our clients and employees, including those across our Emea locations, but they also present practical issues that the whole industry will continue to navigate, such as ongoing sanction regimes, elevated cyber risk concerns, a higher inflation and interest rates environment, and continued market volatility, to name but a few.”

Sandro Pierri, CEO, BNP Paribas AM

“In 2024, the cash that drove economic activity in 2023 will start running low. In the US, excess savings will soon be spent, and business investment will wane. Europe is more vulnerable to recession risk and will face stagflation, while China struggles to resolve its property crisis. Tighter financial conditions will weigh on economic growth and corporate profits. Fiscal support may reverse as governments focus on debt reduction. The key risk is that growth slows by more than markets expect.”

Bidhi Bhoma, CEO, Liberum

“For the UK, negative factors pushing up inflation and expectations around interest rates not coming down remain key risks. For UK capital markets, we cannot afford for the dearth in IPOs and low levels of capital raising to continue — it is a big risk, not only for our sector but also for the economy as a whole. There are now only 1,908 companies trading on the LSE — down from almost 2,500 in 2015.”

Martin Gilbert, executive chair, AssetCo

“Geopolitics poses by far the greatest risk to investment markets and returns. The invasion of Ukraine created the surge in the oil price that triggered the return of inflation in 2022, while events in Gaza have led to more instability. 2024 will be the greatest electoral year in history, when countries with half the world’s population go to the polls, so the potential for further geopolitical upheaval is considerable.”

Verena Ross, chair, Esma

“Markets are adapting to a higher-for-longer interest rate environment in a context of ongoing uncertainty about the macroeconomic and the geopolitical situati

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“Two examples of areas where risks may materialise in the context of this challenging environment are: real-estate markets with higher interest rates impacting real-estate valuations and refinancing costs; and corporate bond markets, where we see a risk of a situation where fundamentals and market valuations are not aligned.”

Ian Simm, CEO, Impax Asset Management

“Spurred on by the arrival of El Niño, 2023 was almost certainly the hottest year on record, with many areas experiencing devastating weather-related damage. Society’s response to major environmental issues will continue to remain in focus in 2024, building on recent policies such as the US Inflation Reduction Act and the EU Green Deal, which are channelling significant capital flows into clean energy and infrastructure. Biodiversity loss will also attract increased investor interest ahead of the COP16 global biodiversity summit in October 2024.”

Richard Houston, senior partner, CEO, Deloitte UK

“The biggest source of risk for businesses is uncertainty and the challenge this creates for confidence and decisions on investment. The wider geopolitical environment is a key contributor to this uncertainty — businesses are looking to governments for long‑term thinking and commitment on decisions.”

Stefan Hoops, CEO, DWS

“The coming 12 months will be characterised by a large number of elections. In the short term, this could lead to significant market reactions — higher risk premiums for bonds, falling share prices, increased volatility, a flight to supposedly safe investments. History tells us that such reactions don’t last long, but viewed through this lens, 2024 looks set to be a continuing roller-coaster ride.”

Dame Jayne-Anne Gadhia, founder,  Snoop

“Ongoing geopolitical tension and elections around the globe pose significant downside risks around uncertainty and instability in 2024.”

Anna Anthony, UK financial services managing partner, EY

“If 2023 was the year of generative AI adoption, 2024 will be the year for upskilling the workforce and navigating its risks, its regulation and its ethical use. Generative AI has rapidly risen to the top of financial services board agendas and care must be taken to ensure its safe use. It will be critical for industry to work closely with government and regulators as AI regulation in the UK is furthered.”

To contact the author of this story with feedback or news, email FN Staff



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