Upward Pressure in American Economy Leads to New Concerns, says GARP Risk IndexBy The Global Association Of Risk Professionals garp, PRNE
Wednesday, January 5, 2011
Quarterly survey of risk management professionals finds debt leveraging, banking health, macroeconomic factors among top influences on economic risk
NEW YORK and LONDON, January 6, 2011 - Debt leverage is still the key risk factor affecting the American
economy, despite concerns over a "new bubble" in commodities and
macroeconomic factors, according to the third quarterly Risk Index from The
Global Association of Risk Professionals (GARP, www.garp.org),
released today. The Risk Index, a quarterly gauge of global perception of the
risk factors affecting the U.S. economy, found overall perception of the
riskiness of the economy slightly elevated, as the Central Risk Index rose to
111 from 109 last quarter.
Perceptions of market volatility reversed their pattern from Q2, dropping
4.3 percent. Other factors comprising the index include banking health,
credit spreads, commodity prices, equity values and operational risk. The
Index measure of systemic risk in the U.S. economy, or how the economy
suffers major crises, has risen four points, from an aggregate score of 111
last quarter to 115 this quarter.
The fastest growing risk to the American economy, according to the Index,
was commodity prices, which increased 7.3 percent in its weight on the Risk
Index. GARP analysts attribute this to concerns over a steep rise in prices
across many commodity prices, perhaps presaging the next economic bubble.
"The Index this quarter reflects some uncertainty in the economy, having
been fielded just before a midterm election in the United States," said Chris
Donohue, managing director, GARP Research Center. "Not surprisingly, risk
managers around the world remain wary of the markets and the macroeconomic
factors in the economy. However, the emergence of commodities as a potential
danger area reflects a heightened sensitivity toward sudden movements in
prices in certain sectors of the American economy."
The Risk Index also found divided opinions regarding two major pieces of
financial legislation, the Dodd-Frank Act and Basel III. Overall, risk
managers felt that Basel will be the most helpful, with 60 percent claiming
it will have a "high impact" compared to Dodd-Frank's 46 percent. However,
risk managers in Asian countries found both to be similarly beneficial, while
risk managers in Europe and North America were quite skeptical of
Dodd-Frank-only 37 percent of risk managers in both regions felt that it
would have a positive impact.
To complete the current Risk Index report, GARP researchers contacted 913
risk managers between October 20 and November 5.
About The Global Association of Risk Professionals
The Global Association of Risk Professionals (GARP) is a not-for-profit
global membership organization dedicated to preparing professionals and
organizations to make better informed risk decisions. Membership represents
nearly 150,000 risk management practitioners and researchers from banks,
investment management firms, government agencies, academic institutions, and
corporations from more than 195 countries. GARP administers the Financial
Risk Manager (FRM(R)) and the Energy Risk Professional (ERP(R)) exams;
certifications recognized by risk professionals worldwide. GARP also helps
advance the role of risk management via comprehensive professional education
and training for professionals of all levels. www.garp.org.
Keith Campbell, G.S. Schwartz & Co., +1-202-986-2152, kcampbell at schwartz.com, or Dave Heinzinger, G.S. Schwartz & Co., +1-212-725-4500 ext. 327, dheinzinger at schwartz.com / NOTE TO EDITORS: To obtain a copy of the Risk Index report and underlying data, please contact Keith Campbell at kcampbell at schwartz.com
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