Emerging Risks: An Overview

Abstract

One of the core functions of financial institutions is risk management. Until recently, most institutions have focused on concepts such as cyclical variations in their business and the economy, their exposure to low and even negative interest rates, and the consequences of various other macroeconomic developments and internal decisions on their profit margins, solvency, and efficiency, among others. Our world is changing, and individuals and businesses are increasingly affected by factors that arise from outside the economy and the financial markets, yet display multiple interactions with the eco-financial system. Today—arguably more than ever—financial institutions face a variety of new challenges that require them to seriously rethink their risk management and investment practices. Climate change, mass migration, political extremism, trade wars, terrorism, cybersecurity threats, and the current evolution of financial technology (FinTech) are just some examples of ecological, societal, and technological factors that affect and interact with our financial markets. This book aims to highlight not only the threats but also the opportunities associated with these emerging risks, thereby providing an inspiration for academics, practitioners, and regulators who already work in or are interested in this field.