The TRADE 56 - Page 62

[ A D V E R T O R I A L ] The rise of uncertainty What new considerations do securities industry participants need to take into account in elaborating their commercial and operational strategies? A popular question from panel moderators and journalists to people in positions of corporate responsibility is: “What keeps you awake at night?” The honest answer is probably the same things that keep other people awake at night. What I’d like to set out here, however, are some of the recent developments that need to be con- sidered during waking hours for their potential impact on strategic decision-making and, if necessary, put out of mind before turning in for the night. In the space available, I’d like to identify some areas of poten- tial concern – more of a survey landscape than a list of considered solutions to anticipated problems. Compliance spend The first is regulation. While most financial services firms are resigned to devoting increasing resources to compliance in the near- to medium-term, there are a number of dangers I see that can- not be addressed simply through extra spend. Reports suggest, for example, that a repeal of at least part of Dodd Frank is under con- sideration in the USA. This leaves firms uncertain about where to devote the time, money and effort required to ensure compliance. Less widely reported is the status 62 // TheTrade // Summer 2018 of negotiations between the EU and Switzerland on the status of equiv- alence in the regulation of financial services. There is no dispute over the technical equivalence of the Swiss regulations; yet recognition of equivalence has been limited to only a year. Such an outcome might act as a warning to those engaged in bringing Brexit negotiations to a successful outcome. While the UK may well replicate many of the EU regulations in an effort to achieve equivalence, the Swiss experience suggests that political calculations are not always predictable. Political uncertainty A second area of uncertainty arises from political developments. A as evidenced by attitudes to the EU budget. Friction in an organisation that is used to moving forward through unanimity in its key deci- sion-making bodies could lead to a slowdown in its ability to progress its engagement with non-EU actors. At the same time, the much-re- marked shift in global economic power from west to east will have implications – as yet unclear – for the global currency and interest rate environment even without the new banking crisis and recession which I believe is inevitable, if difficult to predict from a timing “The much-remarked shift in global economic power from west to east will have implications – as yet unclear – for the global currency and interest rate environment even without the new banking crisis and recession which I believe is inevitable, if difficult to predict from a timing perspective.” sharper nationalist sentiment in parts of the EU, for example, could, if reinforced, complicate the man- agement of that regional grouping perspective. As we discovered in retrospect from the last crisis, certain levels of debt, whether sovereign, corporate or personal,