CMVM publishes 2022 Risk Outlook Report

​

14 January 2022

The CMVM published today its 2022 Risk Outlook Report. Said analyses the most significant risks that are foreseen for 2022. Three main risks are identified therein: market risk, digitalisation and ESG (Environmental, Social, and Governance) associated risks.

In terms of market risk, any increase in the inflation and interest rates could reverse the level of gains in the equity market. These price corrections may be aggravated due to excessive leverage by some investors, who may be forced to sell positions. Faster-than-expected rises in interest rates and the emergence of new variants with greater associated disease severity will potentially induce greater volatility in financial markets.

The Risk Outlook also analyses the potential risks for 2022 arising from digitalisation. Herein, the risk of cyberattacks, cybercrime and fraud are highlighted, as well as risks arising from practicing unauthorised financial intermediation, offering instruments to investors that have little financial knowledge and disseminating inaccurate information. Another risk lies in the rapid growth of alternative and digital assets (such as crypto assets) that are mostly outside the regulatory framework.

Regarding the risks associated with the negative externalities that human activity has on the environment, society, and corporate governance (ESG risks), beyond a certain level, and if there is no accurate mitigation, its materialisation will make the respective negative effects, irreversible. The effects of human inaction in the transition to a sustainable economy will be felt, among others, in the price of energy, in the availability of raw materials and production of goods, and in social pressures, which will limit economic growth and will constrain inflation rates that will impact the performance of financial markets and the real economy. Challenges continue as to investors' perception and understanding of non-financial information, due to the lack of standardisation, thus exacerbating the risks of greenwashing and the incorrect internalisation of the respective externalities.

In the macroeconomic and financial context, the expected normalisation of the monetary policy, inflationary constraints, the phasing out of public support for families and companies and the end of moratoriums, will be particularly relevant challenges in 2022, as the financial situation could deteriorate for families and Governments and the increase in insolvencies in some activity sectors.

In addition to the withdrawal of the monetary incentives, the successive increases in energy prices, the disruption of supply chains, the increase in the costs of transporting goods, the scarcity of raw materials and labour, the climate of uncertainty and the lack of knowledge regarding the evolution of business models in the post-pandemic period, can slow down the recovery momentum. Therefore, support that allows for as smooth as possible transitions will continue to be relevant when public measures to support the economy come to an end.

Additional information: