CMVM publishes 2021 Risk Outlook Report

​

19 January 2021

Today, the CMVM published the 2021 Risk Outlook Report which analyses the most significant risks expected for 2021 and identifies three main aspects: credit risk due to the strong impact of the pandemic crisis in non-financial companies, families and States; environmental, social and corporate governance risks impacting asset valuation and market practices; and market risk due to the difficulties in asset valuation and valuing risk in a context of high uncertainty on the evolution and long-term effects of the pandemic and of the monetary policy.

'The Portuguese financial system, particularly asset management, was among those that best withstood the 2020 pandemic shock at European level. Issuers and fund managers merit recognition for their resilient, flexible and focussed risk management. In view of the challenges and risks for 2021, it is important to build on lessons learnt and we remain observant, prepared to react and focused on offering families and companies, opportunities for savings and financing that are appropriate to their needs.'

Gabriela Figueiredo Dias | CMVM Chair

The pandemic crisis caused an increase in global macroeconomic and financial risk, mitigated by the monetary and budgetary policy measures adopted by authorities throughout 2020. In Portugal, despite the increase in credit risk, loan moratorium and business support measures have ensured the solvency of both non-financial companies and households. In 2021, the risk of an insolvency swell will increase significantly if the pandemic intensifies and the economic recovery is slower than expected. The moment of withdrawing some of the measures taken to deal with liquidity risks and the end of the moratorium on debt repayment, is also sensitive. Therefore, support for the real economy and the recapitalisation of companies will continue to be particularly relevant, allowing for as smooth as possible transitions when the end of public measures to support the economy and families occurs.

If negative externalities resulting from human action on the environment, society and corporate governance (ESG risks) are not considered, there is an increased risk of irreversible losses to the financial markets and the real economy. The materialisation of risks associated with the loss of biodiversity, inaction in combating climate change, negative social impacts, weaknesses in the governance of organisations and the greenwashing phenomena (among others) will have a significant impact on financial markets and in the real economy.

Likewise, the speed of exiting the pandemic crisis and possible changes in public policies to support the economy may increase market and liquidity risk in 2021, due to the potential impacts on the results of listed companies, in fulfilling debt payments, subscriptions and redemptions in asset management, the distortion risk of the price mechanism, in boosting the appetite for higher return assets and in the risk, among others, of the increase in investment gamification by investors.

The 2021 Risk Outlook report also analyses the potential risks for 2021 resulting from the increasingly widespread access of investors to digital channels, the risks of cyber-attacks and fraud, as well as other risks that may materialise and in relation to which regulatory authorities and supervision are watchful.

Additional information: