Debt Leverage Still Leading Risk Factor in American Economy, Says GARP Risk Index

Oct 01, 2010, 08:00 ET from The Global Association of Risk Professionals (GARP)

- Quarterly survey of risk management professionals also finds market volatility, macroeconomic factors among top influences on economic risk

- Perception of Systemic Risk falling, but more acute than overall risk

- Risk Managers in China among the most optimistic about U.S. economic risk

NEW YORK and LONDON, Oct. 1 /PRNewswire-USNewswire/ -- Debt leverage is still the key risk factor affecting the American economy, despite the increased influences of a "jobless recovery" and other macroeconomic factors, according to the second quarterly Risk Index from The Global Association of Risk Professionals (GARP,, 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 unchanged, as the Central Risk Index remained steady at 109.   

The Index's largest gaining factor affecting perception of risk was market volatility, which increased 6.5 percent.  Other factors comprising the index include banking health, credit spreads, commodity prices, equity values and operational risk.  The Index measure of systematic risk in the U.S. economy, or how the economy suffers major crises, has dropped two points, from an aggregate score of 115 in the first quarter to 113 this quarter.

"The Index this quarter reflects some of the prevailing hypotheses about recovery from the global economic crisis," 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, while debt leverage is seen as one of the most risky pieces of the U.S. economy across the board, it is interesting to note that risk professionals in China, which holds nearly a trillion dollars of U.S. debt, express a high level of confidence in the US economy."

Across the globe, risk managers in China showed the least concern over the state of the economy, while Canadian risk managers showed the most across-the-board pessimism over risk in the economy.  Also, Risk Managers in Asia and Europe felt overwhelmingly (both regions over 70 percent) that legislation limiting the trade of derivative products would have a high or very high impact on stabilizing the American banking system, while fewer than half of American risk managers felt the same way.

To complete the current Risk Index report, GARP researchers contacted 280 risk managers during the month of July.

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®) and the Energy Risk Professional (ERP®) 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.

SOURCE The Global Association of Risk Professionals (GARP)