What Are The Prospects Of The Financial Industry Amid The Threats Of Recession And Cyber Attack?

Eko B. Supriyanto, Chairman of The Finance. (Photo: Special)

JAKARTA - The financial services industry is still overshadowed by economic uncertainty. According to World Bank records, the economic recession will still threaten the global economy, which is caused by geopolitical conditions (wars), food and energy crises, rising inflation, and rising interest rates. The World Bank also projects that the economic growth of developed countries will be at the minus level in 2023.

It is feared that this condition will affect the Indonesian economy, and of course it will have an impact on these state business actors. Starting from increasing the cost burden, to declining income.

The impact will also occur in the financial services industry. There will be an effect on the distribution of financing, premium income, to increasing non-performing loans.

Currently, economic risks are shifting from the threat of a pandemic to the threat of global economic turmoil. This is marked by rising global inflation, geopolitical tension, food risk, energy, and financial crisis, as well as increased liquidity and rising interest rates that will increase the risk of stagflation.

Director of Government Securities, Directorate General of Financing and Risk Management of the Ministry of Finance, Deni Ridwan said, inflation is something that really needs to be watched out for because of the post-pandemic economic recovery, in which there is an increase in demand but the supply is limited.

"Energy is also one of the things that we need to underline, it turns out that the current energy crisis is not only because economic recovery is faster than expected but also a void in investment in the energy sector, especially in fossil fuels over the last few years," said Deni Ridwan in a discussion held by The Finance entitled Prospects and Challenges of Finance Industry in the Middle of the threat of Recession and Cyber Attack in Jakarta, Thursday, November 24.

In addition, economic recovery encourages the scaring effect that causes inflation. Marked by several G20 countries, interest rates have started to raise, including Indonesia, which is currently at the level of 5.25 percent.

Indonesia's inflation is still maintained at 5.7 percent due to the role of the state budget as a shock absorber. So another country why inflation is quite high because the budget role is already limited," concluded Deni.

However, the Indonesian economy is projected to remain good and will grow by about 5 percent. In the midst of a weakening global economic outlook along with various increased risks.

The government itself has so far prepared long-term plans for economic recovery after the pandemic. One of them is by creating new economic growth, as a catalyst for growth in the implementation of the structural reform agenda.

The main trends that have emerged after the pandemic are the new normal lifestyle, trade maps, new investments, awareness of green energy, and energy and food security.

"This is something that is shared, so we are trying to take advantage of this opportunity to be able to carry out structural reforms as an acceleration of economic growth," said Deni Ridwan.

Deni explained that the use of emerging trends and structural reform opportunities for accelerating economic growth include, first, the use of domestic production which will help the recovery of the real sector. Second, downstreaming of the high-value Natural Resources (SDA) industry which will encourage the domestic industry, increase employment and increase state revenue.

Then third, the development of EBT and the green economy transition that has been stated in the commitment of the NDC (Nationally Determined Contribution). Finally, the use of the digital economy and financial sector reform. This is important because Indonesia's vision in 2045 Indonesia is the fifth largest country in the world in terms of GDP with a value of 9.1 trillion US dollars with Gross Domestic Product (GDP) per capita of 23 thousand US dollars.

"Of course we have to do a competitive financial sector in the regional where we hope that the financial sector will be deep, innovative, efficient, inclusive, trustworthy and stable. We can see that economic development needs support from the financial sector that is deep, this need relies on saving, but we see that our national saving continues to decline compared to GDP," he said.

In addition to geopolitical conditions, another threat that must also be properly anticipated by the financial industry is cyber crime. The problems that have re-emerged have recently become homework that must be carefully resolved by business actors in the financial sector, along with digital development in the financial sector. According to OJK records, digital development is accompanied by an increase in the probability of cyber attacks.

So far cyber attacks are still dominated by the banking sector, then insurance companies. In addition, cyber attacks also cause losses to the financial services sector. Referring to data from the International Monetary Fund (IMF) in 2020, the estimated total annual average loss experienced by the financial services sector globally caused by cyber attacks amounted to 100 billion US dollars or more than Rp. 1,433 trillion.

The National Cyber and Crypto Agency (BSSN) also noted that cyber threats and attacks in the financial sector until September 2022 had reached 1.1 million cyber attacks, so that per day receiving attacks reached 124 thousand anomalies. Even so, according to BSSN, the results of verification of the assessment of the maturity of cybersecurity conducted on 22 banking institutions as much as 86 percent have entered level 4 or have entered the stage of managed implementation.

"A total of 86 percent of banks are at level 4, which means that cyber security implementation has been carried out in a manageable manner. So we will just have to provide recommendations from the results of these verifications for future improvements," added Director of Cybersecurity and Crypto on Finance, Trade and Tourism, Deputy for Cybersecurity and Economic Password of BSSN Edit Prima.

Furthermore, he also appealed to the financial sectors to be able to implement cybersecurity properly in accordance with the best practices set by Bank Indonesia (BI), the Financial Services Authority (OJK) and BSSN since 2016 through the G7 state forum.

Best practice which can be used as a reference for the financial sector is divided into eight things, where from eight things it is divided into two sides, namely one side for when there is a pre-incident incident and the other side when after the incident (post-incident) occurs.

"From the beginning, it must be developed how the framework and strategy in implementing cybersecurity in the organization must be developed, then later the governance must also be prepared in the context of cyber security that must be eradicated," he added.

The financial services industry, which is able to survive in the midst of global uncertainty and is also able to anticipate cyber attacks, should be appreciated for contributing to the national economy. For this reason, The Finance gave awards to 63 financial institutions (financial institutions) with the best performance in 2022, at the Top 20 Financial Institution Awards 2022 at Hotel Indonesia Kempinski, Jakarta, Thursday, November 24.

The financial institutions that received the award consisted of banks, life insurance companies, general insurance companies, and finance companies (multifinance). The award was given based on the rating results entitled Top 20 Financial Institutions 2022 conducted by The Finance on financial performance reports of four financial institutions in the last three years, from 2020 to mid-2022.

"This rating measures the performance of each financial institution from four (audited) financial institutions with the raw materials for financial reports in the last three years (periods)," said Eko B. Supriyanto, Chairman of The Finance.

The rate of Top 20 Financial Institutions 2022 uses the growth rates and important financial ratios in the four institutions. After measuring the growth and financial ratios are important, then grouped up based on the size of these financial institutions. A maximum of only 20 financial institutions are included as winners for each industry.

As a result, there were 63 financial institutions, consisting of 13 banks, 10 life insurance companies, 20 general insurance companies, and 20 multifinance companies which were considered to be the best. These 63 companies then received appreciation from The Finance at the Top 20 Financial Institution Awards 2022.

Selain 63 lembaga keuangan, The Finance juga memberikan penghargaan special awards kepada 14 lembaga keuangan tertif dalam produk dan inovasi digital, kepada banker terbaik dalam strategi bisnis, dan 17 direktur keuangan (chief excurive officer/CFO) terbaik dari empat lembaga keuangan.

This award is a form of appreciation for The Finance to the institutions and executives of the four best-performing financial institutions during the three-term financial statements. They deserve an award, because even though they are under pressure from the COVID-19 pandemic, they are able to show their best performance," said Eko.