Only for more complex organizations, a more extensive technological infrastructure is needed. Let’s come to the answer to the question then. To have a well established, in other words, efficient risk management system, first we need to develop the risk culture within our organizations meaning that we need to make sure that at all levels every person understands the risks the institution is exposed to. It is the responsibility of top management to provide that kind of information by having a clear approach to risk, its appetite for risk and assigning responsibility for assuming and controlling risks. Therefore, the first step in risk management process is to identify the risks the institution is exposed to and to quantify those risks. Effective risk management requires that a consistent methodology be developed for analyzing risk. Important steps in risk management analysis are as follows: •  identifying the key financial flows;  •  determining the appropriate time horizon;  •  setting a benchmark;  •  defining the institution’s return objectives and views toward risk. As you all know, most progress has been made in the measurement of market risk and much work is now being done in many places to construct models for a better management of credit risk. Difficulties with credit risk measurement lies in the lack of statistics about individual default probabilities. Even if these default probabilities can be estimated reasonably accurately, it is still rather difficult to combine them into portfolio assessments.
Deep social and demographic changes have altered household behavior in terms of work, saving and consumption, while technological development, the densification of value chains and changes in consumer preferences broaden the range of firms’ choices about how and for whom to produce. All this will force the Central Bank to multiply its efforts to generate new data and analyses, to better understand the international transmission mechanisms, the financial behavior of households, the sources of systemic risks in the banking industry and the operation of key markets, such as those for financial derivatives and mortgages, among others. A better understanding of expectations-building mechanisms and the bases of consumer and business confidence can also help the Bank fine-tune the mechanisms to communicate its policy decisions so that it can provide reliable guidance to the markets. But the need for greater transparency does not end in monetary and financial policy, because the Central Bank, being a public institution, must be able to adapt its standards of transparency to the changing needs of markets and to the demands of Chilean citizens. It must also be able to identify and prevent new perils threatening the performance of its various functions. At this point, it is particularly important to ensure the continuity of the payment systems and operations whereby monetary policy takes place, because of the great technological developments in this area and the high costs of any failure.