Wide-ranging strategies have included consolidation, reengineering of business processes and reassessment of business models to fit the new financial landscape. Leveraging on advancements in information and communication technology is important to improve business automation and efficiency levels. To achieve a higher level of operational efficiency, rationalisation of business networks and outsourcing are gaining greater significance. The journey is however never-ending, to adapt to the changing needs of the market, and at the same time, taking into account all the potential risks. The need to enhance the capacity at the firm level is not limited to improving the way business is conducted and the level of efficiency in doing business. The financial institution, as a service provider, relies heavily on human intellectual capital which contributes to the innovativeness and competitiveness of the institution. Thus, human capital has been constantly sharpened through continuous development programmes and challenged to maximise its full potential. Towards this end, Bank Negara Malaysia has established the International Centre for Leadership in Finance to provide an avenue for the development of industry leaders especially in this region. In the wake of the growth in the volume and complexity of financial transactions, and worldwide integration of financial markets, risk management has increasingly become a key concern. Sound risk management practices will minimise adverse consequences faced by financial institutions during periods of uncertainty. Effective risk management systems facilitate the measurement and management of risk exposures, thus minimising potential future losses.
People may well question and in fact some already have the Bank’s grounds for its concerns and its strongly worded message, bearing in mind the short-term and long-term downturn in inflation, slower credit growth, lower oil prices and substantially less wage drift than was feared. The answers are obvious from the Bank’s core writings on these issues. They show that a tight monetary stance must be maintained for longer than would seem to be generally expected. Inflation has certainly slowed down but it is still running high and will continue to do so, and for quite a while will remain incompatible with the target and main tasks assigned to the Bank. Almost everywhere we look, strong pressures persist in the economy. The labour market is greatly overstretched and labour demand is enormous. This has been met with heavy imports of labour and it is questionable whether such a swift influx is necessarily beneficial or healthy for Iceland in the long run, despite making the battle with inflation easier for the moment. In the banking sector, credit growth remains robust even though it is now slower than at the peak, and is still unsustainable in the long term. Now that the banks have fortunately managed to secure medium-term funding, the risk is that they will become more complacent and ease their restraint. Such signs seem to be emerging. The housing market appears to be picking up again and household and business sentiment is still very upbeat.