DeLisle Worrell: Risk and efficiency
Opening remarks by Dr DeLisle Worrell, Governor of the Central Bank of Barbados, at the
Regional Central Banks Information Systems Specialists (RCBISS) Annual (XXIII)
Conference, Bridgetown, 3 June 2013.
* * *
Today I want to celebrate with you an outstanding success story of Caribbean regional
integration. For over two decades information specialists from central banks from across the
region have met like this, to network among yourselves, share common experiences and
take advantage of each others' expertise. Similar networks now exist in almost every sphere
of central banking activity in the region, to such a pervasive extent that we now take them for
granted. We should commend ourselves on this achievement, and seek to use our networks
ever more effectively, in attaining the objectives of our central banks.
That is what this conference is about. How do we use the opportunities which new
technologies offer us to deliver central banking services as efficiently as possible, without
exposing the banking system to unacceptable levels of risk. We need to pay attention to all
the elements in this statement.
We should always bear in mind that the ultimate goal is to make our central banks more
efficient in providing the services which are our responsibility. Meetings like this one are an
opportunity to ask ourselves how well we are performing in this regard. Are our technologies
being used to provide faster and more efficient banking services for the government, the
commercial banks and other financial institutions that we hold accounts for? Are our
transactions in government securities, foreign currencies and securities, and other financial
transactions increasing in efficiency as we improve our technologies. Are we able to bring
information more effectively to bear in the formulation of economic policy? And are we
communicating more clearly and persuasively to the general public, with cogent analysis that
is fully backed up with relevant data? Is our oversight of the financial system keeping up with
the world's best regulatory guidance? The answers to these questions will tell us how
effective our information technology strategies have been, and how we might need to adjust
our strategies in pursuit of further gains.
The second part of my statement above refers to maintaining risks at an acceptable level.
The management of risk is a very complex matter, and I can make only a few observations
about it in this morning's address.
First we have to determine what is an acceptable level of risk. That depends on the cost of
the risky event, at every level of risk, and the availability of insurance against that risk. There
is a nontrivial risk, every time you go out in your car, that you will become involved in an
accident. That doesn't prevent us from driving our cars, even though the cost of an accident
may be considerable, because we have insurance.
Secondly, we have to consider the impact of risk minimisation on our efficiency. We can
minimise the risk of damage to our car by using it as little as possible, and taking the bus to
work and school. Not many Barbadians are persuaded that is an efficient thing to do.
Thirdly, all of us have incorrect perceptions of risk. Most people don't realise that the risk of
being murdered is actually lower than the risk of dying in a car accident, almost anywhere in
the world. And even statisticians who are aware of it don't derive any particular reassurance
from that knowledge.
Fourthly, there are the risks we cannot know. On CCTV on Saturday evening I watched an
animated debate between experts on either side of the debate about genetically modified
foods. The truth of the matter is that the current generation of genetically modified foods has
not been around long enough, in sufficiently widespread use, for us to know what the long
term effects might be. The same is true of prolonged use of cellphones and computers.
There are more technical imponderables with respect to the measurement of risks that
cannot be readily explained in a short speech. For those who have an interest, I can
recommend the excellent book "The Black Swan" by Nassim Taleb, which I reviewed for the
Central Bank's Economic Review, available on the Central Bank of Barbados website.
The complexity of the IT security challenge is aptly illustrated by an email members of the
Barbados Information Society received from the late great James Corbin, just before his
tragic death. In it he reported that computer power was now available to uncover even the
most secure password, by a massive process of iteration, in shorter times than we would
have expected. Does that mean we should not have secure passwords? Absolutely not; we
should be as secure as is reasonable, using numerals in combination with upper and lower
case letters. But I, for one, will not henceforth ever compose a password that is longer than is
called for by the programme or service I am using.
In view of the complexity of the issues, and the number of unknowables, what we may expect
of a meeting like this one is a thorough exploration of the issues, rather than definitive
answers. The world we live in is increasingly complex, and things are changing all the time.
In order to do well in the modern world, we have to cope with uncertainty as a way of life. We
must develop the insights that help us to adapt our strategies in light of changes, in order to
keep in sight our goal of greater efficiency in everything we do.