The income gap in many Asian countries will widen further and threaten social and economic stability, as those with higher capital can more easily reap benefits from economic growth and new technology, leaving those without access or know-how further behind. Evidence has shown that benefits from economic growth are highly concentrated and not at all broad-based. Rising income inequality has raised social polarization and we have seen it culminated in Asian politics even before the Brexit vote and the U.S. Presidential election. Ladies and gentlemen, While all sectors of Asian economies, including businesses, households, banks, financial institutions, as well as authorities, must transform themselves in order to thrive in the new world, I strongly urge that banks and financial institutions look beyond their conventional 3  financial intermediary function, and get actively involved in addressing the key issues of the economy. After all, the financial system is the blood vessel of the economy. Facing with these challenges, and aspiring to achieve a sustainable and prosperous Asia for many more years to come, financial system must, at the very least, help with the three key words I mentioned earlier: 1) productivity, 2) immunity, and 3) inclusion. First, to enhance productivity, the trend in technology advancement together with research and development will be the key enablers to increase productivity in Asia. The IMF’s chief, Madame Christine Lagarde, has recently warned that “another decade of weak productivity growth would seriously undermine the rise in global living standards”.

That included starting a Bank-wide Operational Risk Committee (a predecessor to the Risk Subcommittee) led by the First Vice President, establishing the risk event reporting and risk control self-assessment processes, and creating the Centralized Operational Risk Function (then located in the Bank’s Corporate Group). Later developments included instituting new Bank-wide control policies reflecting a deeper understanding of sources of operational risk. For example, the Bank established policies to govern end-user developed automation tools and the management of contingent workers. The past several years have been characterized by a focus on integration of the Bank’s risk management program. As part of a review of the Bank’s governance, the Risk Subcommittee of the Management Committee was established with a broad risk management mandate spanning financial, operational, and compliance risk. The Bank also enhanced the coordination of risk management, resource allocation, and strategic planning through linkages between the Risk Subcommittee and our planning and resources committee. Most indicative of this trend was the establishment in 2015 of the Risk Group’s Enterprise Risk Management Function which is responsible for providing an integrated view across all of the Bank’s risks. In thinking about areas for future improvement, I ask myself: How can we accelerate organizational learning from our mistakes? Does our analysis of risks and risk events sufficiently reveal organizational and structural issues that contribute to the risk? How can I further create a positive risk culture that encourages reporting and escalating of risk issues?