SOA is an architecture that provides IT infrastructure which allows different applications to exchange databases and participate in business processes that are loosely coupled from the operating systems and programming languages underlying those applications. 5.2.2 SOA is a design for linking business and computational resources that are available on demand to achieve the desired results to service consumers. Under SOA models, different applications/services can communicate with each other by passing data from one application/service to another, or by coordinating an activity between two or more applications/services. Further, the financial institutions with IT infrastructure based on stand alone systems acquired over time to meet different business goals can benefit from an integrated service-oriented architecture. Web services can be considered to implement a service-oriented architecture where certain functions/services can be accessible over standard Internet protocols that are independent from other IT systems in the institution. The Central Bank of Sri Lanka is now using a web-based application to gather regulatory compliance reports from financial institutions. Although it is still at a preliminary stage, it is certainly a step towards improving the quality of the GRC in banks. 6. Conclusion  6.1 Now is the time to change. There should be a multifaceted approach to face the GRC challenges. GRC should be treated as one package or a set. This approach includes governance, built on Principles and Rules, Integrated Risk Management Mechanisms to identify, assess and mitigate risks and a defined compliance mechanism that deals with internal and external compliance requirements.

These risks and their effects on the real economy should not be underestimated. The markets' increasing dependence on one another both within and between countries could lead to considerable contagion effects when there is a disturbance in one part of the system. To summarise; the risks of large financial imbalances building up in economies have probably declined over the past decade as a result of more predictable economic policy. Regulations and risk management systems have also improved. At the same time, the complexity of the financial instruments and the opportunities for extensive positions off the balance sheets have increased the difficulty in assessing future profits and risks in companies. Meanwhile, increased saving and financing in market-listed instruments have made households and companies more dependent on the safe and efficient functioning of the financial markets. This could mean that the effects of disturbances from the  BIS Review 18/2002  3  financial system on the real economy could increase in the long term if regulatory frameworks and supervision are not adapted sufficiently rapidly. Can we live with large imbalances? When share prices plummeted almost two years ago and when uncertainty increased following the terrorist attack in September last year, there were fears that expectations for the future would be revised down so strongly that households' willingness to consume and companies willingness to invest would decline drastically. The fears concerned the US economy in particular, but the uncertainty was also expected to affect the rest of the world.