For example, transactions conducted through the internet can also raise questions regarding jurisdictional authority over those transactions. Cross border activities raise a number of concerns to supervisors on how to supervise banking businesses with no physical presence in the country, and also how to effectively manage risks involved in cross-border transactions. 4. Reputational risk  Reputational risk arises whenever technology-based banking products, services, delivery channels, or processes generate adverse public opinion. For example, breaches of security and disruptions to the system's availability can damage financial institutions' reputation. Also, system disruptions or doubts about the integrity of the system or data could result in a loss of confidence in electronic delivery channels as a whole, and can potentially affect other e-banking providers. IT risk-based supervision focuses on strategic and operational risks. Strategic risk Supervisory objective In strategic risk supervision, supervisors have to ensure that Financial institutions have efficiently managed their IT resources and are prepared for the future development of core businesses. Supervisory areas Therefore, to achieve such objective, supervisors will assess risks that may arise in the following areas. Policy perspectives Since enterprise activities require information from IT to meet business objectives, effective IT strategic planning is mandatory. The strategic plan refers to how to utilize IT in an organization. IT must be aligned with and enable the enterprise to take full advantage of its information, thereby maximizing benefits, capitalizing on opportunities and gaining a competitive advantage. As such, IT policy, plan and procedure are the concentrated areas for supervisors to examine.

Given the information at the Bank’s disposal and the assessments made by the Bank at the time the projections are made, the interest rate forecast in the Inflation Report will reflect a monetary policy that provides a reasonable balance between the objectives of stabilising inflation at target and stabilising output and employment. This forecast might in many cases be close to market expectations, but this will not necessarily be the case. When the interest rate forecast reflects a monetary policy that provides a reasonable balance, it contributes to monetary policy predictability. With a predictable monetary policy, market participants can react to new information in a way that contributes to stabilising developments in output and inflation. This makes monetary policy more effective, especially if market participants share the central bank’s analyses and assessments. To be successful, monetary policy must be capable of influencing expectations. This is essential to effective monetary policy. The essence of this argument is that it is primarily through the expectations channel that the central bank can influence economic developments. The expectations channel is the most important channel for monetary policy transmission. 3 The central bank determines the shortest money market rates via the key rate. The shortest rates, however, are of limited importance to economic agents’ consumption and investment decisions. These decisions depend more on agents’ expectations with regard to future developments in the key rate. The key rate is primarily effective because it influences market expectations concerning future interest rates.