, can be very difficult in any organization, and that is why it is crucial for the risk manager to be known as an independent voice who is influential with top management. ensuring adherence to risk - management practices any successful organization needs to develop appropriate mechanisms to ensure adherence to and sustainability of its risk - management structures, and incentives structures are a key mechanism for this purpose. appropriate incentives reward good behavior and penalize inappropriate behavior. of course, incentives work best when they are known well in advance, that is, when they serve as ex ante signals of what should and should not be done. naturally, in very large organizations it is difficult for senior management to monitor each individual, so incentives need to be consistent, permeate even the lowest levels of the organization, and remind each individual that his or her risk - taking affects the whole enterprise. limits and controls can be useful tools for creating the right incentives and sending appropriate signals, but they of course need to be tailored individually to each firm. problems can arise when incentives are not properly structured and appropriate " risk discipline " is not exercised – for example, when limits and controls are not set or, if they are set, when adherence to them is not monitored or enforced. such controls are incentives for businessline leaders to assume only the risks that the firm can absorb because they penalize those who try to take on excessive risk or inadequate mitigation in the name of short - term profit maximization. one good practice is to have reliable, interconnected enforcement mechanisms within the institution, mechanisms that can – and will – enforce limits. an example is a good centralized treasury function. risk - adjusted performance evaluation and compensation in trading and certain other activities, there is a tendency for business - line heads or individual employees to focus on their short - term compensation and not think about the longterm risks that their activities create for the firm. but it is the responsibility of senior management to provide the proper incentives and controls to counter the potential for individuals within financial firms to discount risks to the broader institution, and of course to ensure that nefarious activity is promptly uncovered and stopped. clearly, it is up to financial institutions themselves – not bank supervisors – to decide how compensation should be structured, but managers and boards of directors should understand the consequences of providing too many short - term and one - sided incentives. they would benefit from thinking about compensation on more of a risk - adjusted basis. accordingly, i encourage institutions to think about ways to alter existing compensation schemes

map 2017 trade and investment policies are also section 2 : review of the being changed to harness our untapped developments in the economy along potential. with the progress in the real, fiscal, we at the central bank, are changing and upgrading many of our processes and policies. frameworks are being developed for proactive monetary and exchange rate policymaking on a data driven basis. in this context, the road map 2017 reviews developments in the economy and the policy actions that have been pursued during the past year. more external, monetary and financial sectors during 2016 section 3 : an analysis of the central bank ’ s monetary policy strategy and policies for 2017 and beyond section 4 : a discussion on the central bank ’ s policies related to the financial sector performance and stability in 2017 and beyond section 5 : key policies related to importantly, it seeks to enunciate strengthening the broader economy policies and programmes for the through the central bank ’ s agency forthcoming period. and ancillary functions accordingly, the outline of the road section 6 : concluding remarks map 2017 is as follows : central bank of sri lanka – road map 2017 2. developments in the economy in 2016 the sri lankan economy achieved a inflation continued to remain at low moderate growth rate of 4 per cent levels although there were some upward during the first nine months of 2016. pressures during 2016. supply side among major sectors, agricultural pressures due to adverse weather activities remained subdued, driven conditions and revisions to the mainly by the contraction in the value government tax policy partly addition of rice, tea and rubber. adverse contributed to the increase in inflation weather conditions during the second during the year. the relaxed monetary and third quarters of the year and policy stance pursued in the past and the subdued demand conditions in the major increase in wages in the economy also export destinations affected this exerted some demand pressures on growth. industry - related activities grew prices. accordingly, headline inflation, as substantially in 2016 with considerable measured by the year - on - year change in contribution from the recovery of the the colombo consumers ’ price index construction sector. notable growth ( ccpi, 2006 / 07 = 100 ), was 4. 1 per cent in was also witnessed in manufacturing, december 2016 compared to 2. 8 per and mining and quarrying activities. cent in december 2015. headline meanwhile, the growth in services inflation, as measured by the year - on activities also remained buoyant, year change in the national consumer supported by improvements in financial price index ( ncpi, 2013 = 100 ),