the first half of this year is a testament to the strength in the current recovery. the economy expanded by 5. 1 % in the second quarter after a robust 3. 9 % in the first quarter. in level terms, real gdp has now exceeded its pre - crisis level. and according to the latest incoming data, the economy in the third quarter looks to remain quite robust as well. thailand ’ s better performance this year, notwithstanding a lackluster global economy, has been supported by the strong momentum in both domestic demand and exports. front - loaded fiscal measure sparked up the initial momentum in domestic demand, while private consumption and investment are now adding firmly to the growth process. as the regional economies began to recover in the last five months, export growth has also provided an additional impetus to the recovery. along with this recovery, inflation remains subdued, credit growth has turned positive, and business profits are improving, encouraging firms to expand their capacities through new investment. these broad movements are indicative of a positive dynamic linked to the current recovery. the most significant improvement since the crisis, however, has been the strengthening of external stability. continued current account surpluses have allowed external debt to run down in concomitant with a build - up of international reserves. the coverage ratio of reserve to short - term debt has risen to 290 % in july 2002, four times the ratio at the end of 1997. ladies and gentlemen, although i share the view that the worst may now be behind us, i believe thailand still has some way to go. the key question is how can we make it last, especially now that the global economic recovery may be somewhat slower than earlier anticipated? the answer to this question probably lies in the answers to yet another important question : what have we learnt from the recent crisis? for thailand to prosper in the future, we can no longer rely on the old way of doing business or, for policymakers, the old way of running the economy. we need a different and more effective paradigm that will not only sustain the current growth momentum but also helped the country meets future challenges. putting the crisis under microscope reveals critical flaws that beg for new approaches and strategies in all of the four major areas : ( 1 ) the real sector, ( 2 ) the financial sector, ( 3 ) the issue of governance, and ( 4 ) the macroeconomic framework. in many respects, these lessons are neither limited to thailand nor unique to the recent crisis. the challenge is perhaps how to put them

close monitoring. bis central bankers ’ speeches operational risk is the final area over which a close watch should be maintained. this risk relates to failures by staff and break - downs in processes, facilities and equipment in daily activities. operational risk is pervasive across all business processes and, in fact, can be the root cause of a wide range of incidents that disrupt or impede the meeting of objectives. with increasing change and complexity as well as uncertainty, operational risk inherently grows. mistakes and errors are more likely and institutions need sound policies to reduce both the underlying likelihood and impact. operational risk management is quite process oriented and is therefore one area within which businesses can focus on continuous improvement. incident capture, causal analysis and applying lessons learned from an operational risk event can serve to strengthen the wider business environment. at the bank we have a system called proactive problem management to serve this purpose. it has been in place for over a decade and it is not about attributing blame but about improving how we do things. it entails line management reporting of incidents and, with the assistance of the central risk management function, finding ways to remediate the situation and, in some circumstances, identifying any wider systemic patterns that may be of relevance. although the bank ’ s head of risk reports directly to me, he has an indirect reporting line to the governor and, with his team and me in attendance, meets with the governor formally once a month. he also has an independent meeting with the chairman of the board audit committee at least once a year. he has ample opportunity to talk directly with the governor or the chairman of the board audit committee if he feels that is required. currently we are refreshing our risk model and have developed an embedded enterprise risk management lead community through all of our business units. these people work with the heads of departments to identify, assess and manage the business risks. the model is enterprise driven in that it aligns risks to departmental objectives in a context of the over - riding governing mandate for the bank : the reserve bank act. the model also includes major projects and smaller initiatives and actions that relate to specific risks. by doing so it provides an insight into active risk management mitigations that are underway giving a level of validation as to how resource is being directed towards certain risk areas. conclusions the first half of this paper outlined the extraordinary events that have buffeted the world since the onset of the global financial crisis. as noted earlier there was an inevitability about the financial crash