david dodge : views on the canadian economy and monetary policy opening statement by mr david dodge, governor of the bank of canada, to the standing senate committee on banking, trade and commerce, ottawa, 3 may 2006. * * * good afternoon, mr. chairman and members of the committee. we appreciate the opportunity to meet with this committee twice a year, following the release of our monetary policy reports. these meetings help us keep senators and all canadians informed about the bank's views on the economy, and about the objective of monetary policy and the actions we take to achieve it. when paul and i appeared before this committee last october, we said that the global and canadian economies were continuing to grow at a solid pace, that our economy appeared to be operating at full production capacity, and that it would remain at capacity in 2006 and 2007. total and core inflation were projected to average close to 2 per cent, beginning in the second half of this year. this projection assumed oil prices at roughly us $ 64 per barrel, a level then indicated by futures prices. our projection also assumed stable commodity prices, government spending that was growing roughly in line with revenues, and a canadian dollar continuing to trade in a range of 85 to 87 cents u. s. in our april monetary policy report ( mpr ), we say that the global economy has shown a little more momentum than had been anticipated : oil prices have been roughly us $ 10 per barrel higher than assumed ; metals prices have risen significantly ; and the canadian dollar had been trading in a range of 85 1 / 2 to 88 a½ cents u. s. in our report, the bank projects economic growth of 3. 1 per cent in 2006, 3. 0 per cent in 2007, and 2. 9 per cent in 2008. total cpi inflation will continue to be volatile and affected by developments in the markets for crude oil and natural gas, and will average close to 2 per cent in 2007 and 2008 ( excluding the effect of any changes in the gst ). core inflation is projected to rise to 2 per cent in the second half of this year and remain there through to the end of 2008. this projection is based on three key assumptions : first, that energy prices will remain roughly as indicated by futures prices ; second, that canadian governments will continue to run budgets that are roughly in balance ; and third, that the orderly resolution of global imbalances will involve a gradual depreciation of the u. s. real effective exchange rate.

they may not be paying close enough attention to the aggregation of their exposures or concentrations that arise in the resulting portfolios of business. also, rapid growth can place considerable pressure on an organization's management information systems, change - management controls, strategic planning, credit concentrations, and asset / liability management, among other areas. many of the companies that have attracted public attention in recent years due to serious breaks in controls failed to focus on process changes and critical investments in their risk management and control systems that were needed to successfully support their business plans. an organization must also understand how its various business components dynamically interact. a successful enterprise - wide risk management process can help to meet many of these challenges. at the same time, it is clear that risk management practices need to be applied in a manner appropriate to the size and complexity of the organization. while the leading - edge risk - management practices used at the largest, most complex banks may have some applicability at smaller, less complex banks, data and cost limitations require greater use of more generalized models and the use of outsourcing to supplement the knowledge base of the institution. and as most of you know, running a smaller or less complex bank presents different types of challenges and requires a risk - management framework appropriately tailored to the institution. for example, transactions may be conducted more on a relationship basis and may be less data - intensive. in such a case, bank management needs to develop risk - management tools that allow it to ensure that risks are still being appropriately addressed. further, smaller organizations often face a challenge of ensuring independent review of processes and decisions since officers and staff often have multiple responsibilities that can present conflicts of interest. many of you are probably familiar with the enterprise risk management framework published over a year ago by the committee of sponsoring organizations of the treadway commission, or coso. the coso framework provides a useful way to look at enterprise risk management. notably, the coso framework states explicitly that, while its components will not function identically in every entity, its principles should apply to institutions of all sizes. small and mid - size entities, for example, may choose to apply the framework on a less - formal and less - structured basis and scale it to their own needs - - as long as quality is maintained. this underscores the message from bank supervisors that good risk management is expected of every institution, regardless of size or sophistication. naturally, some tension will still exist between what supervisors expect and how bankers