##ourcing will remain our number one internal priority, recognising that we can only deliver through the quality, expertise and commitment of our staff. conclusion i will conclude here. the central bank ’ s core work is focused on delivering the financial system the economy needs and consumers deserve. the work of regulation and supervision and your efforts have helped deliver a safer system. but significant issues remain that need attention to achieve our desired outcomes of regulated financial services firms : having sufficient financial resources, including under a plausible but severe stress ; having sustainable, capitally accretive business models, over the long - term ; being well governed, with an appropriate culture, effective risk management and control arrangements in place, which are commensurate with their nature, scale and complexity ; and being able to recover if they get into difficulty, and if they cannot, being resolvable in an orderly manner without significant externalities or taxpayer costs. this is the time to fix what needs to be fixed, to refocus on consumers and to build resilience within your firms. this will result in financial services firms who are in a stronger place to serve the needs of the economy and consumers through an economic cycle. 1 sibley, ed, innovation and insurance in ireland : a supervisory perspective 2017. 2 mifid ii contains new eu - wide rules governing investment firms, credit institutions, trading venues and market structures, as well as third - country firms providing investment services or activities in the eu. it significantly broadens the scope of mifid by bringing new activities and firms into scope, removing or narrowing exemptions and covering new financial instruments and products. 3 the payments services directive 2 ( psd2 ) will come into force in the eu in january 2018. banks will be obligated to share their customer information with third parties ; such as payments firms. 4 ifrs 9 is a new accounting standard that will be effective from 1 january 2018. it introduces an expected credit losses model ( ecl ) which may lead to higher impairment provisions and more volatile impairment charges with a consequent impact on capital ratios. 5 ifrs 17 relates to the principles for the recognition, measurement, presentation and disclosure of insurance contracts within the scope of the standard. 6 see recent update from european commission - reinforcing integrated supervision to strengthen capital markets union and financial integration in a changing environment. available here. 7 cross, gerry. the evolving regulatory architecture : a supervisory perspective. 2017 8 the capital requirements regulation ( eu

##ence we are all operating in an increasingly complex environment, with a greater and greater degree of reliance on technology, an exponential growth in data, continuous change, increasingly 3 / 7 bis central bankers'speeches organisation complexity – including through outsourcing. all of these factors increase operational risk, and the need for greater resilience in our processes, people and systems. system resilience and cyber security threats are acute. risks can crystallize instantly and catastrophically. the evidence from our onsite it risk inspections is that much more needs to be done to manage this risk. for all of you, it is a question of when, not if, so you need to not only reduce the risk of occurrence but have advanced plans for how you will deal with the risk crystallising. to take outsourcing as another example, while there are strong business benefits from successful outsourcing, it does bring additional complexity into the system. it may be more difficult to get a co - ordinated response when issues arise and to get separate firms, perhaps unregulated, to operate in a co - ordinated manner during a time of stress. the firms may have conflicting responsibilities between their own stakeholders. you need to be satisfied, and to be able to demonstrate, that this additional complexity is being managed and mitigated. ( iv ) governance & risk management as i have already alluded to, we are living in an increasingly complex, fast moving and challenging world. successfully meeting these challenges requires effective leadership, governance and risk management. it is therefore of serious concern that, in too many cases, the implementation and embedding of effective governance arrangements and risk management frameworks in irish financial services firms is not sufficiently robust. more than one third of the largest firms ( prism impact high or medium high ) have significant issues, which require remediation in order to bring governance arrangements within our supervisory risk appetite. this needs to change. as does the culture in many firms – not just the retail banks. we expect institutions to critically evaluate their culture, considering what type of culture they want to develop, how staff are incentivised to behave, and to be held to account as to whether the culture they want is the culture they have and how would they know if it is not. we will also be stepping up our work from a diversity and inclusion perspective – linked to our work on culture. it will increasingly feature in our ongoing supervision and inspection work, supported by analytics