Real-time risk management for central banks using Opensource software: a paper for the Bangko Sentral ng Pilipinas (BSP)

For the economy to work, the banking regulators must be at least one step ahead when it comes to innovations that happen in the banking sector.    One way to be a step ahead is for central banks to carry out risk management such that risk can be measured in real-time.  Otherwise, central banks would be left behind looking at history rather than looking at the future.

An effective way to evaluate risk is to track risk parameters in real-time. “Real-time risk management” is a term we shall coin to refer to risk management software systems that could give a snapshot of risk at any particular time. Real-time views of risk are most efficiently captured via highly efficient software systems. Central banks should start looking at Open Source Software (OSS) to address their risk management needs if they are to keep pace with technological breakthroughs in Information Technology (IT) and Computer Science. These breakthroughs could be used to the central banks’ advantage. The Bangko Sentral ng Pilipinas (BSP) can and should be an example of a modern central bank that is able to use modern open technology in risk management. If there is one task in central banks where open source software can be of great use, it is in risk management. Basel II and Basel III provide a framework and a set of parameters that measure risk. To measure these risks, these risks should be measured in real time. In other words, the snapshot of risk should be able to show up-to-date (to the minute or hour) risk measurements. OSS and open technology platforms provide an answer to measuring risk, real-time.

Download the complete PDF paper here.

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