2021 Comprehensive Surveillance Review— Background Paper on The Surveillance Priority Confronting Risks and Uncertainties

Policy Papers, May 18, 2021

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Since the Global Financial Crisis (GFC), coverage of risks in staff reports has become more systematic, with major risks identified and assessed for likelihood and economic impact using Risk Assessment Matrices (RAM).
Remaining gaps:
- Limited attention to the range of possible outcomes.
- Risk identification often does not sufficiently inform policy design to preemptively respond to or prepare for risks.
Two dimensions for progress:
- Increasing emphasis on the range of potential outcomes to improve policy design.
- Encouraging more proactive policy advice on how to manage risks.
Recommendation: Continue leveraging internal and external resources to support enhanced risk analysis and advice in surveillance.

Risk assessment practice:
- Staff reports regularly identify major risks and provide an assessment of their likelihood and economic impact, summarized in Risk Assessment Matrices (RAM).
Limitations observed:
- Still limited attention is paid to the range of possible outcomes beyond point estimates or single scenarios.
- Risk identification alone is insufficient unless it informs actionable policy design and preparedness measures.
Cross-cutting subjects addressed: Contingency planning, Environment, Financial crises, Financial institutions, Insurance, Monetary policy, Natural disasters, Political economy.

Enrich policy recommendations by explicitly considering various risk management approaches rather than only identifying risks.
Increase emphasis on scenario breadth:
- Present a wider range of potential outcomes to improve the robustness of policy design.
Promote proactive policy advice:
- Offer concrete, forward-looking recommendations on how authorities can manage identified risks.
Resource strategy:
- Continue to leverage internal and external resources to strengthen risk analysis capabilities and the quality of advice in surveillance.