In 2017, we identified three major influencing forces in the external environment: shifting geopolitics, evolving social trends and rapid technological advances. These global phenomena are shaping the environment in which all central banks operate and have influenced the development of our medium-term plan (MTP) by helping us identify where we need to focus our efforts.
Shifting geopolitics: changing attitudes toward trade and globalization
Recurrent shifts in the international political environment, and the heightened uncertainty they create, affect all areas of the Bank’s policy work. The following are key areas to watch:
- changing postures in the United States on trade, climate, immigration and international co-operation
- the status of financial regulation reforms
- the growing influence of China and its stance on the world stage
- the European political economy post-Brexit
- increased risk of trade wars, currency wars and proxy conflicts, as well as terrorism
Social trends: shifts in attitude toward institutions and media
We need to pay greater attention to social issues that will influence our policy deliberations, human resources practices and communications. The following are key areas to watch:
- levels of public scrutiny and trust in government, media and business
- increased expectations of public participation in the decision making of public institutions
- evaluation of the role of central banks and their independence
- increased focus on measures to mitigate social and economic inequality
- the challenges and opportunities associated with the shift from traditional media to social media
Technological advances: the rise of disruptive business models
The rapid pace of technological progress is expected to result in significant gains in efficiency and analytical capabilities. However, there is a risk that developments could occur faster than we can adapt to them, both in our own operations and in our policy roles. The following are key areas to watch:
- the evolution of fundamental structural changes in the economy brought on by technology
- technological advances in financial services, such as the rise of fintech, blockchain and cryptocurrencies
- growth of cyber vulnerabilities and security risks
- use of big data and predictive analytics, and the related issues of storing and analyzing these data
- development of artificial intelligence, automation and robotics
- potential changes in the demand for bank notes
Internal factors also influence our work. Employee feedback from our 2017 Work Environment Check-Up (WECU) show that our staff are engaged, committed and loyal—a critical element in the successful delivery of our ambitious plan.
The results also indicate where we can sharpen our focus. While most employees see the Bank as a place where they can develop professionally, they want more and better coaching from managers. The Bank’s emphasis on innovation has been welcomed, although some staff still sense barriers, particularly around risk and capacity.
Our WECU survey results are vital to our planning and thinking, and as we move into our next MTP, we will work with all employees to act on their feedback.
The Bank balances the need to invest in its people and tools within the public sector environment in which it operates. Financial planning assumptions for the 2019–21 MTP are anchored in a commitment to 2 per cent growth of expenditures for core operations between 2019 and 2021, or zero real growth, consistent with inflation averaging 2 per cent—the Bank’s target. We are also committed to no increase in the number of existing core staff positions to deliver our current mandates, except for the addition of positions for split operations for market and banking operations. Should new mandates be established during the MTP period, we will need to add appropriate resources.
The Bank will also make strategic investments and draw on temporary resources to renew ways of doing business. An area of focus will be our work to strengthen the resilience of the Bank and Canada’s financial system.
Opportunities and the way forward
While all these developments create challenges, they also generate tremendous opportunities. Big data, for example, offers limitless potential for innovative research and deeper insight into the workings of the economy. Changes in the broader work environment mean that stable and inclusive organizations like ours are well positioned to attract specialized talent. We can also play a leadership role in various areas, such as the development of fintech, where we have already made significant headway.
Our challenge is balancing opportunity and risk: embracing innovation without risking our resilience, increasing our transparency while maintaining our security, and augmenting our agility without forgoing stability.