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Risk Management in Reserves Management Pertinent PDF Print E-mail

Reserves management operations in central banks cannot be effectively run without appropriate and effective risk management processes. This was said by Mr. Ebson Uanguta, the Deputy Governor of the Bank of Namibia, during the official opening of a week-long regional workshop on Advanced Risk Management and Modelling.  The workshop was conducted by the Financial Sector Management Programme from 27 to 31 August 2012 in Windhoek, Namibia.

In his opening remarks, the Deputy Governor applauded MEFMI for its outstanding work in building capacity for the region. He particularly pointed out MEFMI’s commitment to constantly identifying emerging challenges, risks and opportunities in order to design relevant capacity building programmes to address them. He stressed the importance of risk management and commended the invaluable input by MEFMI in this expert area.

Mr Uanguta stated that MEFMI’s programmes, which are demand driven and consequently custom designed meet general regional issues as well as country specific requirements - a valuable factor which distinguishes the Institute’s capacity building from the technical assistance programmes offered by many other agencies. He thanked MEFMI for the support it has provided to Bank of Namibia in staff development and for the in-country interventions MEFMI has provided over the years. 

Mr. Uanguta informed the participants that risk management in reserves management is a pertinent issue that cannot be over emphasized. Management of reserve portfolios continues to gain attention and significance and therefore scrutiny and accountability from senior government officials. He said while there is now an array of different types of financial tools and instruments available to risk managers to measure and control risk, modeling is an essential input to the development and design of risk management processes. 

He sighted an example of how a lot of work is now being done to construct models for better management of market and credit risk. However, difficulty in measurement often lies in the lack of statistics about individual default probabilities. This is worsened by the fact that most analysts are unable to combine these probabilities into portfolio assessments. In addition,  there is lack of statistical knowledge about the interaction between variables and thus models tend to rest on simplified assumptions that are largely based on subjective judgments.

Speaking during the closing ceremony of the workshop, one of the resource persons Professor Mashele, commended MEFMI for utilising resource persons from within the region to build capacity rather than relying on international resources. He applauded the organisation of the workshop, the programme content and its relevance in central bank reserve management practices.

The workshop was attended by 31 middle to senior level officials from central banks and Ministries of Finance within the MEFMI region involved in the day to day reserve management operations and risk management.

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