The client was a central bank and financial sector regulatory authority. The Terms of Reference (TOR) and Scope of the Study were outlined in a terms of reference dated 29 March 2004.

The TOR emphasised the need for the consultant to work with various groups and departments within the Bank to facilitate a skills transfer and develop a better understanding of strategic planning. The process that was outlined in the TOR asked for a wide consultative approach and an outcome where the objectives and strategies are well understood and have an element of ownership by all stakeholders of the Bank.

First Commercial Limited (FCL) responded to the tender and was chosen to fulfil the mandate in terms of the TOR.

In the scoping study it became apparent that the Bank whilst clearly capable of working through the process of developing a strategic plan, was not in a sufficient condition to implement one. The exercise was somewhat pointless as the resulting plan would have become a “shelf” document and the levels of executive and staff frustration would have been greatly increased. Whereas the Bank saw a strategic plan as a solution to somehow provide order to the daily frustrations they faced, it would, without some serious structural and operational changes, have added to them.

FCL recognised the underlying structural problems and made a series of presentations to the Board and Executive of the Bank to readdress the TOR, amend the work plan and undertake a change management program in parallel with the development of a strategic plan.

The change management program included major human resource reforms including a new performance management system, establishment of an executive committee to allocate resources and operate under the Governors delegation, development of a 24 month rolling budget, improved management information systems, articulation of vision, mission and a process to establish the values of the Bank.

In parallel with this change management program a team of 11 consultants set about integrating the transformation outcomes with the development of a three-year strategic plan. The changes to the underlying processes of the Bank resulted in considerable operating efficiencies. The strategic plan was enthusiastically received by the Board, the Executive and the staff.

The nature of the reforms and the success of the plan are captured in the Governors forward.

Since my appointment in late 1999 there have been a number of significant changes at the Bank. A raft of new legislation in 2000 required the Bank to adjust from being a Central Bank to being a Central Bank and Financial System Regulator. We have seen the appointment of a new Deputy Governor, the appointment of new Department Managers and undergone some structural change. All this in a period where there were fiscal legacies to manage in a somewhat volatile domestic economy. The Bank is now a more settled organization and our monetary policies have assisted to create a more benign economic climate where inflation is low and confidence is high. It is a special window of opportunity that allows us now to turn our attention to longer-term strategic issues and think about how we might better equip the Bank to meet the demands of the future.

Accordingly, at the end of 2004 we embarked on a process to produce a strategic plan for the Bank. Our aim was to envisage our future and to plan and manage it. This document is the result of that effort. It sets out details of our thinking about the direction the Bank needs to travel in the immediate future and specific objectives that the Bank needs to achieve. This approach led us to a deeper appreciation of organisational and managerial efficiency. It caused us to reflect on what services we provide and what outputs we produce, and to consider them in the context of meeting our legislative responsibility in a manner that was not wasteful. The first and most critical step was to determine what our core tasks were under the legislation, and then to make sure that we focused on them and completed them in fully competent way. The core areas of task for the Bank are:

• Development of Effective Monetary Policy
• Financial System Stability
• Efficient Payments System
• Promotion of Macro Economic Stability & Growth

It quickly became clear that being involved in non-core activities is a distraction; it creates problems for managerial efficiency and competence. The result is a plan that is unashamedly focused on core tasks and with several key strategic themes:

• In conjunction with the Government, strengthening the precision of our inflation objective
• Focusing on our core objectives and functions, and not taking on additional non core responsibilities
• Strengthening the balance sheet of the Bank and considering all initiatives in the light of the effect they might have on the financial condition of the Bank
• Continuing to build the prudential supervision framework and through institutional education programs begin to transition the industry toward a risk-based approach and its benefits.
• Strengthening the payments system, especially electronic payments, in the context of taking a more overt leadership role in developing a more efficient payments system framework in PNG
• Upgrading of the efficiency of collection, storage and management of data so that the burden of reporting is reduced and the timeliness of analysis is enhanced.
• Improving in managerial efficiency and the capacity of the Bank’s staff with the understanding that reforms to internal processes are necessary if we are to achieve our objectives.

The Strategic Plan has been developed with the benefit of considerable internal discussion and self-analysis as well as the consideration of the views of some of our important external stakeholders. We have been open and transparent while being true to the vision of being a contemporary central bank and financial sector regulator employing best practice in the development of monetary policy, financial sector supervision and promotion of an efficient payments system

In preparing the Strategic Plan, and thinking about the future, we recognised that the environment in which we operate will almost inevitably alter over time, and that therefore our strategies and planning will also need to adapt. With this in mind the Strategic Plan has been structured around a three-year time horizon, with regular rolling reviews.

Developing this Strategic Plan has been as much about improving internal mechanisms to deliver better outcomes, as it has been about deciding what we need to do. As part of our planning, we have streamlined decision-making at the top of the Bank, redefined job descriptions, better identified performance measures, strengthened our project management techniques, and extending our budget forecasts out to two years and improving the rigour of our budget processes. Following through is a significant change management challenge for the Bank. The work is not complete and will occupy our attention in the coming months as we work through the implementation steps for each of the strategic initiatives. Similarly, we understand that perceptions of our capability may well be diminished without effective communication of our decisions and actions to stakeholders and the public at large. We have taken steps to significantly improve our communications with our stakeholders. This Strategic Plan then, is a serious first step in a wider process of change and transformation under way in the Bank, and which we recognise as necessary if we are to be true to our mission and achieve our objectives.

Improving systems and technology in line with developments in the environment is a significant challenge for the Bank to address; it is a major task involving considerable resources. The enormity of the information technology challenge is recognised as one of our key strategic projects and a short-term priority.

The Bank is a relatively small institution with finite and scarce resources. It cannot undertake all that it might like, or all that others might ask it to do. The development of this Strategic Plan has brought forward more than a hundred projects that might usefully be undertaken over the next three years. Clearly not all of these can be completed; prioritisation is inevitable. The planning process has strengthened our resolve to concentrate on giving priority to projects that have the most significant impact on our capacity to perform our core functions.

In presenting this plan I am conscious of the contributions made by my fellow Board members, the senior executive and all the staff of the Bank. The work by the staff on defining the values of the Bank is outstanding. It is inspirational work and I join them in the commitment to live the values and use them to shape the way we all work at the Bank.