While delivering the inaugural address at the annual convention of Council of Chartered Financial Analystshere on Friday, Rangarajan said these will require the banks to prepare a corporate plan over the next five years taking into account its own strengths and the markets they are looking for. The second phase of reforms will have to focus on the organisational effectiveness of banks and the risk management.

The organisational improvement will have an in-depth corporate planning combined with organisational restructuring, which is necessary to achieve the desired results in terms of productivity and profitability, he said.

He said a properly designed management system that improves productivity and drives the behaviour of employees in delivering quality service must be clearly spelt out. To achieve all these banks need to be given greater autonomy with respect to recruitment and promotion of personnel. Greater accountability has to go with greater autonomy.

On risk management, he said all institutions must have proper risk management schemes to minimise the impact of unexpected changes. Most of the risksarise from mismatching. Risk is inherent and managing risk needs standards and reports, positon limits or rules, and investment guidelines or stategies.

These tools enable institutions to measure exposure, define procedures to manage these exposures and limit individual positions to acceptable levels. Risk-management systems have become standardised to some extent. He called financial analysts to extend the application of the core principles of risk management to other organisations, which are large and have exposures in foreign currencies.