Introduction

While the Federal Reserve's broad mission and functions remain essentially unchanged, the recent financial crisis fundamentally changed how the Federal Reserve Board (the Board) operates within its functional disciplines. Changes in the Board's approach to monetary policy, supervision, and financial stability are expected to prove particularly critical, and will drive an evolution in Board capabilities begun after the crisis and in response to the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the Dodd-Frank Act). This operational evolution will prove central to the Board in the following key areas over the next four years:

• elevating financial stability
• enhancing supervision
• developing and refining new tools for monetary policy
• integrating the way monetary policy and financial stability decisions are made

Since 2010, the Board has undertaken a series of actions to implement provisions of the Dodd-Frank Act and to meet its broader financial stability responsibilities in a timely manner. It has also made important organizational changes to support a macroprudential approach to supervision and regulation, including instituting processes for identifying and responding to sources of systemic risk. For example, the Board created the Large Institution Supervision Coordinating Committee (LISCC) and the Financial Market Utilities Supervision Committee (FMU-SC) and established the Office of Financial Stability and Policy Research (OFS). To fully meet these challenges, the Board must make the appropriate investments in people, data, and facilities, as well as efficient and effective management and administrative processes. These additional resources will allow the Board to design and build an infrastructure for enhanced monitoring of markets and institutions, as well as develop tools and standards for strengthening the financial sector.

With the expiration of the 2008-11 Strategic Plan, ¹ the Board launched an enhanced strategic review and planning process involving Board divisions and offices. The Executive Committee of the Board (ECB)--a body that includes all division and office directors, the chief operating officer, and the Administrative Governor--held working sessions over the course of several months. These sessions, along with 40 cross-organizational interviews, focused on the actions necessary to meet Dodd-Frank Act mandates, address the challenge of ensuring financial stability, close cross-disciplinary knowledge gaps, develop appropriate policy, and continue addressing the recovery of a fragile global economy. The ECB identified and framed the most critical organizational challenges, developed potential options, and clarified trade-offs, resulting in the strategic framework approved by the Board on June 26, 2012.²

The following six themes identified in the strategic framework will guide investment and action over the 2012-15 planning period:

• Continue building a robust inter-disciplinary infrastructure for regulation, supervision, and monitoring risks to financial stability.
• Redesign data governance and management processes to enhance the Board's data environment.
• Establish a modern, safe work environment that emphasizes the need to maintain data quality and integrity and the importance of enhanced collaboration within the organization and with the public.
• Create a work environment built on market-oriented compensation and support for professional and personal achievement that allows the Board to attract and retain top talent, while reinforcing collegiality.
• Strengthen management processes to enable effective implementation of strategic themes, increase operating efficiencies, and reduce administrative burden.
• Establish a cost-reduction approach and a budgetary-growth target that maintains an effective and efficient use of financial resources.

The Board is using this framework to align resources and implement changes through 2015. Throughout the implementation, senior leadership will reassess priorities to take into account changing circumstances, environmental factors, and trends. The Board will also review and offset funding for these initiatives, to the extent possible, through cost-saving strategies and efficiency gains. Strategic investments in the six framework themes, above those required for day-to-day operations, are necessary for the Board to meet supervisory expectations of the Dodd-Frank Act while continuing to enhance its ability to promote stable prices, full employment, and financial stability. Strategic investments will also accompany an agenda of management process changes that will keep major investments on track, identify additional opportunities for cost savings, and improve overall operations.

This report summarizes the Board's accomplishments in 2012 that contributed to achieving the strategic themes and objectives identified in the 2012-15 Strategic Framework.

References

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