Transcript risk - Norway Grants

EEA and Norway Grants
Programme risk management
Inger K. Stoll, Head of Communication, Reporting and
Evaluation, Financial Mechanism Office
November 2012
1
Results and risks
What is Results Based
Management (RBM)
RBM is a management strategy
by which all actors,
contributing directly or
indirectly to achieving a set of
results, ensure that their
processes, products and
services contribute to the
achievement of desired results
(outputs, outcomes and
impact)
What is a result and a risk?
In the context of the Grants:
A result is the output,
outcome or impact of a
development intervention
A risk is an event that may
occur and impede the
objective
2
KEY CONCEPTS
Results achievement
Beneficiary oriented
Managing for results and reduced risks
3
Risks
• Risks are an expression of uncertainty
• Risks are events that may occur, and if they occur,
have harmful or negative effects on the achievement
of results
• Risks are closely related to the results and should
consequently be analysed against the results
framework of a programme
• Risk analyses strengthen the basis for choosing
realistic objectives and level of ambitions
4
Risk management
process in 8 steps
Establish strategy and processes
1. Develop a strategy for integrating risk
management in results management
2. Establish risk leadership integrated in results
management
Analysis, actions and follow-up on several
levels
3. Identify objectives at all levels
4. Identify critical success factors
(assumptions) at all levels
5
Risk management
process in 8 steps
5. Identify risks at all levels
6. Assess and prioritise the risks, in terms of
likelihood and impact; high – medium – low
7. Address risks: avoid, reduce, share, accept
8. Mitigate and manage risks
Learning – change - communication
6
Step 1. Develop a risk strategy
• Develop a risk strategy for integrating risk
management in results management.
• This presentation gives some basic tools to
risk management at Programme level.
FMO’s risk management strategy (in process):
http://www.eeagrants.org/asset/4814/1/4814_
1.pdf
7
Risk management
levels
Total Grants
Country
Programme
Projects
Risk strategy at each level, according to roles and responsibilities
8
Step 2: Establish risk leadership
• All actors shall ensure that relevant risks are
identified and analysed, and that actions are
taken, if possible, to reduce the likelihood of
negative incidents and limit any adverse
effects to acceptable levels
• Assign roles at each level
• Programme Operator must actively take
leadership at programme and for project
levels
9
Step 3: Identify objectives
at all levels, example
Objective (impact)
Widespread improvements in societ or a sector
Gender equality and work-life balance promoted
Outcome(s)
Intermediate effects on target groups and systems
Gender pay gap reduced
Outputs
Products and services delivered
1. Wage negotiations are gender sensitive. 2. Training is carried out.
Activities
Tasks transforming inputs to outputs.
1. Present statistics on gender wage differences
2. Train trade unions and employers associations in g. pay gap reduction
Inputs
Financial, human and material resources
Budget: X € , Input from DPP (y people z €), Resources from local institutions
10
Step 3. Identify objectives at
all levels
Example – Renewable Energy
Objective (pre-defined)
Expected outcome(s)
(pre-defined)
Outputs
More energy
efficient RES in
place
Types of
projects
•Modernised
RES
infrastructure
•R&D on RES
•Feasibility of
RES mapped out
in relation to
local conditions
Increased share of
renewable energy in
energy use
Increased awareness of and
education in renewable
energy solutions
Increased renewable
energy production
X policies at local
and regional level
to stimulate RES
developed
•Training in RES
planning
competence
•Plans/policy
development
100 MW capacity
RES constructed
and in operation
•Windmills
•Solar systems
•Hydropower
•Bioenergy
X awareness
raising
programmes at
local level
carried through
X training courses in
RES provided to
officials at local and
regional level
•Awareness
raising
campaigns at
local level
•Training
courses for
officials at
regional level
•Train the
trainers
•Training
courses for
officials at
regional level
11
Step 4: Identify assumptions
• Assumptions are the necessary positive
conditions that allow for a succesful
cause-and-effect relationship between
the different levels of results.
• Assumptions are critical success factors.
• Assumptions are expressed as positive
statements.
• Assumptions are formulated after the
12
objectives to ensure results chain
realism
Step 4: Identify assumptions
at all levels
Objective (impact)
Widespread improvements
in society or a sector
Assumptions and risks
Outcome(s)
Intermediate effects on
target groups and systems
Assumptions and risk
Outputs
Products and services
delivered
Assumptions and risks
Activities
Tasks transforming inputs
to outputs
Assumptions and risks
Inputs
Financial, human and
material resources
Assumptions and risks
13
Step 4: Assumptions
An example
• Outcome: Participation
in local election
increases from 63% in
2012 to 75% in 2016.
• Output: Voters
registration increases
from 70% in 2012 to
90% in 2016.
• Assumption: Voting
centres are operational
and in place on voting
day.
14
Step 5: Identify risks at all levels
• Risk identification is done in all phases of a
programme, but early identification gives the
best effect.
• Normally requires several contributers.
• If a critical assumption is likely to occur but
not certain, it may represent a risk.
• Risks are expressed as negative statements in
relation to achievement of the desired result.
15
Step 5. Risk identification
• Identify the risk, monitor, manage and try to
influence. A risk registry can be useful.
• There might be a conflict of interest regarding
sharing information of risks.
• Keep in mind: Always document your risk
identification, analysis and mitigation
16
Identification of a risk
An example
Impact (Objective)
Assumptions
Risks
Voting centres are
operational and with all
logicistics in place
on voting day.
Voting material is not
available in all local
languages.
Outcome
Participation in local
election increases from
63% in 2012 to 75% in
2016.
Output
Voters registration
increases from 70% in 2012
to 90% in 2016.
Activities
Inputs
17
Risk categories
It is common to group the risks in categories.
We have identified nine risk categories:
• Policy and politics
• Governance: Institutional, management,
transparency and accountability
• Corruption and procurement issues
• Socio-cultural and gender equity,
minorities, Roma, rights and values
18
Risk categories
•
•
•
•
•
Financial issues
Economic issues
Environmental and climate issues
Technical and technological issues
Role of DPPs and project partners
19
Risk dimensions
Each risk category consists of certain risk dimensions
(expressed as critical sucess factor or assumptions):
Example Governance category:
•
•
•
•
•
Competence and capacity, skills available
Supportive legal framework conditions
Institutional framework is conducive
Control systems in place
Open and transparent systems in place
20
Cross cutting issues
Keep in mind the cross-cutting issues:
• Governance
• Gender equality
• Sustainable development: - Environmental
- Economic
- Social
These are reflected in the risk categories. Crosscutting issues are asssessed and addressed in all
phases of the Program Cycle
21
Step 6: Assess and prioritise
the risks
A risk analysis contains an assessment of the
risks in terms of
• Probability or likelyhood of the occurence of
the risks
• Consequences if the event occurs
As the risk assessment is a forward-looking
exercise, the assessment should take into
account the whole agreement period - and
beyond - to ensure sustainability of the results
22
Risk probability and consequence
23
Risk Analysis
Medium
“Black Swan”
Low
Probability
High
High risk
Killer assumption
Low
Medium
High
Consequence
24
Narrative risk summary
• The risk rating is accompanied by a narrative
assessment highlighting the major risks
identified.
• All the high or substantial risk ratings are
named as major risks
Keep in mind: Distinguish probability and
consequence
25
Step 7: Address the risks –
Risk tolerance levels
Risks are inevitable.
It is not an aim to avoid risks at all costs.
A higher risk may be acceptable in contexts
where the expected impact and benefits
are higher than the potential risks.
26
Risk tolerance
• Decisions regarding tolerance of major risks
can be divided in the folllowing strategies:
Avoid/terminate: Redesign programme or
terminate the programme or parts of it.
Transfer/share: Share risk with other
partners (ex DPPs) or pass the impact of
the risk to third part (e.g. via an
insurance policy)
27
Risk tolerance
Accept: Accept the risks without any
mitigating actions, but monitor and
manage if the risk level increases
Reduce, prevent, mitigate: Prepare a
mitigation plan and implement measures.
28
Step 8: Mitigate and manage risks
• Establish a system for risk monitoring and
handling.
• During implementation it is good practice to
incorporate the mitigating measures in the
regular work plan of the programme or
projects, assign staff members responsible for
actions and resources required.
29
Mitigation and management
• Assess the implementation progress of the
mitigating measures, manage and report.
• Identify any new risks or changes in
circumstances and add to your risk registry
and work plan.
• Sometimes we need to redesign our risk
mitigation strategy and actions.
30
Risk mitigation
31
Reporting and dialogue
• The programme risk management will be
reported in the Annual Programme Report
and in the NFP’s Annual Strategic Report
• The risk picture and the possible mitigating
actions will be a central element in the
dialogue between donors, beneficiaries and
the FMO
32
Risks to achievment of outcomes
• At the programme level, the FMO bases its
risk assessment on the Programme Proposal,
the Annual Programme Report the Annual
Strategic Report from the NFP and the
dialogue. EU analyses are also used.
• The FMO especially focuses on likelihood and
consequence of risks to achievement of the
outcomes = output to outcome review
33
Results for the beneficiaries
• We are interested in achieving results for the
beneficiaries, e g the higher level objectives,
and correspondingly interested in the higher
level risks
We are in it together!
34