EEA and Norway GrantsProgramme risk management

EEA and Norway GrantsProgramme risk management

Inger K. Stoll, Head of Communication, Reporting and Evaluation, Financial Mechanism OfficeMarch 2013

Inger K. Stoll, Head of Communication, Reporting and Evaluation, Financial Mechanism OfficeMarch 2013

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 11 steps

5

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 4. Identify critical success factors (assumptions)

Risk management process in 11steps

6

5. Identify risks

6. Assess and prioritise the risks, in terms of likelihood and consequence; high – medium – low

7. Decide risk tolerance

8. Define and assess risk response

9. Response to residual risk

10. Mitigate and manage risks11. Dialogue and Report

FMO’s risk management strategy :http://www.eeagrants.org/

7

Risk management levels

Risk strategy at each level, according to roles and responsibilities

8

ProgrammeProgrammeCountry

Projects

Total Grants

Steps 1 & 2: Establish risk strategy and leadership

• Risk management system in place• Programme Operator must actively take

leadership at programme and project levels• Assign roles at each level• Also keep an eye on national level risks, and

mitigate where possible

9

Step 3: Identify objectivesat all levels, exampleObjective (impact)Widespread improvements in societ or a sectorGender equality and work-life balance promoted

Outcome(s)Intermediate effects on target groups and systemsGender pay gap reduced

OutputsProducts and services delivered1. Wage negotiations are gender sensitive. 2. Training is carried out.

ActivitiesTasks transforming inputs to outputs.1.Present statistics on gender wage differences2. Train trade unions and employers associations in g. pay gap reduction

InputsFinancial, human and material resourcesBudget: X € , Input from DPP (y people z €), Resources from local institutions10

Step 3. Identify objectives at all levels

11

Increased share of renewable energy in energy use

Increased renewable energy production

Increased awareness of and education in renewable energy solutions

More energy efficient RES in place

X policies at local and regional level to stimulate RES developed

100 MW capacity RES constructed and in operation

X awareness raising programmes at local level carried through

X training courses in RES provided to officials at local and regional level

Objective (pre-defined)

Expected outcome(s) (pre-defined)

Outputs

Types of projects

•Modernised RES infrastructure

•R&D on RES

•Feasibility of RES mapped out in relation to local conditions

•Training in RES planning competence

•Plans/policy development

•Windmills

•Solar systems

•Hydropower

•Bioenergy

•Awareness raising campaigns at local level

•Train the trainers

•Training courses for officials at regional level

•Training courses for officials at regional level

Example – Renewable Energy

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 formulated after the

objectives, to ensure results chain realism

12

Step 4: Identify assumptionsat all levelsObjective (impact)Widespread improvements in society or a sector

Assumptions

Outcome(s)Intermediate effects ontarget groups and systems

Assumptions

OutputsProducts and servicesdelivered

Assumptions

ActivitiesTasks transforming inputs to outputs

Assumptions

InputsFinancial, human and material resources

Assumptions

13

Step 4: AssumptionsAn 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

• 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 register can be useful.

• There might be a perceived conflict of interest regarding sharing information of risks.

• Keep in mind: Always document your risk identification, analysis and mitigation

16

Identification of a riskAn example

Impact (Objective) Assumptions Risks

OutcomeParticipation in local election increases from 63% in 2012 to 75% in 2016.

OutputVoters registration increases from 70% in 2012 to 90% in 2016.

Voting centres are operational and with all logicistics in place on voting day.

Voting material is not available in all local languages.

Activities

Inputs17

Risk categories

It is common to group the risks in categories. FMO uses nine broad 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

NB – Other risk categories are also relevant19

Risk dimensions

Each risk category consists of certain risk dimensions Example Governance category:

•Adequate competence and capacity is not available•Supportive legal framework conditions are not in place•The control systems are not sufficient

20

Step 6: Assess and prioritisethe risks

A risk analysis contains an assessment of the risks in terms of•Probability or likelihood of the occurence of the risks•Consequences or impact if the event occursThe risk assessment is a forward-looking exercise; it should take into account the whole agreement period - and beyond - to ensure sustainability of the results

21

Risk probability and consequence

22

Risk Analysis

High riskKiller assumption

“Black Swan”

23

Low Medium High

Consequence

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

24

Step 7: 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.

25

7. Risk tolerance

• Decide and document what level of risk you accept

• Communicate the risk appetite

26

8. Define and assessrisk response

• Identify mitigating actions (including conrols) and assess their impact

• Decide on mitigating actions

• Re-assess to conclude on residual risk

27

Step 9: Response to residual risk

• Decisions regarding tolerance of major residual 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)

28

9. Response to residual risk…

Accept/tolerate: Accept the risks without any mitigating actions, but monitor and

manage if the risk level increases

29

Step 10: Mitigate and manage risks

• Reduce, prevent, mitigate• 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.

30

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.

31

Risk mitigation

32

Step 11: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

33

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

34

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!

35