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Transcript of Risk Management Framework for Budget Support. risk...Risk Management Framework for Budget Support...
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Risk Management Framework for Budget Support
Prepared for the OCT TAO Training Workshop 9-10 December 2013
European Commission - DG DEVCO Unit 03 – Budget Support and Public Financial Management
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1. Why do we need a RMF?
• Special Report on BS Management (ECA Dec 2010) Need to assess fiduciary and development risks at the outset
and during implementation.
Budget Support Communication (10/2011)Specific budget support risk profile covering five risk categories
RMF tool in programming, design, and implementation
Link with eligibility criteria and FV? Anticipating potential eligibility problems
• 4th High Level Meeting on Aid Effectiveness in Busan
Risk Management Tools are widely used by donors (incl. MS)
Management rather than avoidance of risks
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2. What is risk management? (1)
Risk is any event or issue that could occur and adversely impact the achievement of the Commission’s political, strategic and operational objectives.
Risk management is a continuous, proactive and systematic process of assessing, mitigating, and monitoring risks.
Risk Response
& Mitigation
Monitoring & Reporting
Identification &
Assessment
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2. What is risk management? (2)
Risk assessment is an input into the BS programme cycle. It serves as an early warning system for important new risks. For OCTs it will also be used to assess eligibility.
3. How to assess risks? (1)
Focus is on country systems and risks that may impede achieving the general objectives of budget support.
One assessment per country/OCT
Based on existing assessments of eligibility criteria etc.
• Risk Questionnaire: Risk identification
• Risk register: Main risk management tool (risk identification, risk mitigating, risk monitoring)
• Country Risk Profile: Summary for decision-makers
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RISK MANAGEMENT FRAMEWORK
Political Risks Macroeconomic
Risks
Developmental
Risks
PFM Corruption /
Fraud
Fu
nd
am
enta
l v
alu
es
Human
Rights
Macroeconomic
Policies and
Financial Sector
Public Policy Comprehensiveness
of the Budget
Corruption &
Fraud
Democracy Debt Sustainability Government
Effectiveness
Controls in Revenue
Collection & Budget
Execution
Rule of Law Vulnerability and
Exogenous Shocks
Procurement
Insecurity and
Conflict
External Audit
Not for OCTs
3. How to assess risks? (2)
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3. How to assess risks? (5)
Country Risk Profile
Highlighting key elements of the
assessment based on the risk register
• Major risks and benefits
• Key mitigating measures
• Overall recommendation
• Average ratings on country and category level
• Risk levels and risk trends
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4. How to address risks? (1)
Mitigation …
Should be the most common response to risks
Is a joint effort of partner country & donors
Imply elaboration and implementation of clear and comprehensive action plan to address key risks (substantial / high risks)
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4. How to address risks? (2)
Mitigating Measures
Further Analyses and Surveys: Public Expenditure Tracking Surveys, Public Expenditure Reviews, etc.
Capacity Development
Enhancing transparency, accountability and participation in the budget process (demand-side)
Conditions for the disbursement of variable tranches
Requirements and safeguards as specific conditions
Adapt design features of the contract: duration, tranches, targeted aid, etc.
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5. How to monitor risks? (1)
Check that identified risks are adequately managed
Assess the implementation progress of mitigating measures
Identify any new risks or changes in circumstances
Regular yearly up-date of risk questionnaire, risk register, and country risk profile
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Corruption
and FraudC
ou
ntr
y
Mac
roec
on
om
ic P
olic
ies
and
Fin
anci
al S
ecto
r
Deb
t Su
stai
nab
ility
Vu
lner
abili
ty a
nd
Exo
gen
ou
s Sh
ock
s
Pu
blic
Po
licy
Go
vern
men
t Ef
fect
iven
ess
Co
mp
reh
ensi
ven
ess
of
the
Bu
dge
t
Co
ntr
ols
in R
even
ue
Co
llect
ion
an
d B
ud
get
Exec
uti
on
Pro
cure
men
t
Exte
rnal
Au
dit
Co
rru
pti
on
an
d F
rau
d
Anguilla
Falkan Islands
Greenland
Montserrat
Nouvelle Calédonie
Pitcairn
Saint Helena, Ascension, Tristan da Cunha
St Pierre et Miguelon
Turks and Caicos
Aruba
Mayotte
Macroeconomic Risk Developmental Risk PFM Risk
Ave
rage
Ris
k