One of the most pervasive organisational issues development stakeholders face is the question of risk appetite. To what extent do we in the development community take risks in order to try and secure results? This question is particularly pertinent in situations of state fragility.
Donors accept that they are perhaps overly risk averse. The cross-UK government Building Stability Overseas Strategy accepts that the UK “must also be realistic about the pace of change, providing long term predictable support, taking risks and accepting some failures in order to secure transformational results”. The OECD’s International Network on Conflict and Fragility (INCAF) similarly noted that “achieving long-term transformational results demands appropriate risk taking with political backing and appropriate institutional processes”. Striking the right balance of risk and potential reward can be challenging, but there are some effective tools that can help with this complex sum.
Contracting out some programmes and projects to multilaterals, NGOs and the private sector with all the separation of responsibility and liability that that often entails (see: duty of care) is only a partial answer. In addition to being willing to accept occasional failure as well as success, there are a number of considerations that donors and implementers need to bear in mind during identification, design and delivery. These are particularly relevant when the programme involves financial transfers in some form, be it in the form of grants to local partners or budget support.
A fund can be a useful way of ensuring synergy across diverse interventions, that all stakeholders are aware of overarching objectives and have appropriate risk management policies in place. This logic is also applicable for donor portfolios as well as at project and programme levels; the new UK conflict, stability and security fund and other donor funds such as the Danish peace and stabilisation fund evidence this.
The evidence base for the importance of engaging local stakeholders irrespective of the detail of the particular intervention is strong. Grant contracts can be a good means of achieving this; the contextual understanding and community-level reach of local civil society organisations is often unparalleled. When managing grant and fund contracts, we recognise this and compliment the skills of our partners with risk mitigation measures such as a robust monitoring approach, financial management assessments and formal and informal capacity building to offset any identified shortfalls.
Effective fiduciary risk management is not about saying that a particular idea is not possible, but rather about finding the best way to deliver it with the maximum developmental results within the donor’s risk appetite. We know that working with government systems has its own particular challenges. On our numerous fiduciary risk assessments including in the most fragile of contexts, we always endeavour to not only review a particular modality but also to provide recommendations for how any risks could be minimised through both medium-term mitigations and short-term safeguards.
Working alongside political stakeholders is an essential part of any development intervention. This should always be balanced with a reasoned approach to political risk management, which could include stakeholder mapping and an engagement plan. This should inform all aspects of delivery, including grant award decisions.
Similarly, a crucial part of project design is in-depth contextual analysis, incorporating do no harm and conflict sensitivity approaches and ensuring to cascade these principles to subcontractors and grantees. This should very much be seen as an ongoing process through, for instance, considering adding conflict sensitivity questions to routine programme monitoring. On Crown Agents’ work on the health pooled fund in South Sudan, conflict sensitivity has been at the core of programme delivery.
When designing and delivering grant programmes in fragile contexts, an adequate and robust monitoring and evaluation framework is essential. Consideration should be given to the right mix of methods and modalities – when should a third party or independent monitor be used? Is a logframe the right approach? Would an iterative approach to M&E be most effective?
Particularly in the highly changeable environments of fragile and conflict affected states, it should be remembered that payment by results is no panacea; numerous factors can preclude achievement of results.
Due to the complexity and unpredictability of operations in these regions, donors should consider new approaches and be more willing to use approaches such as a larger number of smaller-scale “trial” grants which can later be scaled up depending on success. This can be a good way of being more innovative and responsive but again require an acceptance of occasional failure and particularly robust, in-depth M&E.
Above all, it is essential to recognise that achieving tangible, sustainable developmental progress in fragile and conflict affected environments necessarily requires a degree of calculated risk taking. Many of the most transformative interventions are the most inherently risky.
Peter Howes is a consultant and project manager in Crown Agents’ Governance and State Building department, where he focuses on project implementation in fragile and conflict-affected states.
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