1. Operational Risk Management For effective Grant Management LFA Training February 2014

2. 2 What is “Risk”? Anything that diminishes GF’s ability to save lives/have an impact on the three diseases. Impact Risk M&E is the field most directly focusing on the Global Fund’s core risk area. Operational Risk is the possibility of reduced program impact, not achieving targets, and/or wastage or misuse of resources due to specific processes or actors in our Performance-Based Funding model not operating as intended

3. 3 Characteristics of a “Risk-Based” Approach LFA proactively alerts GF to potential issues LFA observes entire grant implementation arrangement, not just PR LFA services differentiated (tailored to need) HOWEVER: CT led-process Risk is forward-looking Assess likelihood and severity of future problems Go where risk leads you Shift of focus from PR to beneficiary/impact Shift of process from checklists to critical analysis Emphasis on “unknown unknowns” becoming “known unknowns” Prioritize Balance short-term risk and long-term risk

4. 4 How is the Global Fund thinking about Operational Risk Management (ORM)? Identifying, prioritising and proactively mitigating risks, not avoiding them Targeting resources and scrutiny according to level of risk and impact Working better with in-country partners to strengthen risk management activities Key goals of better ORM Increased program impact, reduced wastage and misuse of resources Reduced bureaucracy – replacing our "one-size fits all" policies & processes Clearer accountability for risk management and response across actors Extensive benefits from better ORM

5. 5 Four key objectives Achieving grant performance targets and program impact, while ensuring aid effectiveness and sustainability Four key types of risks 1. Programmatic & Performance Risks 2. Fiduciary & Financial Risks 3. Health Services & Health Products Quality Risks 4. Governance, Oversight & Management Risks High quality health services, and health products and equipment, in Global Fund funded programs Effective governance, oversight and grant management by the Global Fund, CCMs, PRs, SRs, LFA, and stakeholders Efficient use and accounting of Global Fund investments and other resources Secretariat's risk assessment framework considers four Risk Types, based on our grant management objectives Decision-making in grant management often driven by trade-offs between these objectives

6. 6 Four Risk Types are broken down into 19 Risks related to specific negative outcomes we aim to prevent in grants Operational Risks 4. Governance, Oversight & Management Risks 4.1 Inadequate CCM Governance & Oversight 4.2 P Inadequate PR Governance & Oversight 4.3 Inadequate PR Reporting & Compliance 3. Health Services & Products Risks 3.1 Treatment Disruptions 3.2 Substandard Quality of Health Products 3.3 Poor Quality of Health Services 2. Financial & Fiduciary Risks 2.1 Low Absorption or Over-commitment 2.2 Poor Financial Efficiency 2.3 Fraud, Corruption, or Theft of Global Fund Funds 2.4 Theft or Diversion of Non-financial Assets 2.5 Market and Macro- economic Losses 2.6 Poor Financial Reporting 1. Programmatic & Performance Risks 1.2 Inadequate M&E & Poor Data Quality 1.3 Not Achieving Grant Output Targets 1.4 Not Achieving Program Outcome & Impact Targets 1.1 Limited Program Relevance 1.5 Poor Aid Effectiveness & Sustainability 3.4 Inadequate Access and Promotion of Equity & Human Rights 4.4 Inadequate Secretariat and LFA Management & Oversight Risk Types Risks

7. 7 Contributing Factors are considered to qualitatively assess Likelihood and Severity, which determines the Risk Level Very High High Medium Low Risk Level Rate Likelihood and Severity Likelihood "What is the chance of the risk occurring within the time horizon, based on the contributing factors?" 4 5 Severity "Assuming the risk occurs, how severe is its impact expected to be, based on the contributing factors?" Risk Definition, Factors and Time Horizon Time Horizon 12 months from the date of assessment for all risks 1 2 Contributing Factors "What factors cause or provide information about this risk, and should be considered when assessing it?" Risk Definition "What bad outcome could occur in this grant?" 3

8. 8 The Country Teams can create linkages between various risks in the heatmap

9. Lessons learnt from the existing grants should be the platform for designing new grants 12/08/2013Geneva Risks and implementation arrangements Prioritized Interventions Effective Risk Management Actions Efficient implementation arrangements Firmed up TA Plans Risk management roles of partners Residual Risk / New Risks Current GrantNew Grant Country Dialogue

10. Implementation of prioritized Interventions and the key risk management actions provide reasonable assurance about the outcome. 12/08/2013Geneva Risks at the disease Portfolio Level Risk Mitigation Actions PR-1PR-2 Partners Others Implementation Arrangements Alignment with Country Team create s synergy in the risk management processes

11. 11 Broad set of benefits Concerted efforts to address the risks jointly Complimentary efforts to by all stakeholders – accountability More active use of reprogramming and re-budgeting Prioritized, specific and timely Technical Assistance Strategic dialogue with Partners Tailor scope of supervision to level of effort, to Risks Improved specificity on areas that need special attention Grant outcomes are influenced by risks outside the control of PRs CCM may be able to take lead in addressing disease and country level portfolio level risks. Objective Effective SR /SSR management Escalation of broad risks to CCM Alignment between PR, SR, CCM, Partners and CT on key Risks Types of actions anticipated Effective use of Partners

12. 12 What risks fall within M&E’s remit? 1 2 3 4 Reliable Data Exists so that GF Can Track its Link to Impact Interventions and Activities Target Disease and Key Populations $ Quality & Quantity of Planned Activities Activities Outcomes Impact Linchpin between $ and impact - Given OIG findings, we can no longer assume that expenditure documentation & M&E data are reliable evidence of activities having happened.

13. 13 Benefits of shifting emphasis to real-time supervision of program activities Health Services Trainings BCC Support Optimal Detection, Prevention and Mitigation Technique: View of Program Quality View of Equity/Human Rights Issues Increased Reliability of M&E Data Prevents Extreme Theft of Funds See Full Scale of Financial Inefficiencies

14. 14 Tools for Strengthening Risk-Based Approach Organogram Map Organogram Map Implementers Down to Beneficiaries Key Actors External to Implementation Arrangement Fund, Asset, Data Flow Roles & Responsibilities Unknowns Geographical Map Geographical Map Program Activity Locations across all 3 diseases LFA Verifications and Spot Checks MOH UNDP MIS PNLP CMS Reg Dist. Reg Clinic (88) % 30 % % 20 % % 10 % % % 40 % % 20 % % 50 % % 10 % Procure HPs (100%) Mass Media (20%) Trainings (20%) Supervision (15%) HR (40%) Store HPs (100%) Store & Distribute HPs (100%) Store & Distribute HPs (40%) M&E (30%) Supervise health service (15%) Administer Drugs (75%) Track Patients (20%) Record Pis (5%) Implementer Capacity Assessment GRANT MAKING IMPLEMENTATION Detailed Budget Evaluate activities for programmatic relevance

15. 15 NGO SRs (how many?) GF MoH PNLP (PR) UNDP MIS CMS Regional CMS (3) Regional MoH (how many?) ? Clinics (how many?) ? Basic Benefit of Mapping a Grant: Clarity on Process, Responsibility, Fund Flow Initial Map: Lots of Unknowns ? MARPS 400 patients

16. 16 Some Real-Life Examples Implementation Map focusing on Beneficiaries Implementation Map with OSDV and Site Visits recorded Geographic Map

17. 17