1. 1 The new aid modalities PART II Risk Management LAF seminar Controlling - June 2009

2. 2 INTRODUCTION PART I. GENERAL 1.1. Context 1.2. Content 1.3. Sharing experience PART II. RISK MANAGEMENT 2.1. Impact and Risk management 2.2. Framework for the definition of the modalities 2.3. Case study PART III. ROLE of the LAF PART IV. PRATICAL ASPECTS 4.1. Execution agreement tool 4.2. Approval of the disbursements 4.3. Support of financial staff 4.4. Financial monitoring in FIT PART V. CONCLUSION

3. 3 PART II. RISK MANAGEMENT 2.1. Impact and Risk management 2.2. Framework for the definition of the modalities 2.3. Case study

4. 4 2.1. IMPACT and RISK MANAGEMENT At the end of the training, the participants can list the financial risks related to the financial execution modalities of projects/programmes.

5. 5 2.1. IMPACT and RISK MANAGEMENT Ensure that the financial execution modalities proposed:  Guarantee the good management of Belgian public funds and  Enable risk mastering

6. 6 2.1. IMPACT and RISK MANAGEMENT 1. Definition of risk 2. Risk management approach 3. Identify risks 4. Examples of risks and exercises 5. Map of new modalities projects

7. 7 2.1.1. Definition of the risk notion Different definitions:  "A risk is an event whose uncertain occurrence is likely to cause damage to persons or goods or to both at the same time. “  "Combination of the likeliness and the consequence(s) of the occurrence of a specific dangerous event."  "An event that could endanger the achievement of certain set objectives." Trick "What could go wrong?"

8. 8 Avoid Transfer Decrease Accept GROSSRISKSGROSSRISKS NETRISKSNETRISKS Identify Evaluate 2.1.2. Risk management approach Step 1Step 2 Step 3 Risk processing Step 4 Monitoring Risk mastering actions

9. 9 2.1.3. Identify risks Identification of risks = Selection of the risks to be processed Questions to raise during the identification of the risk:  Is it specific for the project or is a general risk?  Is the risk related to internal or external events?  Is it linked (or not) to other risks?

10. 10 2.1.3. Identify risks  There are different techniques to identify risks  The identification of risks is related to the perception by individuals  There is no exhaustive list of risks

11. 11 2.1.4. Examples of risks and of mastering actions Description Unclear guidelines for financial management of project closureImpact  Risk of budgetary overshoot  Ineligible expenses  Amount available on the accounts at project's end is not sufficient to cover all commitments.Action  LAF seminar: specific module about project closure  Information sessions at the Representation (PO + LAF) with project managers of closing projects

12. 12 2.1.4. Examples of risks and of mastering actions: Exercise What risks and what impacts related to the new execution modalities do you identify in your projects? Annexe : examples

13. 13 2.1.4. Examples of risks and of mastering actions: Exercise What risk processing actions can be considered according to you? Annexe : examples

14. 14 2.1.4. Examples of risks and of mastering actions  These are examples of risks identified: Description / Impact / Control action  Choice of 2 or 3 examples ANNEXE: Example list of financial and operational risks

15. 15 2.1.5. Map of new modalities projects BENIN 2008BENIN 2009 New financial modalities

16. 16 2.1.5. Map of new modalities projects ECUADOR 2008 ECUADOR 2009 New financial modalities

17. 17 2.1.5. Map of new modalities projects MALI 2008 MALI 2009 New financial modalities

18. 18 2.1.5. Map of new modalities projects MOZAMBIQUE 2008 MOZAMBIQUE 2009 New financial modalities

19. 19 PART II. RISK MANAGEMENT 2.1. Impact and Risk management 2.2. Framework for the definition of the modalities 2.3. Case study

20. 20 2.2. FRAMEWORK for the definition of execution modalities At the end of the training, the participants can draw up a proposal of key financial risks of a project and of risk mastering measures.

21. 21 2.2. FRAMEWORK for the definition of execution modalities Financial execution modalities of an intervention How to define them?  Knowledge of the national financial management systems  Risk analysis  Definition and choice  Monitoring and supervision  preliminary analyses to the ICPs, to the formulations, to the project start-up, … (internal, subcontracted, joint etc.)

22. 22 2.2. FRAMEWORK for the definition of execution modalities KNOWLEDGE of the national financial management systems  Knowledge of the public finance management system of the partner (country, sector, geography)  Gathering information on the national system, on the interventions (BTC, other donors), on reforms (decentralisation), on the institutional framework…  Description, Capitalisation, Sharing information = Permanent file

23. 23 2.2. FRAMEWORK for the definition of execution modalities RISK ANALYSIS  Analysis of strengths and weaknesses of the national system  Analysis of financial risks of the national system  Necessary management capacity development  Assessment of the maturity of the internal control system of the partner

24. 24 2.2. FRAMEWORK for the definition of execution modalities DEFINITION AND CHOICE  Definition of the execution modality of the intervention  Motivation of the choice of the modalities  Added value of the chosen modalities, impact of the effectiveness of aid  Coherence with other interventions (BTC, other donors) = Motivation file of the intervention

25. 25 2.2. FRAMEWORK for the definition of execution modalities MONITORING AND SUPERVISION  Feasibility  Installation of monitoring and of supervision by HQ RR PJ  Support and start-up  Adaptations (changes in the context, staff), changes in the course of the intervention etc.  Evaluation of the relevance and the effectiveness

26. 26 2.2. FRAMEWORK for the definition of execution modalities Analyses conducted/ to be conducted  Tanzania: June 2008  Ecuador: April 2009  Niger: May 2009  Senegal: May 2009  Mali: In progress  Rwanda: June 2009  Benin: July 2009  Bolivia: July 2009  Etc.

27. 27 2.3. CASE STUDY Case study ANNEXE: Case study_New Modalities