1. EEA and Norway Grants Programme risk management Inger K. Stoll, Head of Communication, Reporting and Evaluation, Financial Mechanism Office March 2013 1

2. 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

3. KEY CONCEPTS Results achievement Beneficiary oriented Managing for results and reduced risks 3

4. 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

5. 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)

6. 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

7. 10. Mitigate and manage risks 11. Dialogue and Report FMO’s risk management strategy : http://www.eeagrants.org/ 7

8. Risk management levels Risk strategy at each level, according to roles and responsibilities 8 Programme Country Projects Total Grants

9. 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

10. Step 3: Identify objectives at all levels, example Objective (impact) Widespread improvements in societ or a sector Gender equality and work-life balance promoted Outcome(s) Intermediate effects on target groups and systems Gender pay gap reduced Outputs Products and services delivered 1. Wage negotiations are gender sensitive. 2. Training is carried out. Activities Tasks transforming inputs to outputs. 1.Present statistics on gender wage differences 2. Train trade unions and employers associations in g. pay gap reduction Inputs Financial, human and material resources Budget: X €, Input from DPP (y people z €), Resources from local institutions 10

11. Step 3. Identify objectives at all levels 11 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 Example – Renewable Energy

12. 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

13. Step 4: Identify assumptions at all levels Objective (impact) Widespread improvements in society or a sector Assumptions Outcome(s) Intermediate effects on target groups and systems Assumptions Outputs Products and services delivered Assumptions Activities Tasks transforming inputs to outputs Assumptions Inputs Financial, human and material resources Assumptions 13

14. Step 4: Assumptions An 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

15. 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

16. 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

17. Identification of a risk An example Impact (Objective)AssumptionsRisks 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. Voting centres are operational and with all logicistics in place on voting day. Voting material is not available in all local languages. Activities Inputs 17

18. 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

19. 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 relevant 19

20. 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

21. Step 6: Assess and prioritise the 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 occurs The 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

22. Risk probability and consequence 22

23. Risk Analysis High risk Killer assumption “Black Swan” 23 LowMedium High Medium Low Probability Consequence

24. 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

25. 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

26. 7. Risk tolerance Decide and document what level of risk you accept Communicate the risk appetite 26

27. 8. Define and assess risk response Identify mitigating actions (including conrols) and assess their impact Decide on mitigating actions Re-assess to conclude on residual risk 27

28. 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

29. 9. Response to residual risk…  Accept/tolerate:Accept the risks without any mitigating actions, but monitor and manage if the risk level increases 29

30. 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

31. 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

32. Risk mitigation 32

33. 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

34. 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

35. 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