Risk Management at MCC

Transcription

1 Risk Management at MCC Christopher Williams, Director, Investment and Risk Management Division Presentation at Aid and International Development Forum 2011, Washington, DC June 8,

2 Risk Management at MCC MCC s experience in: Identifying, assessing, and managing risk when developing and implementing large-scale grants (compacts) with recipient countries Supporting recipient countries in identifying, assessing, and managing risk during compact program implementation Tools and approaches both used by MCC and recommended by MCC to its partners 2

3 What is MCC? What is MCC? The Millennium Challenge Corporation is a U.S. Government agency designed to reduce poverty through economic growth in select developing countries. Good governance Economic freedom Investments in people 3

4 What is MCC? Where is MCC? 4

5 What is MCC? In What Does MCC Invest? 5

6 How is MCC Different? Among other aspects, country ownership. Countries determine their priorities and develop proposals for achieving sustainable economic growth. MCA entities established by recipient governments lead implementation of MCC compacts, employ national citizens, and procure and manage contractors. 6 Pictured: In Jordan, local women engage in a consultative workshop in Amman for development of its $275 million MCC Compact. MCC employs strict standards to ensure gender integration is employed in its work with partner countries.

7 Purpose of Risk Management Decrease probability and impact of negative events Increase likelihood and impact of positive events Balance the cost of risk management with expected benefits

8 Risk Management during Compact Development Countries review and present conclusions on implementability of proposed concept papers MCC reviews concept papers and supports project development and appraisal MCC conducts due diligence of country systems and/or supports international competition for financial and procurement managers MCC conducts risk assessment as part of internal memo to Investment Management Committee Conditions precedent are negotiated and incorporated into compacts 8

9 Risk Management during Compact Implementation MCC is recommending a basic risk management process based on existing MCA practices Identify the risk management tools (e.g., risk register) Identify the risks Rate/evaluate the risks Prioritize the risks (e.g., top 10-15) Report risks and mitigation proposals (e.g., to MCA Board) Can include developing scenarios to quantify impact Can link into decisions regarding contingency funds Monitor and repeat MCAs can also require their contractors and Independent Engineers to provide their own risk management systems and documents 9

10 Risk Management during Compact Implementation MCC itself uses multiple channels to manage risk Transparency of MCA activities through governance and outreach MCC Resident Country Mission for each compact Quarterly Performance Reports with risk matrices MCC staff review of financial and procurement plans Independent Engineer contractors to support oversight Training on fraud and corruption (F&C) prevention F&C risk assessments and public MCA F&C action plans Anonymous F&C reporting through MCC website 10

11 Sample Tools: MCA Risk Register MCA and MCC RCM should develop and agree on a user-friendly risk register template Enough detail to be useful, but. Not so much that it will be cumbersome MCA responsible for compact risk register Risk ID Risk Category Risk Description Impact Description Probability Impact Risk Score / Priority Rating Triggers Proposed Risk Response Original Target Comple -tion Date Revised or Actual Comple -tion Date Date Last Updated 11

12 Sample Qualitative Risk Analysis Probability 4 4* * * Impact NOTE: We recommend that all risks which are estimated to have a 4 -level probability or impact should be considered medium priority, as opposed to risks which have 2 -level probabilities and impacts, which should be considered low priority, even though they have the same risk scores. High Priority - Further Analysis Medium Priority Plan risk response Low Priority Document risk only 12

13 Simulated Excerpt from MCA Risk Register Risk ID Risk Category Risk Description Impact Description Probability Impact Risk Score / Priority Rating Triggers Proposed Risk Response Original Target Completion Date Revised or Actual Completion Date Date Last Updated RRP. 1.A Quality Poor performance by design contractor Delay of issuance of IFB for road rehab, possible redesign (yellow) Bad contractor staff, poor oversight by SRA 1. 30, 60, 90% reviews 2. Detailed review by MCC, Ind. Engineer 1. 3/15/11, 6/15/11, 9/15/11 2. Same 3/11/11 RRP. 1.B Political / Policy Insufficient road maintenance funding Delay of or failure to issue IFB for road rehab (yellow) Budgeted amounts and actual outlays vs. CP 1. Joint donor reminders to GOM 2. Outreach to contractors 1. 6/15/ /15/11 3/11/11 THVA.2.A Time / Completion Refusal by communities to form WUAs Inability to meet CP for release of IFB for CIS rehab (red) At least 5 WUAs must be registered to release, no later than July Strong oversight of ISRA contractor 2. Outreach to comm. re impact 1. 7/1/ /1/12 3/11/11 THVA.1.B Opportunity Cost Failure to attract potential investors to CIS regions Impact of CIS investment lower than should be (green) N/A 1. Ensure DOS, MIEPO, AmCham have info 2. Inform regional investors 1. 6/15/ /15/12 (after detailed designs done) 3/11/11 MCA. 3.A Political / Policy TIP 3 Rating Potential suspension of compact (yellow) DOS report mid-june Inform DOS, GOM of impact 2. Map out actions 1. 3/15/ /15/11 3/11/11 13

14 Sample Tools: Standard Risk Categories Time/completion risk Cost/financial risk Quality risk Results risk (including sustainability) Political and policy risk (including reputational) Fiduciary risk (including fraud and corruption) Capacity/management risk Opportunity cost risk 14

15 Sample Tools: MCC Quarterly Portfolio Review Simulated Risk Matrix 15

16 Sample Project-Specific Risk Scenario Modeling + 6 Months + $ 2 Million 16

17 Communicating about Risks With MCC: Risk register should be discussed in HONEST detail with MCC technical staff With MCA Board of Directors: MCA should consider sharing the top risks and proposed actions with the Steering Committee With External Stakeholders: MCA should consider sharing the top risks and proposed actions with the MCC Advisory Council MCA should consider discussing project risks and proposed actions with relevant civil society organizations With the Press: MCA staff meeting with press should have standard talking points on compact and project risks 17

18 When Risks Are Not Managed Design work not shared with MCC IE (CV) Access to house revised without proper compensation (CV) Farmers breaking new irrigation channels (ARM) 18

19 Thank you! 19