-
From the anarchy of Somalia to the relative stability of Nepal, fragile and transitional situations represent a broad spectrum of contexts. However, they share some common features: these are risky environments – for the people who live there, for their governments, for neighbouring countries, and for those who seek to provide assistance. Positive outcomes are hard to achieve, and the risk of regression in countries emerging from armed conflict is high.
-
-
This study, commissioned by the Organisation for Economic Co-operation and Development’s (OECD) International Network on Conflict and Fragility (INCAF) Task Team on Financing and Aid Architecture, deals with a topic that has become an increasing priority for many aid actors. In the words of the UN Secretary-General in his report on Peacebuilding in the Immediate Aftermath of Conflict, “I look forward to an early outcome from the ongoing efforts of the [OECD DAC] to revise donor procedures so as to allow earlier and faster release of funds in post-conflict situations with a higher tolerance of risk … I urge donors to be bold and innovative in finding solutions that will establish flexible, rapid and predictable funding modalities for countries emerging from conflict.” (UN, 2009).
-
Should aid providers be more willing to take risks when working in fragile states? This is the question investigated by this report. Taking as its starting point the suggestion that donors may be too risk averse in their aid engagement in these contexts, the study considers the evidence for this and related propositions. Based on an analysis of donor policy, it makes recommendations for change in approaches to risk that might lead to greater aid effectiveness in these environments. The study, commissioned by the OECD DAC’s INCAF Task Team on Financing and Aid Architecture, reviews approaches to risk and risk management by aid providers (principally bilateral and multilateral donors) in fragile and transitional contexts. It draws on interviews with selected DAC members, together with some of their key partners in the UN and World Bank systems, as well as literature and evidence of risk management practice in other sectors, public and private.
-
This chapter sets the scene by outlining what is meant by risk and risk management in the context of fragile and transitional settings. A new risk framework is presented, based on three categories: contextual, programmatic and institutional risk. The authors define key terms, such as “ fragile”, “transitional”, “risk” and “risk management”. They suggest that these definitions should be adopted by all DAC donors to allow for a more integrated analysis of risk and opportunity.
The chapter also outlines the range of international principles for donor engagement, some of which are contradictory when applied to work in fragile and transitional contexts. It explores some of these dilemmas, and concludes by emphasising that short-term, ad hoc, incoherent and poorly co-ordinated national and international interventions will not be successful. Several donors are now advocating more holistic and joined up approaches to working in these settings, and their approaches are briefly described. -
Chapter 2 addresses three questions: (1) How are risks dealt with in aid policy?; (2) How do donors currently assess risks and report on successes versus failures?; and (3) How do perceptions of risk vary and how can differences be bridged? It looks at whether taking risk and reporting results are compatible, and asks how we can break down vague and over-ambitious objectives into more realistic and tangible goals. It also points out that one of the greatest challenges in adopting a whole-of-government approach to fragile states is to bridge differences in organisational cultures. It concludes by describing how the donors who are more willing to take risks can lead the way, later to be followed by more cautious donors. It also emphasises that individuals need the support and backing of senior managers if they are to be encouraged to take appropriate risk.
-
Chapter 3 reviews current approaches to risk management in fragile and transitional contexts. It looks first at institutional approaches, including several case studies of donors that have set up specialised units to operate in contexts where standard development approaches would be too limiting. It finds that specialised units like these can provide leadership and a responsibility focal point for more risky activities. They can also keep the public and political decision makers informed about progress and set-backs on a very regular basis, so as to create buy-in.
The chapter then moves on to consider the two most important kinds of aid in fragile situations: financial support and technical assistance. It finds that transition financing mechanisms are needed that enable flexible and rapid responses to a wide variety of needs and opportunities and reviews the different types of funding arrangements that are possible. These include funds set up especially for fragile situations; pooled funding arrangements that help donors share and spread their risks; and budget support so that donors can align their efforts with existing partner country mechanisms. -
Chapter 4 looks at some practical options to help donors take appropriate risks in fragile and transitional contexts. It begins by looking at some of the approaches adopted in the private sector (particularly the financial and commercial sectors) and the parts of the public sector not dealing with aid, and considers their relevance for the aid sector and fragile and transitional settings. It then looks at some of the lessons from two areas of practice where risk management is central: working with politically corrupt systems and undertaking local procurement. Case studies of donors’ approaches to corruption and local procurement provide a wealth of ideas for how these important issues can be dealt with in fragile and post-conflict situations.
-
This chapter sets out conclusions and recommendations for DAC donors in particular, and for the organisations that they fund. It lists five main findings: (1) Donors are unduly risk-averse in their aid engagement in fragile and transitional contexts. (2) Lack of shared risk analysis concepts and frameworks is hampering effective collaboration on risk management. (3) The pressure to demonstrate narrowly defined results and accountability requirements is making donors and their implementing partners more risk averse. (4) Current approaches to controlling corruption and other fiduciary risks are stifling effectiveness. (5) There are not enough collective approaches to managing risk or well co-ordinated donor strategies of engagement. For each of these points practical recommendations are made, mainly concerning the need to establish a risk culture and related processes which encourage appropriate risk.
-
-
Risk is a relative concept. We have to ask “risk of what, to whom?”, which requires among other things ways of determining the vulnerability of different groups or institutions to a particular kind of threat. The relative aspect of risk is reflected in the formula commonly used in disaster management: risk = hazard x vulnerability. This serves to illustrate that establishing how great a risk is gives only one kind of information. It is another thing to ask “what are the causal factors – and how can we influence them?” In the event of a disaster, we may be able to do little about the hazard, especially if it is a natural phenomenon rather than a human-made one. But we may be able to reduce people’s vulnerability to the effects of earthquake, floods, etc. It is the effects of these events, not the events themselves, that constitute the disaster.
-
-
-
-
On 25 and 26 November 2010, experts and policy makers from a wide range of member states and international development and humanitarian organisations met in Copenhagen to explore issues relating to the risks inherent in development cooperation, including both humanitarian, development and stabilisation interventions. The conference aimed to review different organisational perspectives on risk and risk management, to share learning from the experience of aid engagement in selected contexts, and to identify practical options for managing results and for improving financial, operational and political risk management.
-
The New DAC International Network on Conflict and Fragility (INCAF) has decided to do more detailed work to explore different financing issues during the transition from humanitarian to development activities, as part of its 2009-10 Programme of Work and Budget (PWB).1 The overall objective of this work is to develop specific recommendations that can enable earlier and faster release of funds during the transition period through allowing for higher tolerance of risk and facilitate more effective implementation. The efforts will be spearheaded by the Financing and Aid Architecture Task Team and the outcomes will feed into the INCAF’s intermediate output 1.2, “Progress report on implementing the 2007 High Level Meeting Policy Commitment to improved development effectiveness in situations of conflict and fragility including tracking resource flows.”