Boards and MFI senior management often do not adequately understand the critical role they should be playing to assess, address, and manage risks. The objective of the initiative is to create a common framework and language so that MFI board members can better execute their roles in managing risk. Through research, exchange and the development of publications with industry players, Running with Risk aims to contribute to a more productive boardroom dialogue about risk. Ultimately, a stronger, more effective board presence related to risk mitigation will improve the health of MFIs around the world.
The Center for Financial Inclusion’s Investing in Inclusive Finance team is working closely with the Risk Management Initiative in Microfinance, a seven-person dialogue group, which includes members of premier microfinance investment funds, networks, and the mainstream financial sector.
The Running with Risk project produces or contributes to the following:
Microfinance, a Risky Business
A lively, conversational, personal, and even provocative paper about the importance of risk. This paper relates why practitioners and experts believe that MFI boards play an important role in risk management and what the boards’ roles and responsibilities entail – all in an effort to prompt discussion, raise awareness, and spark debate about this issue.
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Ten Risk Questions for Every MFI Board
Ten industry risk experts each responds to one tough risk question for a questionnaire. This questionnaire offers honest and candid responses to some of the most difficult risk issues that board members face, tackling issues such as over-indebtedness, fraud, “newer” risks, and lack of information. This questionnaire also offers board members information about setting risk strategy and appetite, developing risk scenarios, which risks to focus on first, and how technology can help in risk management.
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Governing Banks Manual: Microfinance Edition
The International Finance Corporation (IFC) has developed a toolkit called the “Governing Banks Supplement,” which helps train financial institutions in governance and risk management. The IFC has presented the Center with a unique opportunity to modify this toolkit to focus specifically on governance and risk management for the microfinance industry. The Running with Risk Toolkit would provide microfinance managers and board members with a very hands-on, experiential learning opportunity to improve their ability to identify areas of risk, and develop skills for managing those risks effectively.
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Discussions and Trainings
In addition to raising awareness about the importance of governance and risk management through the publications and tools mentioned above, CFI strives to engage with board members directly to influence their thought and actions. Publications and tools will only become effective when they are used by the target audience of MFI board members.
CFI promoted all of the publications through their broad network and specifically hosted a webinar on Governing Banks: MFI Edition, Part I through the industry-wide Governance Working Group on July 15, 2013. Approximately 30 participants, including board members, investors and governance experts attended the webinar.
CFI also presented the publications at the “Governance Leadership in a Competitive World” pilot seminar on October 3-4, 2013. Held in Mexico City, over 30 board members and CEOs from 15 MFIs in Latin America attended the seminar to discuss the issues of risk and strengthen their capacity in risk management through various tools, including the Governing Banks Manual.
Our work is generously supported by Calmeadow and the Citi Foundation.
