Failure to understand risks leads to Failure

Change is not easy to many people or organizations. The discipline of Risk management provides techniques to facilitate change.
Risk management is often misunderstood as being time-consuming, impractical, difficult, or perceived as a functional compliance duty. The need for risk management is downplayed by the absence of evidence (of risks), however this doesn’t mean evidence of absence (of risks). Although risk management facilitates, rather than encumbers, the achievement of objectives, rarely it is pervasive in the organizational culture and in the decision making process.
The quality of the risk management process is a reflection of the management team and Board risk appetite, their tolerance for uncertainty and pressure for results. 
How does a robust risk assessment framework look like:

• Risk management is integral to normal organizational processes and decision-making, driven from the top.
• Risk management is using simple language, concepts and common sense thinking. 

• Risk management cuts across the different responsible departments and stakeholders
• Risk management is transparent and inclusive of all organizational levels and stakeholders. 

• Risk management is a dynamic and ongoing process. 


Specifically, in Grant management there are four risk areas:

1. Programmatic risks – related to the program relevance, the quality of M&E
2. Financial risks – related to financial efficiency, fraud, theft
3. Service delivery risks – related to quality of services and products, delivery disruptions, equity of access to services
4. Governance risks – related to inadequate management, oversight and reporting

Recognizing that risk-free environments do not exist, in the decision-making process these four areas need to be carefully considered against agreed risk thresholds to enable the achievement of the organization’ mission and ultimate goal.
The purpose of establishing thresholds is to ensure that risks are not over- or under-managed and that the organization’s resources are effectively utilized. Reducing risk involves costs; the lower the risk threshold, the higher the cost. Lack of upper thresholds signals inadequate protection and exposure to unacceptable losses impacting the organization’s ability to meet its objectives.
The Board and senior management have a shared responsibility to nurture a risk-aware culture that encourages prudent risk-taking within established risk thresholds.