Risk Management for MFIs – II

MicroSaves' Briefing Note 122 discusses how to calculate risk scores as well as develop and use risk monitoring tools. It examines how to set responsibilities, develop the risk management and reporting structure with a business continuity plan in an organization. The Note states that risk management covers all functions of an organization. It is a continuous process that requires effort from everyone in the organization. Organizations that need to reduce risks can develop a risk management system that is best suited to the level and complexity of operations. Key points from the Note include:

• Risk scores are calculated by combining frequency and impact of risk;
• Organizations can base inherent risk scores on various management reports;
• Risk monitoring tools are essential parts of a risk management system;
• Frequency of risk assessments varies among organizations;
• Organizations use four basic strategies of risk management: avoid, transfer, accept, and control;
• Management should, over time, aim to reduce residual risk;
• Everyone in the organization is responsible for containing risk;
• Risk reports help assess and manage risks, and take corrective actions;
• Business continuity planning helps an organization re-start its operations after exposure to risk.