Risk management in development cooperation is increasingly important

The anticipation and management of risks are a key part of the implementation of development cooperation. The need for assistance, but also the related risks, are emphasised in fragile states and conflict zones. New financial instruments, such as loan and investment type of development financing, have also brought about new risks.

The risks associated with development cooperation are varying and of different levels. Risks that undermine results may include sudden changes in the operating environment: political instability in the partner country, security problems and extreme natural phenomena, or fluctuations in international development funding. Examples of this are the COVID-19 pandemic and the spread of armed conflicts, which have led to changes in the funding granted and operating methods used by the Ministry for Foreign Affairs.

Implementation of development programmes also involves risks. For example, shortcomings in programme planning, human expertise and systems may delay or limit results. Corruption and misuse of funds may also prevent results from being achieved.

Both the need for assistance and risks are emphasised in fragile states and conflict zones.

Risk management is part of the strategic planning, knowledge management, performance management and quality management of development policy and development cooperation. The Risk Management Policy in Development Cooperation completed in 2021 strengthens the practices of the Ministry for Foreign Affairs and its partners and obliges the development of risk management in all activities funded by Finland. In addition to managing political and financial risks, Finland requires its partners to take action to prevent sexual exploitation, abuse and harassment.

The UN and international financial institutions play a key role in the implementation of Finland's development cooperation. They are also responsible for the risks related to cooperation and for risk management. According to MOPAN, which assesses multilateral cooperation, the risk management procedures of organisations have evolved favourably in recent years. The Ministry for Foreign Affairs participates in the work of the organisation boards and, due to agreements on special funding and the monitoring of their implementation, in the steering of risk management. The Ministry for Foreign Affairs will take any suspected abuse, such as the misuse of funds and sexual harassment seriously. Abuses are always addressed.

Risk management in development cooperation also involves handling of suspected abuses. All actors engaged in development cooperation have a duty to report any abuses they have observed or they suspect to the Ministry for Foreign Affairs via the Vaarinkayttoilmoitus.fi(Link to another website.) website. Misused funds are recovered in accordance with internal recovery instructions. The reporting service for the Ministry for Foreign Affairs and the instructions for handling suspected misuse are based on Finland's international commitments to combat corruption and bribery.

The Ministry for Foreign Affairs issued 17 recovery decisions in 2018-2022, resulting in the recovery of EUR 173,162. In addition, some discretionary government transfers were returned voluntarily. All funds that Finnish organisations were ordered to repay were returned. As a result of international legal processes, it may take years to process some cases.

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An entry is made in connection with new funding decisions based on the targets set on a scale comprising human rights blind, human rights sensitive (taking human rights into account), human rights progressive (promoting human rights) and human rights transformative (addressing human rights challenges) or not specified.
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The entries are made on the basis of target-setting in connection with new funding decisions. The sample contains the funding decisions which have the promotion of gender equality as the principal or significant objective.
3
A three-year average of decisions involving funding that supports equality. For example, the figure for 2017 shows the average for 2015-2017.
4
Multilateral Organisation Performance Assessment Network.
5
OECD DAC Corruption Risk Management Recommendations 2016. https://www.oecd.org/corruption/oecd-recommendation-for-development-cooperation-actors-on-managing-risks-of-corruption.htm
6
London Safeguarding Summit 2018 commitments. https://www.gov.uk/ government/collections/safeguarding-summit-commitments
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The Ministry for Foreign Affairs (16 May 2022): Table 4. Development financing payments to Finland’s largest partner countries 2016-2021. https://um.fi/documents/35732/0/Tilastoliite+2021%2C+osa2. pdf/47739300-0dac-50c8-d9ce-706195ee8070?t=1649772600686
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MOPAN (16 May 2022) MOPAN Assessment library https://www. mopanonline.org/assessments/
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MOPAN: 2017-18 ASSESSMENTS, Global Environment Facility (GEF) 2019. https://www.mopanonline.org/assessments/gef2017-18/GEF%20 Report.pdf
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MOPAN: 2017-18 ASSESSMENTS, United Nations Population Fund (UNFPA) 2019.
https://www.mopanonline.org/assessments/unfpa2017-18/UNFPA%20Report.pdf(Link to another website.)
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MOPAN: 2017-18 ASSESSMENTS, UN Women 2019. https://www.mopanonline.org/assessments/unwomen2017-18/Final_assessment_UN_Women_2019_02_14.pdf(Link to another website.)
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MOPAN: Assessment Report United Nations Children’s Fund (UNICEF) 2021. https://www.mopanonline.org/assessments/unicef2020/MOPAN%20Assessment%20UNICEF%20web%20[for%20download].pdf(Link to another website.)
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Ministry for Foreign Affairs of Finland (2020). Finnish Development Policy Influencing Activities in Multilateral Organisations, Volume 1, Main report. https://um.fi/documents/384998/0/Vol1+_MainReport_Evaluation+of+Finnish+Development+Policy+Influencing+Activities+in+Multilateral+Organisations+%281%29.pdf/2666cd6a-0bb2-1c76-0659-db1ac6fa30bf?t=1591860985653
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A more in-depth examination was conducted by the World Bank Group, UNFPA, UNICEF, the World Food Programme WFP, UN Women, International Fund for Agricultural Development IFAD, the Food and Agriculture Organization FAO and the International Trade Centre ITC.
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MOPAN: 2017-18 ASSESSMENTS, International Fund for Agricultural Development (IFAD) 2019. https://www.mopanonline.org/assessments/ifad2017-18/IFAD%20Report.pdf(Link to another website.)
16
African Development Bank Group (2022). Annual Development Effectiveness Review 2022. https://www.afdb.org/en/documents/annual-development-effectiveness-review-2022(Link to another website.)
17
European Commission (2021). Global Europe: Neighbourhood, Development and International Cooperation Instrument. https://ec.europa.eu/ info/funding-tenders/find-funding/eu-funding-programmes/global-europe-neighbourhood-development-and-international-cooperation-instrument_fi
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One of the organisations receiving programme support is Fingo, the members of which include 270 Finnish civil society organisations.

Experience helped to adapt work in Afghanistan

The Taliban’s rapid rise to power in Afghanistan in August 2021 forced aid actors into a situation where traditional development cooperation with the government had to be swiftly suspended. Donors and aid organisations adjusted their activities quite flexibly, facilitated by over 20 years of experience in Afghanistan. With the help of UN and civil society organisations, funds were allocated to new needs and to those most in need. This process was moderately successful, and adaptation work is still partly ongoing.

The rapidly changing situation demonstrated that in general, development cooperation partner organisations selected by Finland could continue and adapt their programmes as required by the situation.

There are still no prerequisites for direct cooperation with the Taliban regime, and Western funds are not channelled to the Taliban regime. Instead, aid is channelled through international and local organisations.

Prevention and elimination of sexual exploitation, abuse and harassment

Finland requires zero tolerance on sexual exploitation, abuse and harassment (SEAH) and inaction to it from its partners in development cooperation and humanitarian aid. The prevention and elimination of SEAH became a key objective and operating principle in international and Finland's development cooperation during the government term.

Finland has made international commitments on the prevention and elimination of SEAH: London commitments (2018) and OECD’s Development Assistance Committee’s (DAC) Recommendation on Ending Sexual Exploitation, Abuse and Harassment in Development Co-operation and Humanitarian Assistance. Thus, Finland is committed to prevent sexual harassment, to support victims of exploitation and to improve the protection of the party who reported the offence . In accordance with common political will, Finland has updated terms and conditions of funding agreements and requires its partners to implement common principles and standards.

Risk reduction through good planning

The Risk Management Policy in Development Cooperation published in 2021 complements the Ministry for Foreign Affairs' common procedures and defines sector-specific risk management objectives, principles, responsibilities and an operating model. Risk management policy is based not only on national legislation but also on the ISO31000 standard, which international organisations comply with and the recommendations of the OECD Development Assistance Committee (DAC).

The implementation of risk management policy requires that the Ministry for Foreign Affairs quality system is made more effective. Risks are managed through active monitoring, audits, evaluations and influencing. These are reduced with good planning and the careful selection of partners.

Possible misconduct at UNOPS a significant case in the UN system

The United Nations Office for Project Services (UNOPS) reported a suspected misconduct in December 2021. As soon as the matter had emerged, the Ministry for Foreign Affairs froze funding of UNOPS and launched an investigation. Finland was the first country to provide information on the case on 14 April 2022. The UN has launched several investigations on the matter, which Finland has actively required. Finland's own investigations will also continue in 2022.