This report investigates the question ‘Should aid providers be more willing to take risks when working in fragile states?’ The study considers the evidence for this idea 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 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 Development Assistance Committee (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 public and private sectors.
Key Findings:
The report concludes that current donor behaviour and systems are too risk-averse to achieve the desired results. They are risk-averse in where they engage and in how they engage.
Recommendations:
- Establish a culture which encourages appropriate risk taking. This includes giving incentives to staff or implementing agencies to take calculated risks; removing disincentives for taking risks; and ensuring political cover for risk-takers if initiatives fail.
- Create funding and finance mechanisms which are more flexible, reduce transaction costs and increase speed of disbursement.
- Agree, with other donors, upon risk concepts and terminology and strengthen the use of joint risk assessment and analysis.
- Set more realistic objectives and criteria for measuring “success” when working in fragile and risky contexts.
- Accept that working in fragile contexts inevitably involves a higher degree of exposure to corruption and the misuse of aid. Current approaches to controlling corruption and other fiduciary risks are stifling effectiveness.
- Share risks with other donors and maximise collective impact by pooling efforts and funding. Concerted donor approaches to risk management work better than bilateral approaches.
