Triple Jump news - Monday, January 30, 2012

Improved Risk Management

FEBRUARY 2012 – Small microfinance institutions (MFIs) are now able to manage their risks in an integrated and cost-effective manner deploying a unique approach developed by Triple Jump Advisory Services.

This is the outcome of a pilot project that Triple Jump Advisory Services has implemented in Guatemala with support from the Dutch Entrepreneurial Development Bank, FMO. The pilot has yielded a unique hands-on approach that goes beyond theory or a one-off exercise, and has contributed to a long-lasting re-organisation at the very heart of the participating organisations.

The current financial crisis has boosted the interest in effective risk management. Most existing risk initiatives barely go beyond theory and concepts, or they are too complex for small MFIs. Often the operational capacity and the quality of the MIS at small MFIs do not allow for advanced statistical approaches. Additionally, knowledge of, or experience with, risk management techniques is fairly absent throughout the organisation, and the budget constrains the recruitment of professional risk management staff.

Triple Jump Advisory Services decided to address this challenge and set up a pilot with three MFIs in Guatemala to develop and test a new approach to embedding professional risk management within the institutions in a cost effective way. The participating MFIs appointed risk management committees in consultation with Triple Jump Advisory Services. These committees were subsequently trained and accompanied to analyze and manage their credit, financial, operational and strategic risks and develop their own risk management strategy. The centrepiece of this strategy is the risk manual that will be updated at least once a year and will evolve with institutional growth.