KAMPALA PRINCIPLE 5:PGCs_SUBP 5.D

Sub-principle 5.D

Establish provisions to mitigate and manage risks

 

Why is this important? 

 

It is important to effectively identify, manage and mitigate potential risks. Regular risk assessments with all programme partners can provide an effective means towards ensuring that private sector engagement (PSE) projects produce both development outcomes and shared benefits for businesses. Conducting risk assessments allows instances of harm or risks to business operations or vulnerable groups and sectors to be discovered, thereby enabling project partners to correct course and pursue a more appropriate project trajectory. Partner country governments are most suited to ensure the well-being of their citizens by mitigating and managing potential risks that may result from PSE projects and policies.

Self-reflection questions
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Policy Level Project Level
  • Does your PSE strategy explicitly acknowledge the potentially risky nature of PSE projects? Do you therefore offer options for identifying and addressing these risks as well as financial mechanisms that spread risks and help to build trust? 
  • Does your PSE strategy propose dialogue with other stakeholders and potential partners to identify and mitigate risks involved in country contexts? 
  • Does your PSE strategy specify acceptable levels of risk and offer strategies for when projects fail?
  • Does your PSE strategy and/or country programmes propose dialogue with other stakeholders and potential partners to identify and mitigate risks involved in country contexts? 
  • Have you considered a role for national and local civil society organisations (CSOs) in monitoring risk across all PSE projects and policies?
  • Have you established a clear risk mitigation strategy for your project in consultation with development partners? Is the strategy in the public domain and open to regular revision?
  • Have risks been allocated to those stakeholders the best suited to managing such risks? For instance, public sector actors are best placed to address political, macroeconomic and regulatory risks while the private sector is best suited to manage the market, commercial and business risks. 
  • Will you conduct regular risk assessments along with all project partners before, during and following the completion of each PSE project? How will you manage and mitigate risks as they emerge and evolve over the project life cycle?
  • Do all project partners have at least a minimum risk management capacity – i.e. the ability to reduce, mitigate or adapt to project-related risks, including gender impact, environmental impact and human rights?  
  • In the event that a PSE project is causing environmental, social or governance harm, how will you seek course correction (such as renegotiating a contract to rebalance and manage risk; readjusting a project’s aims, partners or activities)? 
  • Anticipating that some projects may cause significant harm in extreme cases, will you request that all PSE contracts include a termination clause?

Actions to consider
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Policy Level Project Level
  • Develop and regularly update your national risk assessment framework in consultation with representatives from key public, civic and private groups in developing these guidelines.
  • Determine and assess what level of risk you are comfortable with and establish guidelines on acceptable levels of risk.
  • Establish strong knowledge management structures to share good practices. Support international efforts to collate best practices and data on effective private sector investment and engagement.
  • Start small: conduct initial pilot studies to scope out potential risks, provide initial adjustments, and offer more confidence to the private sector and other partners through the demonstration effect. 
  • Keep regular contact with MSMEs and local CSO representatives to monitor and mitigate emerging risks during project implementation.

Pitfalls to avoid
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Policy Level Project Level

      DON’T…

  • Rely entirely on standard due diligence frameworks developed for public sector projects that do not incorporate the specific nature of, and risks associated with, PSE.
  • Withhold CSOs’ contribution and undermine their role in assessing risk both at the strategic, policy or local levels.
  • Produce risk mitigation strategies that do not recognise risks for all partners involved, most notably for those furthest behind.
  • Fail to establish guidelines on acceptable levels of risk. 
  • Irregularly monitor or update risk assessment frameworks.

      DON’T…

  • Overlook or not fulfil transparency requirements when managing risk. 
  • Employ one-size-fits-all approaches to risk analysis and mitigation without differentiating between each project’s specificities like the sector, geography or stage in a project’s life cycle.
  • Use too many approaches to risk management and mitigation by disconnecting from other project partners when developing shared risk assessment, management and mitigation processes. 
  • Fail to take extra care within fragile sectors such as education and health which have previously been prone to surges in risks.

COUNTRY-LEVEL EXAMPLES

In the case of the Kampala Principles case study on Enabling the Digital Inclusion of Smallholder Farmers in Uganda, a tripartite agreement between private and public sector actors was established to share risks and guarantee a market to farmers, while the development partner, the International Fund for Agricultural Development, monitored and managed risks and responded to stakeholders’ concerns.

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