In response to the global financial crisis that began in 2007, the International Finance Corporation (IFC)’s Global Corporate Governance Forum (the “Forum”) developed a supplement to the Corporate Governance Board Leadership Training Resources published in 2008 called Governing Banks. As part of that effort, the Forum explored the corporate governance and risk governance needs of banks’ Boards of Directors through an extensive research and review program.

In 2012, the IFC provided the Center for Financial Inclusion at Accion (CFI) with permission to modify the Governing Banks supplement to be specified even further for the microfinance industry. The rapid growth of the microfinance sector in recent years has left many board members of microfinance institutions (MFIs) without an adequate understanding of the multitude of governance and risks management challenges they face. The <a href="http://www.centerforfinancialinclusion.org/programs-a-projects/investing-in-inclusive-finance/running-with-risk">Running with Risk project</a>, managed by the CFI’s Investing in Inclusive Finance Team, seeks to raise awareness about the importance of effective risk governance for institutional growth and sustainability.

Governing Banks: MFI Edition builds on the work of the Forum Governing Banks team, and modifies the document to take into account the specifics of regulated microfinance institutions. This was done with the support of an Advisory Team with expertise in corporate governance, risk management, and microfinance.

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Governing Banks: MFI Edition. Part 1: Risk Governance

<a href="http://cfi-blog.org/category/investing-in-inclusive-finance/" target="_blank" rel="attachment noopener wp-att-9676"><img class="alignright" style="border: 0" src="http://centerforfinancialinclusionblog.files.wordpress.com/2013/02/untitled2.jpg" alt="" width="310" height="54" /></a>The Investing in Inclusive Finance program at the Center for Financial Inclusion at Accion explores the practices of investors in inclusive finance. Across areas including risk, governance, stakeholder alignment, and fund management, this blog series highlights what’s being done to help the industry better utilize private capital to develop financial institutions that incorporate social aims.

You may have caught Philip Brown’s <a href="http://cfi-blog.org/2013/04/23/how-can-mfi-boards-be-explicit-about-risk-strategy-and-appetite/" target="_blank" rel="noopener">blog post</a> last month on how MFI boards can be explicit about risk strategy and appetite. Philip’s post was one of 10 responses collected for the publication, in which industry experts each candidly responded to one tough risk question that every board member should be asking, and be able to answer. The publication,<a href="http://www.centerforfinancialinclusion.org/publications-a-resources/browse-publications/502-ten-risk-questions-for-every-mfi-board"> Ten Risk Questions for Every MFI Board,</a> was officially released today.

Through the publication, we set out to cover topics such as over-indebtedness, risk management measures, fraud, “newer” risks, and lack of communication, offering insight on some of the most difficult risk issues that board members face. Ten Risk Questions for Every MFI Board provides concrete warning signs and strategies for effectively managing or avoiding specific risks. We hope this resource will empower board members to speak up when they are uncomfortable about a move the MFI is making, or when they think an early warning sign of a larger problem may be present.

The publication is part of the Center’s <a href="http://www.centerforfinancialinclusion.org/programs-a-projects/investing-in-inclusive-finance/running-with-risk" target="_blank" rel="noopener">Running with Risk project</a>, which seeks to raise awareness about and enable effective risk governance for the institutional growth and sustainability of MFIs. Running with Risk is creating a common framework and language around risk so both the MFI’s management and board of directors better understand the potential of their roles, and can more adequately anticipate and manage risks. In Ten Risk Questions for Every MFI Board, the various experts discuss the importance of boards in determining and assessing how much risk is acceptable for the MFI and taking responsibility in leading the institution to ensure that the proper policies, procedures, and people are in place.

Ten Risk Questions for Every MFI Board is available for download on the <a href="http://www.centerforfinancialinclusion.org/publications-a-resources/browse-publications/502-ten-risk-questions-for-every-mfi-board" target="_blank" rel="noopener">CFI website</a>. Along with Philip Brown, the publication includes responses from risk experts Lynn Exton, Karla Brom, Alex Silva, Liliana Botero, Daniel Rozas, Petronella Chigara-Dhitima, Stephan Hartenstein, Andrés Calderon, and Christian Ruehmer.

Have you read?

<a href="http://cfi-blog.org/2013/04/23/how-can-mfi-boards-be-explicit-about-risk-strategy-and-appetite/" target="_blank" rel="noopener">How Can MFI Boards Be Explicit about Risk Strategy and Appetite</a>

<a href="http://cfi-blog.org/2012/08/14/a-core-reference-tool-updated-cmefs-governance-guidelines/" target="_blank" rel="noopener">A Core Reference Tool Updated: CMEF's Governance Guidelines</a>

<a href="http://cfi-blog.org/2012/07/16/banana-skins-2012-overindebtedness-tops-the-risk-charts/" target="_blank" rel="noopener">Banana Skins 2012: Overindebtedness Tops the Risk Charts</a>

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Ten Risk Questions for Every MFI Board

With this risk expert exchange, the second publication of the Running With Risk Project, the CFI has asked 10 microfinance risk experts to candidly respond to the top risk questions every board member should be asking, and should be able to answer. We hope this expert exchange will empower board members to speak up when they are uncomfortable about a move an MFI is making, or when they feel an indicator may actually be an early warning sign of a larger problem. This expert exchange is also intended to provide board members with concrete suggestions of warning signs and strategies for effectively managing or avoiding certain risks. Ultimately, a stronger, more effective board presence on risk mitigation will contribute to the health of MFIs around the world.

Experts include:
<ul>
 	<li>Alex Silva, General Manager, Omtrix and Executive Director, Calmeadow</li>
 	<li> Lynn Exton, Independent Consultant</li>
 	<li>Karla Brom, Independent Consultant</li>
 	<li>Liliana Botero, VP of Risk for Latin America, Accion</li>
 	<li> Daniel Rozas, Independent Consultant</li>
 	<li>Petronella Chigara-Dhitima, Senior Operational Director, Accion</li>
 	<li>Stephan Hartenstein, Managing Director, NomoRisk GmbH</li>
 	<li>Andrés Calderon, Risk Vice President Africa-Asia, Accion</li>
 	<li>Christian Ruehmer, Independent Consultant, Deutsche Bank</li>
 	<li> Philip Brown, Managing Director of Risk, Citi Microfinance</li>
</ul>
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10 Risk Questions for Every MFI Board

In this report, David Lascelles, senior fellow and joint founder of the Center for the Study of Financial Innovation, shares his insights about risk in a lively and provocative manner. He discusses some of the most important risks that boards should consider and highlights the importance of managing risk at all times, not just during crisis. In fact, effective board oversight of risk should help to anticipate and avert crises.
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Risk Management

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Governing Banks: MFI Edition. Part 1: Risk Governance

Ten Risk Questions for Every MFI Board

10 Risk Questions for Every MFI Board

Microfinance — A Risky Business