Organisation

Risk Analysis – Responding to a Challenging Environment

The organisation faces a range of environmental challenges. The high-risk environment in FCAS naturally affects SPARK’s work and imposes certain limitations that are less likely to occur in more stable environments.

SPARK is experienced in the provision of support to entrepreneurs in FCAS, where it runs pilots upon entering a new country. SPARK built its reputation through a strong track record in countries such as Kosovo, Rwanda and Liberia. This is the basis upon which SPARK can build to further expand its reach. Additionally, donors and local authorities have started to approach SPARK on their own initiative.

Nevertheless, SPARK’s working environments pose a number of challenges. Lack of rule of law and good governance and the danger of a renewal of conflicts are often characteristic of the countries in which SPARK operates. In such environments, the implementation of programmes can be severely impacted or even come to a halt. Learning from past experience and lessons learned by others – as well as ensuring a high level of preparedness for the occurrence of such risks – is essential for ensuring the continuity of SPARK’s programmes. SPARK communicates openly about the nature of its work in FCAS and makes it clear to donors and other stakeholders that working in FCAS carries additional risks. SPARK is aware of the necessity of having responses to such risks in place. The most important risks, and SPARK’s mitigation approaches, are briefly explained in the following section.

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Risk Probability Impact Mitigation Strategy
General and Programmatic Risks
Loss of added value as development organisation xx xxx Learning, innovation and continuous development of distinctive approach
Broad geographic coverage and limited span of control xx xx Realistic planning and allocation of sufficient resources
Insufficient capacity of local partner organisations xxx xx Two-tier approach of implementation activities and capacity building of local partners; rigid selection criteria
Slow start of programme xxx xx Realistic planning
Financial Risks
High dependence on a limited number of donors xx xxx Increase of acquisition activities and diversification of donor portfolio
Fraud within the organisation or among partners xx xx Rigid implementation of Partner and Sanctions Policy; payments only in instalments
FCAS-Specific Risks
Unregistered operations xx x Open communication and high level of transparency
Staff security – health issues, kidnapping, safety xxx xxx Security Policy and trainings; adequate response measures; insurance
Organisational Risks
High staff turnover xx xx Internal trainings and identification of opportunities for development; handover procedure
Limited fundraising/acquisition capacity xx xx Business Development Unit in Belgrade; recruitment of staff with respective skills; trainings

x = low             xx = medium                 xxx = high

General and Programmatic Risks

  • Loss of added value

In recent years, the area of private-sector development has garnered increasing attention and more organisations have started offering programmes in this area. This increase in competition could result in a loss of interest from donors and partners, diminishing SPARK’s relevance. For this reason, SPARK not only builds on existing expertise and communicates its track record, it also develops its own expertise, conducts research (e.g. Tracer Studies as described in section 5.6), monitors the development of the sector, invests in learning and searches for new, innovative approaches. These activities allow SPARK to remain a relevant partner in its key thematic area and to distinguish itself from other organisations in the field. SPARK shares and co-develops its expertise with the sector through its series of expert meetings and Tracer Studies. Capacity building through increased staff training is another relevant means, but budget limitations mean SPARK is restricted in this regard.

  • Broad geographic coverage and limited span of control

Extending the reach of SPARK’s programmes could mean that in some countries resources become too limited, both in terms of staff and material components. This could result in a lowering of quality, which would endanger SPARK’s reputation with stakeholders in the respective country. There is a tension between the donor’s inclination to reduce implementation costs and SPARK’s experience of comparatively high implementation costs that are inherent to working in FCAS. Programme activities should therefore be focused, and it is clear that there is a limit to the number of countries in which SPARK can operate. After a period of expansion, SPARK has now adapted its strategy to one of consolidation and concentration of the countries in which it works. Together with realistic planning, it is also crucial to carefully select the staff that will be in charge of implementation and to make sure that adequate financial resources are made available to sufficiently support the programme on the ground and therefore mitigate this risk.

  • Insufficient capacity of local partner organisations

The capacity of local partners in FCAS is generally low and this is a recurring problem across various FCAS contexts. This is an obstacle for SPARK, as the organisation puts great emphasis on collaborating with local partners to transfer skills, knowledge and eventually the responsibility for joint activities. Building local capacity takes time, while funding partners have an interest in fast job creation to rapidly increase the level of stability. Pledging more resources to capacity building of local partners is an approach that usually meets with success, but is limited by the donor’s willingness to provide the necessary funds.

In other contexts, there may be no adequate local partners. SPARK has positive experience with establishing local partner organisations from scratch. When working with existing partners, SPARK adheres to strict selection criteria in order to determine suitable relationships. SPARK follows a two-fold approach: first, implementing activities are conducted while building the capacity of the local partner. This helps to progress projects while initial results are delivered and local capacity is built. Second, a sanction policy is in place – e.g. in case partners fail to meet agreed results or don’t do their financial reporting (see section 5.8).

  • Slow start of programme

Sometimes, programmes start with delay and targeted results cannot be achieved within the set time frame. This is for various reasons, including the low functionality of local institutions, the aforementioned lack of capacity of local partners and volatility in the respective environment. While SPARK’s communication with donors when establishing a programme is generally good and frequent, the assumptions underlying programme planning and design could at times be more realistic. All of these factors might impact SPARK’s reputation and reliability from the perspective of its donors and local stakeholders; careful and realistic planning and transparent communication are necessary to mitigate this risk.

Financial Risks

  • High dependence on a limited number of donors

Traditionally, SPARK has received a substantial amount of its funding from the NLMFA. Due to budget cuts, the Dutch development budget decreased by 25% in 2014. Moreover, in future there might be further cuts in the budget for development cooperation or a change in policy focus. This could result in less project funding and fewer tender opportunities from this important donor. Against the backdrop of increased competition in its core competence, SPARK has already increased its project development and acquisition activities significantly, and will continue to do so. An acquisition strategy is in place and the Business Development Unit (BDU) in Belgrade has been supplemented with additional staff. As 76% of SPARK’s income in 2014 was sourced from the NLMFA, a wider range of donors is being approached in order to diversify the support base and decrease dependency on the NLMFA.

  • Fraud within the organisation or among partners

Due to the low level of rule of law and often-high corruption levels in the countries where SPARK works, fraudulent activities can occur and funds could get lost. This is potentially damaging to SPARK’s reputation, might affect the implementation of projects and can complicate the acquisition of future funds. For this reason, SPARK’s Partner Policy includes a sanctions clause for fraud cases and organisational checks for major programmes. Moreover, funds are not paid at once but in instalments. With €40 million spent since 2000 and very few incidents of reported fraud, SPARK’s current procedures have proved effective thus far. But in renewed conflict situations (for example, in South Sudan), the organisation remains vulnerable to fraud. In 2015, further fraud-prevention measures will be taken. One example is the temporary relocation of funds from local bank accounts to Dutch accounts until the situation in the affected country has stabilised.

FCAS-Specific Risks

  • Unregistered operations

After a conflict, countries often experience chaotic circumstances and government institutions are seldom fully functional, which makes registration of operations difficult or turns it into a very lengthy process. This could impede the achievement of early results. On occasion, local governments want to see a specific track record prior to official registration, while partner organisations prefer the assurance of working with a registered organisation whose activities are not threatened by sudden discontinuation. Fortunately, the nature of SPARK’s work is not of a specifically political bent, so that barriers to registration can usually be overcome. In those cases where barriers are encountered, SPARK openly communicates with donors and local governments about its activities for beneficiaries and partners and its efforts in obtaining formal registration in the respective country. With no incidents reported to date, SPARK’s approach has worked well so far.

  • Staff security – health issues, kidnapping, safety

In FCAS, the security situation is often unstable and conflicts can re-emerge. Besides risks to programmes and potential reputational damage, the life and health of colleagues can come under threat. In FCAS there’s increased potential for employees being mugged, attacked or kidnapped. Beginning with the recruitment process, SPARK emphasises the need for conflict sensitivity and awareness of potential dangers. To mitigate risks, security trainings are conducted with field staff. SPARK’s security policy informs employees about what steps to take in case of an emergency, and staff is trained about how to collect the right information in a tense situation. Country managers are in charge of adapting these policies further to the local contexts and revisit them according to changing situations on the ground. In Iraq (Kurdistan) and for its activities in Syria (from Gaziantep, Turkey), SPARK staff furthermore has access to networks such as the International Safety Organisation (www.ngosafety.org) to inform their activities in these very unstable environments. Due to SPARK’s focus on volatile environments there is, despite these precautions, no guarantee that an incident might not happen in future.

Organisational Risks

  • High staff turnover

A high rate of staff turnover can lead to a loss of knowledge and expertise and could ultimately endanger the continuity of programmes. Investment in staff capacity is lost and a substantial amount of time has to be spent on recruiting and training new staff, which increases inefficiencies. For this reason, SPARK tries to identify possibilities for internal personal development and new responsibilities in order to maintain staff satisfaction levels. In case of a change in staff, a handover procedure is in place to ensure that programmes can continue with minimal interruption. In 2014, staff turnover was higher than desired. As a consequence, SPARK is currently working on a new HR policy, which, among other things, is aimed at increasing staff incentives in order to improve staff retention. There is, however, limited capacity for financial incentives if SPARK is to remain a financially competitive organisation.

  • Limited fundraising/acquisition capacity

As SPARK aims to diversify and extend its donor portfolio, it relies on the skills of its staff and internal acquisition competencies. This is important for the development of SPARK’s project portfolio, to ensure opportunities for growth and to achieve SPARK’s mission in the long run. In support of this, SPARK has established a central Business Development Unit (BDU), but also trains country managers and emphasises such skills in the recruitment process. Furthermore, it is important that other operational areas – for example, the communications team – are aware of their contribution to effective acquisition activities. While the number of submitted project proposals has significantly increased due to improved acquisition capacity, few of these (pending) proposals have so far been converted into contracts.

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