The Risk Management Initiative is a consortium of collaborating organisations with the goal of developing and supporting the implementation and evaluation of stronger and sector-specific risk management practices and standards for microfinance institutions. They have a number of technical and position papers on their website, and have new guidance on how to use the RMGM, the risk management self-assessment tool for depositing and non-depositing financial institutions.
The RMGM, which stands for Risk Management Graduation Model, has been piloted throughout the developing world in a number of small and medium sized financial institutions. The system is a pathways-based best practices standard, with tools for internal and external evaluation. The program also has developed a strategic improvement section depending on assessment results.
The model is tiered to various sizes of institutions, and has a different assessment model for deposit accepting and non-deposit accepting institutions. The assessment looks at different areas of concern, beginning with the organisational strength and support for risk management. The organisational assessment begins with governance and strategy, risk culture, and internal controls. The tool then looks at various areas of risk management, including operational risk, strategic risk, credit risk, and financial risk. Social concerns and social program evaluation are also included. When assessment activities are concluded, the tool moves into strategic improvement planning and implementation.
One of the surprises that came from the initial piloting of the tool was the critical importance of the basic organisational structure and support for risk assessment standards and strategic improvement activities. Rather than regulatory and other external concerns, the most critical variables were internal, such as internal controls, risk culture, and oversight of operational risk.
Like many best practices and standards development tools, senior leadership buy-in was critical to the successful implementation of the assessment program. The RIM consortium has developed a number of tools to help with different levels of implementation, and the leadership education and support portion is included. Another attribute of the tool, and the RIM consortium, is their commitment to agility during technological disruptions in the industry and the ability of standards development to continue to respond to changes in the sector.
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