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ERM > Step 1 - Establishing the Scope - Context and Criteria

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Step 1: Establishing the Scope, Context and Criteria

 

Policy:

UNDP’s ERM Policy defines the scope and criteria for consistent risk management across the organization. Risk appetite may vary at the unit/office level based on the context and objectives.

Establishing the context requires understanding the external and internal context relevant for the realization of objectives at each level. External context includes but is not limited to social, cultural, environmental (including natural hazards and climate change), political, legal, financial, technological, security and economic factors. It also implies understanding the external stakeholders and their relationships, perceptions, and expectations. Similarly, internal context includes strategic objectives, values, standards, resources available, business processes, organizational culture, relationships with internal stakeholders, capacities, etc.

Guidance:

In risk management, it is important to first understand the internal and external context, and know which criteria to use. In other words, this is a sense-making stage in preparation for risk identification and assessment process.
At this stage you and your team should address the following :

  • The programme/project objectives and the specifics:
    The project or programme might be a country-specific one or a part of a larger regional or global one. Understand its duration, its implementation modality (i.e. is it under your implementation or shared implementation with other partners (then which type of partners?) or nationally implemented one? Such questions would help you to scope the boundaries of the intervention. Not necessary everyone in the team would be aware of all those specifics but it will be very important to know them for better understanding of the risks. Very important to clearly define the objectives you intend to achieve and your thinking about risks should always be in referenced with those objectives, i.e. risks to which objective we intend to address?

  • The specifics of the context. A few factors:
    Think of the intervention's geography, cliamate, natural hazards, localization, as well as legal and regulatory (in one of the regions or across several regions), but also legal and regulatory framework related to your field of work, external stakeholders both national or international, political context (fragile countries, upcoming elections, etc.), poverty level, corruption, criminality, etc. Understanding the various dimensions of the context will help you and your team to better envisage the dynamic of different risks and their interactions/interdependencies.

  • Risk Criteria:
    The risk criteria  (i.e. the scale to be used to measure risk likelihood and risk impact)  guide us during the risk management process. It is important in order to provide teams with clear guidance about risk management tools and ensure comparability across different interventions. Imagine your project is being implemented in different countries, you would like to make sure that all teams use similar tools alternatively you would not have share ground to draw conclusions from.

 

 Remeber:

 

1.    Keep the focus on the purpose of this stage

 

Understanding internal and external context and the environment in which we are operating is key to achieving our objectives. Internal factors include looking at office activities, structure, capacities, funding, stakeholders. On the other hand, external factors include political and economic situation as well as social and environmental settings.  This will help  identifying and assessing risks as well as aligning risk management strategy and risk tolerance to successfully navigate surrounding uncertainties towards successful achievement of your objectives.

Remember that (a) risks are always attached to the specific objectives and (b) needs to be analyzed within the agreed time horizon!

 

2.     Consider the internal and external contextual factors

 

 The first step in risk management is to understand the context of your intervention, both internal and external.

The most basic form of human stupidity is forgetting what we are trying to accomplish.                                                                                     Friedrich Nietzsche

(a)     Internal contextual factors relate to the specifics and the objectives of your project or programme,  be it country-specific, or  part of a larger regional or global one.

(b)   External contextual factors relate to the specifics of where your intervention is taking place.  

 

3.    Record Keeping is not necessary

There is no need to record this stage in a report or suchlike. Usually, most important context specifics are already captured in the project or programme document. What is important instead, is for yourself and the team to familiarize with the context and be on the same page in your understanding of which are the important parameters of the internal and external context.