RISK MANAGEMENT Jacqueline Pontré, Volker Welter, Joao …apps.who.int/medicinedocs/documents/s19071en/s19071en.pdf · All aspects of public administration and financial management

JOURNAL OF PUBLIC PROCUREMENT, VOLUME 11, ISSUE 3, 301-322 FALL 2011

RISK MANAGEMENT IN HUMANITARIAN PROCUREMENT AND SUPPLY CHAIN

Jacqueline Pontré, Volker Welter, Joao N. Veiga Malta, Ibrahim Faria, Anna Chernyshova*

ABSTRACT. Public procurement in many countries is one of the most important factors in governance and is a priority target of reform. In many humanitarian situations however, service delivery cannot wait for procurement reform. The needs of many of the Millennium Development Goals are immediate, while procurement reform may take years to institutionalize. Under these circumstances, international organisations such as the United Nations have both implementation and capacity-building roles, often placing them in high-risk situations. This has led to the development of procurement risk assessment and management tools, designed to provide objectivity in country procurement risk monitoring and review, as well as assist capacity building. The procurement risk assessment methodology that follows uses established risk modeling to provide procurement risk ratings in 60 HIV/AIDS, Tuberculosis and Malaria programs in 26 countries, and is successfully promoting procurement strengthening within high-risk country offices.

INTRODUCTION

The Millennium Development Goals (MDGs) endorsed by all 192 members of the United Nations in 2001 established a fifteen-year ---------------------

* Jacqueline Pontré, MA, MPhil and Volker Welter, Ph.D., are Procurement Advisor, and Senior Procurement Advisor, respectively, United Nations Development Programme’s Procurement Support Office in Copenhagen; Joao N. Veiga Malta, MA, is Senior Procurement Specialist at the World Bank. Ibrahim Faria, MD, MBA, is a Project Coordinator, UNDP in Togo. Anna Chernyshova, MBA, is a Programme Officer, UNDP in Belarus. The views expressed in this publication are those of the authors and do not necessarily represent those of the United Nations, UNDP or the World Bank.

Copyright © 2011 by PrAcademics Press

302 PONTRÉ, WELTER, MALTA, FARIA, & CHERNYSHOVA

humanitarian agenda to reduce extreme poverty and child mortality, address disease epidemics and promote development. In total, eight goals were established, including the “Combat of HIV/AIDS, Malaria and other diseases”. In 2002 the Global Fund to Fight Aids, TB and Malaria (GFATM) was established to develop a new funding stream to address these pandemics, and by 2010 had committed more than US$12billion to more than 550 programs in 136 countries.

A basic problem confronting these, and other humanitarian goals and development programs in many countries, is the lack of robust institutions, governance and human capacity required to support these initiatives. All aspects of public administration and financial management are vulnerable to these issues, but of particular concern is public procurement and supply chain management (PSM), which has been a priority target for reform for development organisations such as the World Bank (2006). Comprehensive benchmarks for assessing public procurement in developing countries have been published by the Organisation for Economic Cooperation and Development (OECD, 2006).

Often, for developing countries, there are severe shortages of procurement expertise and limited procurement legislation and standard procedures. These shortcomings cannot be addressed within a time span measured in months: legislation alone will in most countries take a minimum of two years to develop and initiate, while procurement expertise also takes significant time to recruit and train. In addition there is a need for the development of effective institutional structures and systems that support transparent processes and effective monitoring and evaluation, and while these procurement reforms typically take years to institutionalize, MDG program requirements such as that of the GFATM are urgent.

In the case of the GFATM programs, the requirement for effective public procurement frameworks to specify contractual requirements and monitor and manage contract obligations including for all parts of the supply chain, such as for the acquisition and distribution of pharmaceuticals, bed nets and syringes, is one of the most significant challenges.

Where the requirements of procurement and supply chain management exceed the existing institutional and human capacity of a country the GFATM has often engaged the UNDP to provide the

RISK MANAGEMENT IN HUMANITARIAN PROCUREMENT AND SUPPLY CHAIN 303

resources, expertise and governance structures to allow these programs to proceed. In these cases the UNDP establishes a Project Management Unit (PMU) in the specific country to manage the program. The dominant concerns of these units are PSM and financial administration.

In addition, the GFATM charges the UNDP with responsibility for developing the capacities in these countries for them to take over full responsibility for these programs. Therefore while pharmaceuticals and equipment supplies are drawn from numerous international providers with varying quality accreditations, the UNDP PMU employs, where possible, local personnel albeit often with limited experience and skills, in order to develop local capacity as part of their employment activities. Similarly national institutions, albeit often with weak governance and capacity, are engaged by UNDP as sub-contracted service providers and are included in UNDP training programs.

This capacity-building focus has a material bearing on the risks incurred by UNDP in its roles of procurement and supply chain manager, and which has had to offset these risks as far as possible with additional oversight, guidelines and interventions. As service provider to the GFATM the UNDP is legally accountable for program performance including the activities and effectiveness of its employees, all sub-contractors, sub-sub-contractors, as well as commercial suppliers including for pharmaceuticals.

These accountabilities represent major financial and reputation risks for the organisation as well as risks for the safety and wellbeing of its target populations: for example supply interruptions for HIV/AIDS pharmaceuticals can have severe consequences for patients, while in cases such as major fraud, the GFATM may cancel or not renew a program.

To assist with risk management in this area the UNDP Procurement Support Office (PSO) has developed a risk assessment methodology to allow consistent and objective procurement risk monitoring. The purpose of this methodology is two-fold. First it alerts UNDP of the major risk areas in each country team to ensure an appropriate level of oversight and intervention is provided. Second, the methodology is designed to encourage capacity


development of local officials and national institutions by assisting them to identify, manage and take responsibility for PSM risks.

This methodology has been deployed across the 60 grant programs valued at US$800 million in 26 countries managed by the UNDP as at 2009. This paper describes this development and its results.

EXISTING POLICY

In relation to each existing and every new grant UNDP policy requires that there be a detailed mapping and analysis of the organisation’s responsibilities and the corresponding capacities of its respective country management teams to effectively deliver on the associated accountabilities. The mapping and analysis of PSM risks

FIGURE 1 The ERM Risk Management Cycle

Source: UNDP’s ERM Policy Report (Bureau for Development Policy, 2008).


are also formal requirements under the UNDP’s Enterprise Risk Management (ERM) policy (Bureau for Development Policy, 2008).

The ERM policy provides the general, overarching framework for risk management within UNDP. The ERM policy explains how to conduct and apply ERM through five steps, shown in Figure 1, which form the risk management cycle. It also defines the roles, responsibilities and accountability levels needed to ensure proper risk management (Figure 1).

Risk identification and assessments are the first steps to the development of country-specific risk management plans, which seek to mitigate the financial, patient safety and other program risks listed above. Risk management plans are also an important element in driving procurement capacity development and reform under many of these programs. The risk identification process is designed to address all PSM factors that program managers should be monitoring and managing. The assessment step shows these managers the results of their activities and helps to guide customised interventions such as recruitment and training. The risk assessments provide a basis for the UNDP to ensure that the support it provides to each country program is properly designed and accurately targeted.

The stakeholders in this policy include the GFATM in terms of contractual performance, the UNDP itself in terms of legal and financial accountabilities and reputation, the country-specific institutions and personnel, various non-government and commercial organisations, as well as the HIV/AIDS, TB and Malaria patients.

CONCEPTS

Risk is the exposure to the consequences of uncertainty, and includes the possibility of a variation from the desired outcomes (Cooper et al., 2005). Risk can include loss or gain but in the context of the GFATM programs the focus is on possible problems or negative outcomes. Risk is generally recognised (Baccarini & Archer, 2001; Cooper et al., 2005) as having two dimensions - probability and impact. Risk assessment methodology measures both of these and combines them in a way that can be easily monitored and is useful to management.

Risk is also something that exists in the future, and this sometimes distinguishes it from a problem. For example the past or


present absence of a procurement plan for the supply of pharmaceuticals for a country Malaria program would not be a risk - it would be a fact and a problem. This problem becomes a risk if it remains unresolved into the future. In many country situations, existing problems are strong guides to the risks to the program in the future.

It is recognised best practice in risk management to assess the risks associated with each project regardless of its financial value, recognising that even low value projects can be high risk. We distinguish here between absolute and relative impacts – clearly for a $20milion project the absolute financial risks will be greater than for a $5million project. However the relative risks for each project are the major concern and these would seem to be largely independent of project size. The risk assessment methodology seeks to identify and prioritize the high risk factors associated with procurement in a way that can be monitored and evaluated over time.

METHODOLOGY

A challenge is that risk management methodologies need to be applied in the country offices, and in country government institutions, where there is often no experience of risk management. The methodology needs to be able to be applied by personnel with limited management experience. There is also a need to report the risk exposures in terms that facilitate monitoring and reporting of numerous programs. The approach was to develop a methodology for procurement risk assessment that was user-friendly, easily understood and required minimal training.

The weights (or ratings) assigned both to the probability and impact for each risk represent judgements about the circumstances and capacities within each country setting. In this case each risk was weighted in terms of a five-point scale for probability and a five-point scale for impact, as described in Table 1. This formed the basis of risk prioritisation.

These scales are similar to those found in the literature - for example Table 1 shows the same quantitative scale used for an environmental risk analysis, and has also been used in Australian government (Western Australian Government (1998) for


TABLE 1 Quantitative Scales

Almost certain 5 Severe 5 Likely 4 Very High 4 Possible 3 Moderate 3 Unlikely 2 Low 2 Rare 1 Insignificant 1

procurement and project management, and by the Australian Defense Department (2003), while the OECD (2006) benchmarking report for procurement in developing countries used a four point scale. The principle assumption underlying the semi-quantitative approach is that qualitative scales can be transformed into numerical values as indicators of impact and probability (Cooper et al., 2005), Vose, 2000). Qualitative non-numeric scales have also been used, for example by the Department of Defense USA (1998), and also within UNDP internal reports, but these are more suitable for individual analyses rather than for tracking progress amongst 60 program grants across 26 countries. An extensive discussion of these methodologies can be found in Cooper et al (2005) and Bowden et al (2001). Much of the risk literature has focussed on project management, especially construction projects. In the case of the GFATM activities the risks are associated with ongoing programs for which the management context is distinct but the principles are the same.

The risk ratings are arrived at by multiplying the impact with the probability for each risk factor using the approach that:

Risk = Impact x Probability

This derivation of risk and its subsequent aggregation represent a convention in risk management (Cooper et al 2005) even though the scales in Table 1 are only semi-cardinal. This approach generates the risk-rating matrix, which is the primary assessment tool for the country teams and summarises the risks for the grants managed by UNDP in a simple numerical form. Other formulae are also used in risk analyses but the above was preferred in this context because it is intuitive, simple and can be easily understood within country office contexts.


IDENTIFICATION OF PROCUREMENT RISKS

The GFATM programs cover that all aspects of the supply chain be managed in complex and difficult environments. These programs require, inter alia, that procurement and supply chain management includes forecasting of demand based on epidemiological and demographic factors, quantification of pharmaceutical requirements that will avoid wastages and shortages, pharmaceutical quality controls including laboratory testing, secure storage and transport, import and customs requirements, pharmaceutical waste and disposal policies, and monitoring and evaluation of all activities. All of these steps undertaken in environments of poor capacity involve risks. There are risks associated with factors such as the quality of governance, and the selection, capacity and monitoring of contractors and sub-contractors. Further, there are risks arising from legislation, training (or lack of), the degree of co-operation and coordination with national authorities, and local facilities and infrastructure. A total of forty-six frequently encountered risks have been identified. Risk factors adopted are also consistent with the reporting requirements of the GFATM, which cover all aspects of PSM. Within this framework, risk factors are classified as either endogenous or exogenous as follows.

Endogenous Risks

For the GFATM program endogenous risks are those for which the probability of occurrence is within the management scope of the program. However for these risks the impacts will generally be outside the scope of program management by the country teams.

For example the probability of poor procurement planning can be addressed with better management, but the impacts such as on organisation reputation and potential suspension of further funding from the GFATM are largely outside the scope of management. Examples of risk impact scoring for three risk factors are shown in Table 2.

For each of the endogenous factors an impact score was assigned according to the consultations that took place during the development of the template. The use of similar impact scores between each country was adopted and seems reasonable for the factors, and greatly simplified the analyses and enabled the application of the methodology within the country office context.


From Table 1 and Table 2, five (5) indicates a high impact should the risk materialize, and one (1) indicates that performance or circumstances in this area are not critical to the success of the program.

TABLE 2 Examples of Risk Impact Scores

Impact Score

Risk Factors Lack of procedural compliance with procurement

Lack of accredited suppliers

Inadequate oversight of contractors

Impact

5

GF withdraws from further funding. UNDP reputation damage

Lack of competition High prices for supplies. Poor quality frequently encountered. Patient risks. Additional funding required

Systemic failure of program delivery. Patient treatment disrupted. GF withdraws further funding UNDP reputation damage

4

GF reviews performance and may withhold further funding. UNDP reputation damage

Significant number of supplies with higher prices. Inferior or unknown quality of drugs. Patient risks.

Frequent failure of program delivery in many areas. Patient treatment disrupted. GF funding at risk UNDP reputation damage

3

GF reviews performance and likely to renew but some reputation damage

Some supplies with higher prices, some inferior quality standards. Patient risks.

Some programme delivery failure in several areas, patient treatment at risk, GF funding to be reviewed

2

GF to reschedule funding following mission

Minor incidence of higher prices. Infrequent quality problems.

Minor programme delivery failure in some areas, patient treatment generally not at risk.

1 GF to review and reschedule

No impact on prices or reliability of supply

Program meets targets regardless of contractor performance.


Procurement risks arising in country teams and national institutions classified as endogenous included the following:

1. Assumptions underpinning the project budget (4)

2. Level of M&E capacity in PMU (4)

3. Adequacy of the management information systems (2)

4. Quality of supply forecasting procedures (3)

5. Quality of PSM plan (4)

6. Level of procurement experience (5)

7. Level of procurement qualifications (4)

8. Level of ability to scale up the program (3)

9. Level of procurement procedural compliance (4)

10. Level of contract management capacity (4)

11. Access to accredited suppliers and long term agreements (4)

12. Level of coordination and liaison between procurement and program areas in PMUs (2)

13. Procurement audit rating (4)

14. Adequacy of distribution plan and management (3)

15. Adequacy of storage facilities at central dispersion point (3)

16. Adequacy of storage facilities at distribution points (4)

17. Systems for monitoring and reporting of inventories (3)

18. Intellectual property legislation or international copyright law compliance (1)

19. Level of coordination with national authorities (4)

20. Level of facilities and processes for product testing (3)

21. Level of insurance coverage (3)

The numeral in parenthesis following each factor represents the impact score that was assessed for that factor. This list is not comprehensive, for example further major risks are for the in-country contractors and sub-contractors to the PMU under each program.


Exogenous Risks

Exogenous risks are those for which the probability of occurrence is outside the management scope of the program. However for these risks the impact will generally be inside the scope of program management. For example the likelihood of military activity or adverse weather conditions is outside the management scope, but the impact on the supply chain may be addressed by contingency planning including the use of buffer stocks in outlying regions. Exogenous risks include:

1. Adverse natural environment for delivery of drugs and supplies

2. Unavailability of required support services, staff and resources

3. Significant civil and / or military activity

4. Poor quality of delivery infrastructure

5. Unsatisfactory political environment

6. High corruption rating

For exogenous factors the impact score is assessed individually for each country setting, along with the probability score. The differences in adopted assessment approaches, between endogenous and exogenous factors within the context discussed above, are shown in Table 3.

TABLE 3 Endogenous versus Exogenous Assessment

Procurement Risk Endogenous Exogenous

Likelihood Management dependent

Independent, country-specific

Impact Independent, country non-specific Management dependent

The foregoing risk identification process is the basis for the measurement and prioritisation of procurement risks and for the evaluation of procurement management processes in the country offices. It is important to note that the list of endogenous and exogenous risk factors above is far more extensive than would be


required to simply generate a country risk ranking. The risk ranking of countries is only one objective. The primary focus is to provide a risk checklist for country operational managers for them to monitor the issues, encourage them to identify weaknesses, develop their capacities and set their own goals.

SOURCES OF DATA AND VALIDATION

It is desirable for the procurement Risk Assessment framework to be able to be applied by individual country officials themselves. This is firstly because of the number of grants and country offices make it impractical for an independent assessor to undertake all these reviews. Secondly, and more importantly, country offices need to be encouraged to own the results and to actively address the risks. A self-assessment version of the framework has been developed that included the opportunity for officials to enter two risk scores for each factor. The first score would be their assessment about their existing risk likelihood ratings, while the second score would represent their management target for a time horizon of six months into the future. For exogenous factors they would also score the impact ratings as discussed above. The self-assessment template in Table 4 is an abridged version of the complete template that includes 46 risk factors.

During the pilot phase the self-assessment scores were validated against other data sources. The data used for the development and verification came from a range of sources including the following:

- The self-assessment risk questionnaire (this was the primary source)

- The Global Fund ratings overall plus the individual GFATM ratings for four operational areas, namely Financial Management and Systems, Institutional and Programmatic, Procurement and Supply Management and Monitoring & Evaluation;

- The PSM plan assessment ratings conducted by the PSO;

- The UNDP Audit Reports;

- Individual mission reports of the UNDP support team (New York, Dakar and Copenhagen).


The most thorough of these were the audit reports, however these are often dated and few are less than 12 months old. The individual mission reports were often the most useful, especially when supplemented by feedback from the regional offices that maintain close contact with each country office on an ongoing basis.

In the majority of cases the self-assessment tool was consistent with the data sources from all of these alternative sources. In some cases adjustments were required where country offices’ own assessments of their risks were inconsistent with other data sources, apparently underestimating these risks. In these cases an independent desktop assessment was undertaken and adjustments made based principally on observations from regional offices and recent mission experiences.

TABLE 4

Risk Likelihood Assessment Template: Endogenous Factors

Which of the Following best describes your circumstances? Score

5 4 3 2 1 Factor 1: Quality of PSM and Procurement Plan Procure-ment, distribution and supply plan still under develop-pment

Basic procurement, distribution and supply plan but assignment of responsibilities to individual staff is incomplete

Procurement, distribution and supply plan with significant gaps or unreasonable expectations with unclear assignment of responsibilities

Good procurement, distribution and supply plan with some gaps and most responsibili-ties clearly assigned to individual staff

Very good procurement, distribution and supply plan with clear assignment of all responsibi-lities to staff

Factor 2: Procurement experience Little significant procurement capacity

Basic procurement capacity but inadequate for the volume of contracts

Some procurement skills and experience, inadequate for contracting volume

Good procurement skills and experience, adequate for most of the contracting workload

Very good procurement skill with ex-tensive expe-rience and adequate for all expected contracting workload


TABLE 4 (Continued)


5 4 3 2 1 Factor 3: Procurement qualifications No formal procurement qualifications

Few staff involved in procurement have formal procurement qualifications such as for Atlas

Some procurement staff have management or qualifica-tions including for Atlas

Most procure-ment staff have formal procurement qualifications including for Atlas

All procure-ment staff are fully qualified in procure-ment

Factor 4: Scaling up of procurement capacity required by the program Program will require a major scaling up (>85%) of experienced procurement staff

Program will require substantial scaling up (50%-85%) of experienced procurement staff

Program will require signify-cant (15%-50%) scaling up of experienced procurement staff

Existing resources require a minor scaling up <15%)

Exiting resources able to accom-modate additional program – no scaling up required

Factor 5: The conduct of procurement and level of compliance with procedures Procurement processes not fully documented. Incomplete or have inadequate guidelines

Access to procurement guidelines and regulations sometimes. Inadequate. Documented procedures not always applicable

Good access to guidelines and regulations, some process documentation, inadequate transparency. Processes not always fully documented

Good access to manuals, good docu-menttation. Processes fully documented Unclear allocation of roles and res-ponsibilities

Fully compliant and transparent procedures, manuals and documenta-tion. Respon-sibilities for each activity clearly allocated

Factor 6: Contract management capacity Managed by staff with little or no contract management experience

Managed by staff with some basic contract management experience

Managed by experienced third party and mostly sufficient for workload

Managed within an experienced contracting unit with sufficient staff for most of the workload

Managed by experienced contract manager with sufficient staff for expected workload


TABLE 4 (Continued)


5 4 3 2 1 Factor 7: Contract performance monitoring Performance indicators for contracts are not bench-marked

Contract prices are not always compared to those in the PRM

Contract performance indicators are not frequently monitored

Contract performance indicators are regularly monitored and recorded

Performance indicators for delivery, quality and price are all bench-marked and monitored. Remedial follow up always taken

Factor 8: Availability and competency of suppliers and long term agreements Supplier reliability and quality unknown and no use of long term agreements

Few reliable suppliers and few long term agreements

Some competent suppliers and some long term agreements

Adequate number of competent suppliers and adequate number of long term agreements

Abundance of competent suppliers and ample long term agreements

Factor 9: ACP Performance Rating ACP rejection rating > 85%

ACP rejection rating 50%-85%

ACP rejection rating 15%-50%

ACP rejection rating < 15%

No rejections by ACP

Factor 10: Procurement Audit Rating Compliance failures in most areas.

Compliance failures in many areas.

Compliance failures in some areas.

Compliance failures in a few areas.

Compliance in all cases. No Audit exceptions.

Factor 11: Distribution planning and management No adequate or compre-hensive distribution plan

Distribution plan not fully comprehen-sive, or inadequately documented with unclear allocation of responsibili-ties

Distribution plan fully documented but not well connected to target population, responsibilities not clear

Distribution plan well targeted with clear allocation of responsibi-lities but lacking in contingency planning

Distribution plan well documented, up-to-date with contingencies and focussed on budgeted target population and responsibilities clearly allocated


TABLE 4 (Continued)


5 4 3 2 1 Factor 12: Storage facilities at central dispersion point Shortage of well-defined storage facilities with security and environmental controls

Storage area defined but not properly secure and lack of clearly documented recording of stock

Storage area well defined with management and recording systems for stock movements but no clear allocation of responsibili-ties

Secure storage with environmental controls and clearly defined allocation of responsibilities for managing stock movements but inadequate or irregular reporting

Secure storage with adequate capacity and environmental controls and clearly defined allocation of responsibilities for managing of stock movements with good reporting

Factor 13: Storage facilities at distribution points General lack of well-defined storage facilities with security and environmental controls

Few storage areas generally defined but often not secure and often lack of clearly documented recording of stock

Some storage areas generally well defined with management and recording systems for stock movements but often no clear allocation of responsibili-ties

Many secure storages with environmental controls and clearly defined responsibilities for managing stock movements but inadequate reporting

Secure storage all with adequate capacity, environmental controls and clearly defined responsibilities for managing stock, with good reporting

Factor 14: Few centres (<15%) undertaking adequate monitoring and reporting of inventories

Some (15-25%)centres undertaking adequate monitoring and reporting of inventories

Many (25-50%)centres undertaking adequate monitoring and reporting of inventories

Most (50-85%)centres undertaking adequate monitoring and reporting of inventories

Almost all (>85%)centres undertaking adequate monitoring and reporting of inventories


TABLE 4 (Continued)


5 4 3 2 1 Factor 15: No adequate facilities exist in the country and no agreed contingencies

Some facilities but unclear accreditation or a lack of agreed arran-gements

Facilities with approved accreditation but difficult access

Facilities with approved accreditation at reasonable cost and access

Accredited laboratories and compliant procedures with good access, performance and reasonable cost.

RESULTS

The application of this tool to all 60 grants in 26 countries gave procurement risk profiles in terms of 46 risk factors. Risk scores were rolled up into risk categories and also into total risk for each country based on the formula:

Aggregate Category or Country Risk = ∑ (Pi x Ii)

Where the summations occur over all the risk factors for that risk category or country, and where Pi and Ii are the probability and impact of the ith factor.

The rolled up results were re-scaled by dividing by the total maximum achievable risk for that category or country. The re-scaling was to give results ranging from zero-to-one, to provide a scale that users found to be more intuitive, rather than a raw scale that varied depending on the number of factors in each category and that ranged from zero-816 for total country risk.

The risk profiles for two successive years for a Malaria program in Togo is shown in Figure 3 in terms of broad procurement risk categories obtained from individual risk scores from the matrix. Analyses of individual risks in these profiles provide the basis for risk management planning.

The substantial reduction in procurement risk levels in Togo shown in Figure 3 reflected the management priorities in that country office and the recruitment of additional expertise into this area. This

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TABLE 5 Risk Categorisation

Categorisation Risk Rating Territories Grants Severe ≥ 0.60 8 13

High ≥ 0.50, < 0.60 7 18 Medium ≥ 0.40, < 0.50 6 13

Moderate < 0.40 8 16

that monitoring capacity is often weak in the country teams (see also Goodwin et al 2000 for more discussion of managing outsourcing risks).

Based on these assessments risk management plans have been developed. Risk management planning has been a country-by-county exercise based on a common framework of factors established by the above assessments. Risk management planning methodologies have been elaborated upon in several governments including by the Office of Government Commerce (UK, 2002), the Treasury Board of Canada (2001) and the New South Wales Government (1993), as well as by the US Department of Defense (2003), Standards Australia and Standards New Zealand (2004). Individual country risk management plans have included time-bound recruitment of procurement professionals and evaluation specialists, the upgrading of management information systems, procurement and supply chain management training, procurement planning, capacity-building of national counterparts, and intensive support from the PSO. This has met with some success such as for the case of Togo. The PSO is continuing to work with all of these offices to address the issues and build more robust management of procurement and their supply chain.

SUMMARY AND CONCLUSION

The procurement risk assessment template provides a structured methodology for assessing and dealing with future uncertainty and organisation weaknesses. A benefit of the methodology is that it allows country level procurement risks to be diagnosed more objectively, consistently. The template is simple and intuitive and yet comprehensively covers procurement and supply chain management risks with 46 factors in diverse country applications. The template


has also been adapted for self-assessment by country office management personnel.

The purpose of the analysis has been to provide the basis for risk management planning and guide the country teams in the identification of the measures to mitigate those risks. Each grant requires a Risk Management Plan. Procurement risk management plans that follow from these assessments are developed as far as possible by the country teams themselves and be inclusive of national counterparts. The PSO has facilitated Risk Management Plans for severe and high-risk operations.

The methodology serves two purposes. First it allows the UNDP to monitor and diagnose its own liabilities, and to implement targeted risk management plans for its county-based teams. Second it promotes risk awareness and analysis amongst national institutions and local personnel and forms a basis for targeting of capacity building initiatives. The template encourages country teams to establish their own time-bound goals for risk management. The continuing application of the methodology is being encouraged as a key part of management control and capacity building.

REFERENCES

Baccarini, D.& Archer, R.(2001). “The Risk Ranking of Projects: A Methodology.” International Journal of Project Management, 19 (3): 139-145.

Bowden, A.R., Lane, M.R., & Martin, J.H. (2001). Triple Bottom Line Risk Management. Chichester, UK: John Wiley and Sons.

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Cooper, D., Grey, S., Raymond, G., & Walker, P. (2005). Project Risk Management Guidelines: Managing Risks in Large Projects and Complex Procurement. Chichester, UK: John Wiley and Sons.

Australia Department of Defense (2003). Environmental Risk Management. [Online]. Available at http://www.defense.gov.au/ environment;and http://www.defense.gov.au/environment/risk_ management/risk_framework.pdf.


U.S. Department of Defense (1998). Risk Management Guide for DoD Acquisition. Fort Belvoir, VA: Defense Systems Management College.

Goodwin, D., Cooper, D.F., Cross, J., Knight, K.W., & Walker, T. (Eds.) (2000). Guidelines for Managing Risk in Outsourcing (HB 240:2000). Sydney, Australia: Standards Australia.

New South Wales Government of Australia (1993). Risk Management Guidelines. Sydney, Australia: Public Works Department.

OECD (2006). Methodology for Assessment of National Procurement Systems. [Online]. Available at http://www.oecd.org/ dataoecd/1/36/37130136.pdf.

Office of Government Commerce UK (2002). Management of Risk. [Online]. Available at www.ogc.gov.uk/guidance_management_ of_risk.asp.

US Department of Defense (2003). A Guide to the Project Management Body of Knowledge. Fort Belvoir, VA: Defense Acquisition University Press, Extension to the Project Management Institute.

Standards Australia and Standards New Zealand, (2004). Handbook for Risk Management Guidelines (AS/NZS 4360). Sydney, Australia: Author.

Treasury Board of Canada (2001). Integrated Risk Management Framework. Ottawa, Canada: Author.

Vose, D. (2000). Risk Analysis: A Quantitative Guide (2nded.). Chichester, UK: John Wiley and Sons.

Western Australian Government (1998). Managing Risks in Contracting. [Online]. Available at www.dtf.wa.gov.au/cms/ uploadedFiles/_Procurement/Buyers/RISK_MANAGEMENT.pdf.

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VOLUME 11 NUMBER 3 FALL 2011

Documents

RISK MANAGEMENT Jacqueline Pontré, Volker Welter, Joao …apps.who.int/medicinedocs/documents/s19071en/s19071en.pdf · All aspects of public administration and financial management