Risk Management

It is impossible to avoid mistakes and setbacks. Denmark accepts these risks because doing so is necessary for the creation of long-term progress. At the same time Denmark works systematically to assess and prevent risks.

A boarding school for girls in Tete in northern Mozambique, where Danida is supporting an information programme about HIV/AIDS and pregnancy.
Photo: Klaus Holsting

Risks and results are interconnected. We do not achieve our ambitious goals without innovative thinking and being prepared to take chances. Among the risks are:

• Experimenting with new approaches that turn out not to have the desired effect
• Programmes that fail due to limitations in their execution by the partners
• Setbacks because of war, natural disasters or other
• Fraud and corruption with development assistance funding

We accept risks

It is impossible to avoid mistakes and setbacks. We are willing to accept these risks because doing so is necessary for the creation of long-term progress.
 
There are risks involved in both new and established partnerships. There are risks in both fragile states and in stable, democratic countries.

Denmark is working to become better at judging and assessing risks. The risk of losses and unsuccessful programmes must be compared to the possible results of the programme. There is also a risk involved in doing nothing.

Even though Denmark accepts risks as part of development cooperation, we are constantly working to minimise the risks. When an activity is being prepared, the different risks are assessed.

The management of an activity is designed to prevent or alleviate the most likely risks. For example, if the partner’s financial management is weak, a start can be made by improving the partner’s accounting system.

Combating fraud and corruption

There is special focus on the risk of fraud and corruption in development work. Even though fraud and corruption can occur in all countries and cultures, the risk is greater in developing countries with weak institutions.

Danida cannot accept abuse of development assistance. The risk exists, and therefore our position on abuse is clear and we have a clear, consistent way of responding to it. Denmark follows up on all suspicions of irregularities. It is fortunately often the case that the suspicion proves to be unfounded. 

In practice the extent of fraud and corruption involving Danish development funds is very limited. Over the four years between 2007 and 2010, DKK 11.2 million was lost due to fraud or abuse in the recipient countries. In comparison, Denmark granted approximately DKK 50 billion in development assistance in this period. The extent of fraud is thus a mere DKK 2 for every DKK 1,000 of development assistance.