Proactive risk management is essential to the long-term sustainability of microfinance institutions (MFIs). This toolkit presents a framework for anticipating and managing risk in microfinance institutions with a particular emphasis on new product development. The discussion is tailored to senior managers who play the most active role in setting the parameters and guidelines for managing risk.
There are two parts to this toolkit. Part I lays out a general framework for identifying, assessing, mitigating and monitoring risk in the MFI or bank as a whole. The document emphasizes the inter-relatedness of risks and the need for a comprehensive approach to managing them. Establishing a comprehensive risk management control structure in a financial institution is a necessary precondition to effectively managing risks related to new product development and roll-out.
Part II focuses on risks inherent to new product development and suggests tools to help manage the process. The toolkit’s approach to managing risk in new product development and roll-out is, by intent, conservative and time-consuming. However, the toolkit recognises that sometimes it will be necessary to fast – track certain steps or maybe even take the risk of leaving some steps out in the hope of a greater gain down the line. The toolkit cautions against too much haste in rolling out new products. Being first in a market with a new product is not a sustainable competitive advantage. The toolkit recommends following and/or adapting all the steps in MicroSave
’s product development process to suit an organisation’s needs, and complementing it with the risk mitigation tools provided in this manual. Managers should always weigh the costs of leaving out particular steps against the benefits that they might yield in preventing unnecessary cost and product failures, or increasing opportunities for new product successes down the line.
For a quick overview, do read through the toolkit summary