CLA and Enterprise Risk Management: How USAID Takes Risks in an Uncertain World

USAID operates in a world of complexity and uncertainty. Every day, the Agency is called upon to manage risk: as we plan strategies and design projects, as we implement activities on the ground, and as we continually adjust course as things beyond our control inevitably change.

Managing risk is a fundamental part of USAID’s core mission to advance countries on their Journey to Self-Reliance, which requires taking some big but calculated risks. Advancing the Journey to Self-Reliance requires changing the way we work with and through local partners, so that our investments leverage specific types of local capacity, support local ownership, and enhance the sustainability of results. These investments may come at the expense of  achieving immediate or short-term results, and often require working in fragile contexts. At this year’s Moving the Needle, USAID’s flagship collaborating, learning, and adapting (CLA) event, USAID staff, implementing partners, and other development professionals discussed how USAID takes risks in an uncertain world by implementing Enterprise Risk Management and CLA approaches.

USAID’s approach to risk-taking: Enterprise Risk Management

USAID has shifted to a holistic approach to risk management (in both understanding and responding to risk) called the Enterprise Risk Management (ERM) program. The Agency's ERM program seeks to break down internal silos by enabling open and honest communication across functional areas about the risks we face in pursuing our top-line objectives. ERM also recognizes that managing risk isn’t just about minimizing or controlling risk; it’s about taking advantage of opportunities to maximize the likelihood of achieving our overall mission while mitigating threats. The cornerstone of USAID’s ERM program is the “Risk Profile,” in which each operating unit identifies the most significant risks to achieving its objectives and determines a plan for managing them.

How CLA supports ERM

In complex and uncertain contexts, CLA practices help take a balanced and systematic approach to risk-taking. By supporting smart and disciplined risk-taking, like taking prudent risks to capitalize on opportunities, CLA helps successfully achieve development objectives and foster self-reliance. ERM and CLA have similar underlying principles:

• Continually learning and adapting. ERM and CLA approaches are applied iteratively on an ongoing basis. A Mission’s CLA Plan and a Mission’s Risk Profile should be used as living management tools, not one-off events.
• Valuing diverse perspectives. ERM and CLA emphasize the importance of collaborative, inclusive dialogue to generate new insights and learning that can help us better identify and manage uncertainty.
• Focusing on achieving the overall objective. ERM and CLA are management approaches that aim to more effectively achieve our highest-level objectives in the face of uncertainty. They help us identify where we need to adapt in order to achieve these objectives.

Used together, ERM and CLA approaches can strengthen each other. The programmatic risks we identify through ERM can help inform our learning agendas by enabling us to include those risks as learning questions and continually monitor them and gather additional information for effective adaptive management. CLA approaches, in turn, can help us better respond to the risks we identify. For example, portfolio reviews, pause-and-reflect sessions, and other learning activities give us the opportunity to check in on how things are going, what has changed, and how we need to adapt our response. In addition, CLA approaches such as scenario planning can reduce the negative impact of a risk if it does occur.

Examples Shared at Moving the Needle 2019

Scenario Planning in Yemen helped identify and monitor risks in a challenging environment while identifying programming opportunities and potential strategic shifts that were responsive and adaptive to evolving circumstances.

• Scenario planning was identified as the right tool to improve decision making when facing uncertain future conditions and for adaptive management in such a complex and uncertain environment.
• Scenario planning provided an opportunity to solicit input from a variety of other stakeholders and support prudent risk-taking in leveraging opportunities to expand USAID’s programming.
• This tool was used to help identify future trends and events that could affect programming, build confidence in what our partners can do, and generate buy-in from the interagency.

Learning and adapting when working with local partners

The Cooperative Development Program, with support from USAID’s Office of Local Sustainability, in South Africa and Peru provides an example of managing risk when working with local partners. The purpose of the program was to strengthen farmer cooperative competitiveness to improve quality and productivity. However, climate and weather change, lack of mindset and behavior change, price and market volatility, and lack of trust within the organization were risks that stood in the way of achieving the program’s goals. To reduce these risks, the program used a CLA approach to adapt its technical assistance based on listening to farmers and learning about their priorities.

Key Takeaway

Both ERM and CLA aim to increase the effectiveness and sustainability of USAID programming and support the Journey to Self-Reliance. By applying CLA principles to ERM - and vice versa - USAID is more likely to mitigate risks, recognize and take advantage of opportunities, and strengthen local capacity for development.