Commentary, Platform

Managing Risk or Creating It? The Real Message Behind the 2014 World Development Report

This past Sunday, the World Bank released it’s 2014 World Development Report titled Risk and Opportunity: Managing Risks for Development. This report delves into the process of risk management, looking at how it should be conducted, what obstacles prevent people and societies from conducting it effectively, and how these specific obstacles should be overcome.

The theme of this years report will not come as a surprise to most, as ‘resilience’ is one of development’s sexiest new buzzwords. In the age of aid effectiveness, these concepts have massive appeal to donors because proactive and systematic risk management can help to build resilience and protect hard-won development gains (read: investments).

While on the surface the report focuses on preparing for, preventing, and mitigating risk, the real message that the World Bank hammers home is about creating an environment where people are less averse to taking risks. Many people may be baffled by this concept – why would we want to invest in risk management only to encourage more risk? Let’s follow the argument.

Under the leadership of Dr. Jim Yong Kim (the President), the World Bank has set out to transform risk management from being viewed as merely a control function to one that is more dynamic and responsive to change. When risk management is only focused on regulation and preventing potential losses, it results in missed opportunities day after day. In his forward to the report, Kim illustrates the link between risks and opportunities:

“Pursuing opportunities requires taking risks, but many people, especially the poor, are often reluctant to do so, because they fear the potential negative consequences. Failure to act can trap people in poverty, leaving them vulnerable to negative shocks and even less able to pursue opportunities that would otherwise improve their well-being”.

The report cites the example of farmers in Ghana and India whose access to rainfall insurance has encouraged them to take on risks in search of higher yields, such as increasing their investments in fertilizer, seeds, pesticides, and other inputs. Taking these risks has led to increased prosperity and other positive development outcomes. Conversely, Ethiopian farmers who lack access to risk management tools often choose not to use fertilizer because they fear drought and other potential shocks. They prefer to stash their money in a mattress for when the next dry spell comes, as opposed to investing in intermediate inputs

In many cases, the risk of inaction is often the worst option of all.

Illustrating the extent to which risk management can unlock constructive development opportunities is the first step towards changing the way people perceive risk, and how they strategize and execute risk management.

This past summer, Dr. Jim Yong Kim came to my work place (the North-South Institute) for a round-table discussion with key leaders of Canada’s private, academic, and third sectors. This was the first time that I really started thinking about risks and rewards in development. While the Bank’s 2014 report looks mostly at risk on the micro level, during the round-table discussion Dr. Kim mentioned that the Bank itself must become more bold and not be afraid to take risks to support projects that have the potential to transform a country or a region. While one of the key constraints in development may be an individual or nation’s aversion to risk, international development institutions and donors are equally guilty of this.

I think that part of the World Bank’s underlying strategy is that by changing the way institutions think about risk and risk management on-the-ground, it might lead them to adapt the way they approach risk internally. While a farmer may shy away from taking risks because they fear negative repercussions, a donor agency may not pursue a new project or strategy that has the potential to transform a country due to fear of resource waste, pressure to avoid fiduciary risks, or concern that the outcome will have negative effects on their reputation ( for more take a look at this ODI report).

Now, I’m not saying that international development agencies and donors should start taking crazy risks in search of massive rewards (à la Wall Street traders). That is simply not possible, especially due to the role that public opinion plays in development and foreign aid. However, I do think that we need to eliminate incentives to take part in excessive risk aversion if we want to see truly substantial and transformative change.

In my opinion, individuals, societies, and institutions could be doing a much better job at managing the trade-offs between risk, opportunity, and reward, and implementing effective risk management strategies will be the first step towards remedying this.

So what do you think? Do you agree that excessive risk aversion is hurting development? Do you think that implementing risk management strategies will actually encourage people to take “smart risks”? I’d love to hear your thoughts in the comments section!

Experiences, Learning

After The Internship: What I have learned

It’s almost two weeks into September, and I’m only now coming to terms with the fact that summer has come and gone. While most students dread the end of summer because it marks a return to the daily grind of juggling classes, coursework, a job, and a social life, for me heading back to school has always been something to look forward too. A challenge of sorts.

However, this year, for the first time ever – I’m not excited about it. I suspect that some of this unwillingness to return to the classroom stems from the fact that I’ve had a taste of my future career path and going back to school feels like a backwards step.

Like many students who use the summer months to attempt to gain a foothold in their chosen field, I landed a summer internship. My experience was with a Canadian policy research institution specializing in international development called the North-South Institute (NSI). Although I’m thankful to have had this experience, part of me wishes that I had gotten this internship after I graduated instead of before – stopping my newly found career momentum feels counter-productive. But that’s the way it goes.

In the months leading up to my graduation, I really could stand to benefit from a reflection on the valuable lessons that I have learned throughout my internship. At the end of the day, it’s all about building on what you know and refining your skill set to become the best candidate possible for future positions.

Working for the North-South Institute was not my first internship in the field of international development, but it was by far the most educational and enriching experience I have had to date.

When people ask about how my internship went, the first thing that comes to my mind is how fortunate I was to have such amazing colleagues. I can’t oversell the importance of networking and building personal connections with your coworkers! An integral part of success is your ability to cultivate emerging relationships and how well you can leverage your network. Working at NSI provided me with many networking opportunities, and I even got to meet many key international figures, ranging from the President of the World Bank, to member of the Post-2015 High-level Panel, to high ranking officials of the Canadian Department of Foreign Affairs, Trade, and Development (DFATD).  Of course, building strong relationships is critical to advancing your career, but developing a rapport with your coworkers is about so much more than reaping the benefits of networking.

Throughout my work term, I held the position of research assistant with the Governance for Equitable Growth team. I was completely blown away by their passion, their work ethic, and the innovative research they were doing.

At first, I was extremely intimidated and felt like I was in way over my head.

My research skills were inadequate, my writing skills far inferior, and my ideas bland and uncreative. When I was first asked to help draft a policy brief I distinctly remember glaring at my computer screen in frustration, overwhelmed by the desire to send it to the trash instead of to my supervisor for review.

Luckily, by the end of my work term I had lightened up a bit and realized I was being far too hard on myself. At 22 years old, and having only studied international development for two years, to place such unattainable expectations on myself was not doing me any favours. For every aspect of life there is a learning curve, and while it is essential to aim high and push yourself in order to improve, there was just no way I was going to be spewing epoch-changing genius when I have only just begun to scratch the surface of the issues I was writing about.

Over the summer months, I continued to become better versed in many of these subjects which helped me to accept that gaining expertise takes time. This learning process can be accelerated in an environment where you have the opportunity to consult experts and ask questions on a daily basis. In my opinion, that is the true benefit of getting work experience and building a rapport with talented coworkers. I’ve often heard the saying ‘surround yourself with greatness, and you will become great’, and I think that will most likely be my strategy moving forward.

Now to get back into student life!