Location: Iraq
Organization: Global Communities
Job Level: Mid-level
Background:
CHF ACSI is the largest microfinance service provider in Iraq. Since 2003, it has built a portfolio of $45 million serving over 20,000 active clients. The growth has almost entirely been funded through grant funding and retained earnings from the project. As of 2012, CHF ACSI has an additional $40 million in debt funding through a thirteen-year facility from a single lender that will permit its expansion over the next five years.
Although CHF ACSI does not have detailed its risk management framework, its tightly controlled credit policies have enabled the project to maintain an excellent portfolio quality (PAR30<1%) since inception. It also maintains pro-active security protocols, which enable it to mitigate security risk to staff and operations. Its asset structure is almost entirely short-term, with most loans maturing within 12 months of disbursement. Due to its capital structure (i.e. grant funded), it has few liabilities. For this reason, it has not had perform regular gap analysis. It works in United States Dollars (USD), and the few liabilities that it does have are designated in the same currency, so has not had to manage exchange rate risk. The only risk indicators regularly tracked are portfolio at risk (PAR) by age class and write off ratio.
ACSI would like to put in place both a credit and a financial risk management framework and the appropriate management structures (e.g. Asset-Liability Committee). Although it has yet to deal with a market-level credit crises or a significant depreciation of local currency which could affect its ability to work in USD, it wants to build the capacity to manage these risks before they occur.
Objective:
CHF ACSI is seeking to assure that its growth continues to be managed prudently and efficiently while it endeavours to meet its full growth potential. Thus it is seeking a consultant to carry out four tasks:
- Perform an enterprise risk assessment of CHF ACSI
- Develop an Enterprise Risk Management Framework and design or adapt appropriate tools for managing credit, operational and financial risk
- Train management and other key staff in the use of the risk management tools.
- Review the already developed TORs of risk management committee and conduct 1-2 meetings with management to assist them using the forum of effective risk management function
Description of Services under the SOW:
Perform a Risk Assessment
Conduct a full analysis of the institution’s revenue, expenditure, and conversion and treasury cycles in order to assess major potential risks to the MFI, including credit, financial, security, and reputation. Assess controls presently in place in order to mitigate such risks. Areas covered in the operational risk management overview will primarily be focused on lending activities, but will also cover administrative functions, including finance and accounting, human resources, procurement, fixed assets, and MIS upkeep and security. Also assess external risks for ACSI which may affect the business and any mitigating strategies which need to be in place and assess the adequacy of controls and mitigants already in place. This work will be approximately 75% on-site (20 days) Activities include but are not limited to:
- Review of credit assessment, approval and disbursement procedures.
- Randomly select client files in branches visited and ascertain that loan files comply with MIS.
- Randomly select clients for visits across branches to ensure that clients in loan files match that of the clients visited and that all corresponding financial information may be validated. Ensure that proper client proof of identity is in the files.
- Evaluate the delinquent, recording of collateral and loan recovery procedures.
- Review financial and segregation procedures to determine and detect potential weaknesses.
- Review notes payable, foreign exchange, Interest rate risk, and compliance with third party requirements.
- Review of the acquisitions process (including services, rent and insurance contracts).
- Review of policies pertaining to usage of company Assets.
- Review of Human resources procedures in terms of hiring, appointing and firing staff.
- Review Security policies and how they affect management decision making
- Provide an assessment of the overall functioning of the MIS, IT access and data protection.
- Evaluate the reliability of data obtained from operational reports and used by accounting / officers / management.
- Review of regular reports sent to CHF International, donors, and lenders.
- Check of compliance with CHF policies (including Finance and Development Finance Policies.
Develop Risk Management Framework and Tools
Following the Risk Management assessment the consultant will support ACSI in developing Operational, Finance and Market risk tools, by working with its Finance, Credit, Portfolio Management and Treasury departments. The consultant will ideally use tools recently developed for other CHF network microfinance institutions as a model to be adapted, in order to promote uniformity throughout the network. Finalizing, the consultant will assist/help CHF ACSI in developing an over-arching risk management framework in which the tools can be implemented and managed. Work will be approximately 40% on site (15 days).
Train Management and Key Staff in Use of Tools
Staff and management will be trained in the use of tools, and how they fit into the overall framework. This will require two separate trips and 100% of the trainings will take place on site (10 days) including conducting at least 2 risk management committee meetings
For all activities, the consultant will work in close collaboration with key staff at CHF ACSI to ensure their ownership of the new tools and procedures.
Deliverables:
Risk Management Assessment Report: Submitted to ACSI management and CHF International covering the following:
- Main areas or risk, indicators, and metrics to measure the risk based on the assessment, highlighting areas of particular weakness and strength
- Evaluation of compliance with current Operational, administrative, financial, MIS and IT procedures.
- Recommendation on how ACSI can take a comprehensive and systematic approach to identify, anticipate, mitigate, measure and respond to risks by designing a risk management manual
- Specific recommendations for improvement in internal procedures and controls.
Tools (to be further defined following the assessment
- Credit Risk manual
- Operational Risk tools and revised process maps and policy manuals
- Finance and Market Risk tools
Training for staff on new RM framework tools and manuals.
Minimum Requirements and Qualifications
- At least five to ten years of experience in internal audit or operational risk assessment in microfinance or SME lending.
- Experience in systems audit
- Past performance in similar work for well-known microfinance/ SME lending institutions, preferably in the Middle East.
- Strong verbal and written communication skills
- Fluency in English, Arabic helpful
Estimated Duration and Schedule
Estimated duration: 40 days, broken down approximately as follows:
Assessment – 18 Days
Framework/Tools – 17 Days
Training - 8 Days
Schedule of activities under the SOW are expected to take place between July and September 2013.
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