The Economic Recovery and Growth Plan – Risk Factors

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By Robert Mbonu

In a bold and strategic move, the current administration through the Ministry of Budget and National Planning launched the awaited Economic Recovery and Growth Plan (ERGP) on April 5. Government recognizing the economic challenges that Nigeria faces and the need for urgent action developed this as a blueprint for recovery in the short term, and a strategy for sustained growth and development in the long term.

Designed as a four year (2017 – 2020) plan, the vision of the ERGP is one of sustained inclusive growth. It is aimed at increasing national productivity and achieving sustainable diversification of production, to significantly grow the economy and achieve maximum welfare for its citizens.

The Nigerian economy is characterized by structural challenges that limit its ability to sustain growth, create jobs and achieve real poverty reduction. The ERGP aims to address this, and diversify the huge concentration risk in Government revenues which is highly dependent on the oil and gas sector.

Due to space constraints and without delving too deep into the several principles and broad objectives that have driven the thinking and the development of this Plan, my interest as an enterprise risk professional lies in its successful delivery.

The ERGP differs from previous plans in its focused implementation which is at its core. Whilst all the ministries, departments, and agencies (MDAs) will have their different roles in implementing the Plan, a Delivery Unit is being established in the Presidency to drive the implementation of key priorities. This delivery unit must therefore design the overall risk framework, take ownership and have the desired capability and expertise to drive a project of such a huge magnitude. Since “the devil is in the detail”, my searchlight will be beamed on this delivery and implementation unit.

This project is faced by an interplay of project and operational risks. Using an illustration of two concentric circles, the project risk is on the outer circle, while operational risks are on the inner.

The project risk is that which can prevent the plan from being delivered on time and within budget. This is the overarching risk to the project. It concerns the specification, performance and quality of the key expected outcomes.

On the other hand, since the implementation of this plan is so diffused, and spread across several MDAs, it introduces key issues of operational risks which must be managed. At the MDA levels, these are the risks of non-performance resulting from inadequate or failed internal processes, people and systems or from external events.

From this understanding therefore, the operational risks are inter connected and feed into the overall project risk

Contrary to other risk types, operational risks are not diversifiable and cannot be laid off, meaning that, as long as people, systems and processes remain imperfect, operational risk cannot be fully eliminated.

In terms of governance, the reporting Ministry of Budget and National planning will be expected, as the board, to approve and periodically review the overall project risk framework. They should oversee management at the delivery unit to ensure that the policies, processes and systems are implemented effectively at all decision levels. The governance structure should be commensurate with the nature, size, complexity and risk profile of the broad activities of the plan, and include relevant committees with independent oversight.

The delivery unit will be expected to take the lead in establishing a strong risk management culture. They should also develop, implement and maintain risk management processes that is fully integrated into the projects overall risk management framework. The strategies for operational risk management chosen by individual MDAs will key into this framework and depend on a range of factors, including nature, size, complexity and profile of the various risk elements.

A thorough understanding of the risks – nature and complexity – is core to this project. Integrating the risk framework into the inner workings of the individual MDAs includes ensuring that appropriate structures exist, describing the tools to be used and making sure that there are management information systems in place. Experienced and trained risk champions must take charge of the MDA’s, with a common language and understanding, for the various types of risks.

The delivery unit is responsible for establishing and maintaining robust challenge mechanisms and effective issue-resolution processes. These should include systems to report, track and, when necessary, escalate issues to ensure resolution. They should translate the overall risk management framework established by the board into specific policies and procedures that can be implemented and verified within the different MDAs. The unit should clearly assign authority, responsibility and reporting relationships to encourage and maintain accountability, and to ensure that the necessary resources are available to manage operational risk in line with the overall plan.

Managers of the operational risk function should be of sufficient stature within the MDAs to perform their duties effectively. They should have the appropriate capabilities and access to resources as well as the right level of authority.

The ERGP is overall a laudable effort. The key issue in its deliverability is the internal coherence, and how the implementation challenges will be overcome. With the right skills and expertise employed, it can be achieved. Finally, given its complex execution mechanism, the real test will be its realistic workability taking timing of the plan period into consideration. To manage the truck load of uncertainties, risk management must be closely integrated and built-in to the plan and not applied as a bolt-on.

• Mbonu, FERP, CIRM(UK), HCIB, MsRM (Stern), studied Engineering, is an experienced Banker and Enterprise Risk Management professional. Earned a post graduate degree in Risk Management from New York University Stern School of Business, and is a member of the Institute of Risk Management -UK. Can be reached on 09092092046 (SMS Only); email: rm4riskmgt@gmail.com