Risk Tolerance in Development NGOs. Developing a Risk Management Process as Part of Enterprise RIsk Management

Abstract

This thesis is an attempt to develop a methodology on how to approach the topic of Risk Tolerance, as one crucial element of Enterprise Risk Management in Development Organizations. The private sector has utilized the approach for several years and it could be beneficial for NGOs to draw from the experience of private sector firms, to adapt the concept to their needs and apply it to their operations at all levels. Adapting the private sector concept of Risk Management in general and Risk Tolerance in particular, to the needs of Non-Governmental Organizations is subdivided as follows: Part 2 analyzes the evolving concept of ERM and assesses one of multiple ERM frameworks, namely the "COSO Enterprise Risk Management - Integrated Framework". The chapter concludes with an exploration of the Solvency II directive for (Re)Insurances as an example of a highly sophisticated risk management system from the private sector. This chapter is followed by part 3, which outlines the benefits and limitations of ERM and Risk Tolerance for development aid organizations in a changing environment. Drawing from chapters 2 and 3, a process is proposed, on how an NGO could systematically develop a risk tolerance within an Enterprise Risk Management framework.