Using Social Performance Management for Managing Institutional risks

1. Using SocialPerformance Management for Managing Institutional risks Sa-Dhan TERI

2. Insititutional Risks for MFIs • Reputation Risk “The worth of reputation is not realized till it is lost” • Mission Drift “Walking the talk”

4. Reputation Risk is… Risk associated with the perception that different, influential people (- stakeholders) have of a company and its ability to perform the services it offers. Stake holders include – shareholders, staff, clients, suppliers, competitors and regulators… By Bob Kniep and Ulrich Binninger

5. Reputation is • A long term issue • An emotional association of the stakeholders to the institution • Implementation of institution’s adopted values • Putting in place best practice arrangements – governance, health, safety, policies, code of ethics, grievance redressal….

6. Sources of Reputation Risk • Un-ethical behavior • Disgruntled Employees • Dis-satisfied customers • Unhappy Suppliers (e.g. wholesale lenders) • Non-compliance • Event driven influence (fraud, fire, law suit…)

7. Symptoms of Reputation Risk • High Staff turnover • High Client Drop out • High Portfolio at risk • Lawsuits • Poor feedback mechanisms from stakeholders • Police case • Fraud

8. Symptoms of Reputation Risk • Breach of contract with suppliers or no renewal of services • Ineffective communication between line staff and management • Problems with unions • Poor external rating • Lack of evidence on claims made through annual reports, external communication….

9. Mission is what an institution stands for and describes the purpose or reason for the existence of the MFI. provides the strategic orientation for the MFI. communicates to stakeholders where the MFI is goingIt tells us ….. the MFI’s contribution and commitment to its stakeholders

10. Key questions derived from Mission • Who are your clients? • Are you meeting their needs in line with their capacities while being socially responsible? • Are you making the desired change in their lives? • And finally are you functioning in line with accepted social values?

11. Mission drift is • Taking a path not intended in the mission • And could cause dissonance within and outside the MFI • Meaning not following the “script” and could affect “reputation”

12. Mitigating Risks • Using Social Performance Management • What is social? – health, education, non- financial services…..

13. Social Performance is Translating your Organisation’s mission into practice in line with accepted social values Social Performance Task Force

14. Social values in mf relate to • reaching larger numbers of poor/excluded people; • supporting enterprises and employment; • creating benefits for clients and their households; • being socially responsible • Promoting gender equity

15. Social responsibility relates to • Clients • Staff • Community • Environment

16. Social Performance Management is The process of translating mission and values into practice, including setting social objectives, tracking their achievement, and using information to align systems and improve practice

17. Context of MF industry • Increasingly commercial approach to microfinance • Professionalization of the sector • Are MFIs professional set of “moneylenders • Focus on Social Performance: • Has it been lost? • Is it taken for granted/ assumed? • Is there “mission drift”?

18. M-Cril Data on social performance – Reaching the unreachedData from 12 MFIs

19. M-CRIL data on Client Awareness

20. M-CRIL data on Gender related indicators

21. 2.2b Social Performance Pathway

22. 2.2c Social Performance Pathway: Strategy and Operations

23. 2.2d Social Performance Pathway Learning Points • Social Performance is defined in terms of both processes and results • Translating mission into practice is a deliberate and intentional process • Serving target clients and desired change in the lives of clients is the end result of this process, it is not automatic

24. 2.3a Social Performance Management Components • Developing social goals and objectives • Monitoring and assessment from a social perspective • Aligning systems and improving operations Just like we manage financial performance…..

25. Using SPM to mitigate risk requires • Tone from the top • Profiling clients- knowing who you are serving - PPI • Market Research to identify their requirements • Communication strategy for stakeholders especially clients – transparency about EIR ... • Code of conduct for staff

26. How SP differ from Impact Assessment? Social Performance pathway Deliberate management process focused on improving impact. It is an ongoing process aligning all the organisational systems for achieving social objectives. Existence of SP processes can be good predictor for impact. Impact assessment change that can be attributed to the intervention Costly, complex, post facto research exercise Focus on proving impact Results are often disputed on account of attribution problem

27. Using SPM to mitigate Risks • Sensitive HR policies • Effective Feedback mechanism from staff, client • Grievance redressal mechanism for staff • Tracking who leaves and why • Appropriate loan collection practices • Reporting on social performance • Using Internal audit to ensure adherence

28. Finally…. The way to gain a good reputation is to endeavor to be what you desire to appear By Socrates