3.5: Risk: it’s inevitable – so what do we do about it?

This episode examines perceptions and realities surrounding risk in cash and voucher assistance (CVA). It addresses concerns that cash programming is riskier than other forms of aid, explores ways to manage risk effectively, and highlights the importance of local risk management strategies.

This episode features insights from:

 ·  Irfan Khan: Director of Humanitarian and International Partnerships at Muslim Hands

·  Oliver May: Consultant on risk in the humanitarian and development sector

·  Sindhy Obias: Executive Director of the Assistance and Cooperation for Community Resilience and Development (ACCORD)

Key themes explored in this episode:

 ·  The perception that cash assistance carries a higher risk of fraud and diversion compared to other aid modalities, and the lack of evidence to support this view.

·  The influence of cognitive biases and perceptions, and the need for a more nuanced understanding of risk in the context of cash.

·  The importance of engaging with communities to understand and mitigate risks.

·  The need to avoid risk transfer risks to partners and communities.

·  The challenges posed by counter terrorism and anti-money laundering regulations which can hinder the delivery of aid.

·  The importance of transparency and learning from past experiences, including instances of fraud.

Listen to this episode for valuable insights into identifying, addressing, and potentially reframing our understanding of risk in CVA.

Transcript

Episode 3.5: Risk: it’s inevitable – so what do we do about it?

Guests: Oliver, Irfan and Sindhy

Karen: Hello, welcome to the fourth episode of this series of CashCast. I am your host, Karen Peachey. 

As this season is all about change and efforts to increase the use of cash by different organizations, the subject of risk was always going to arise. 

There is nothing that is risk free in life, even doing nothing, the question is how we deal with risk. 

Given that risk management is a vital part of humanitarian response, a question for many people is why does cash seem to get more attention when it comes to discussions about risk? We speak to three of our guests from different backgrounds about their experiences of risk.

- Transitional music - 

First, let’s hear from Oliver May, who throughout his career has particular focus on integrity risks like safeguarding, fraud and counterterrorism.

Oliver: I think our edginess around risk is because the risk feels more present because the value is more obvious. In fact, Anna Reilly out of Duke University in the US did some really interesting work, suggest that the less like cash something is, the easier it is to rationalize stealing it. So cash is basically our yardstick for the ultimate item of value. It is the definition of value. So you can see how people might assume it's higher risk. … 

Karen: For Oliver, the very nature of cash is part of the problem but is it really more risky than other forms of assistance?

Oliver: The reality is I haven't seen any compelling evidence that cash as a modality is automatically greater risk than greater risk of fraud than any others. You know, it's just a different fraud profile to, for example, WASH. In fact, I've fraud tested some cash programs where it was a struggle to see how you could defraud them. And yet I've reviewed some more traditional non-feed item programs, hygiene kits, for example, sticking with WASH where massive losses have occurred. 

And when you think about it, there are ways that cash programs, like mobile money, contain opportunities to better detect fraud through things like data. So what I think is happening here is a cognitive error.

Going forward, I think we need to learn about those cognitive errors and biases in heuristics that affect our perception and decision making and look out for them. These influence everything about how we do our work. 

Karen: In short, from Oliver's experience, there's no evidence that cash is riskier than other forms of humanitarian assistance. So where do these cognitive errors and fears about risk and diversion come from? 

Oliver: I think it's in a couple of places. The first one I would point to is where we have to justify the work that we do to external parties and to the public and the narrative that we create. I think there can be some concerns that, first of all, that any mention of the F word is bad [he means “fraud”, of course], whereas actually, I would say the public wants us to be assuring our programmes and want us to be on the lookout for fraud and dealing with it when it happens. And I think there's been a big shift in that attitude over the last few years.  

Another ... challenge here is how readily a narrative we can create for the people who are paying for this kind of assistance with things like WASH or distribution of food and non-food items, it connects very readily to a stereotypical cliched idea of aid that gets people off our backs a little bit. Whereas in cash, we have to think more carefully about how we portray it and how we craft that narrative. And I think that can put some people off. So I think there is an issue there. But then it comes down to us to articulate that better and get really good at making that public case for why this is an important and dignified form of assistance. 

Karen: Building on the research from Duke’s University that Oliver mentioned, people have a different reaction to $100 of cash sitting on a table and, say, $100 worth of rice. With the cash valued more highly. 

In Oliver's view, these reactions feed into the way we see risk concerns about how the public and other donors might react to fraud in the realms of cash assistance. 

Much as some of the risks and concerns are based on perceptions, there are, of course, real risks to deal with. How is the humanitarian community fairing when it comes to dealing with real risks?

Oliver: The first I think is…We are still not engaging sufficiently with the communities that we are supporting and we are still not locally led enough in it, which means we are still not having proper conversations with those who live and breathe the context, communities, places, local systems, local accountability structures that we're operating in. And then we're wandering in with these global northern ideas about how to manage risk and what controls look like and how they work, and then getting surprised that they're not connecting properly. Which ironically is the number one golden rule of risk management. You have to do that. You have to do that work. You have to develop that understanding. You have to be led and be fully contextual.  

The second thing I think that's happening is that we're not particularly self-aware. We come in with these ideas and systems and approaches but not recognizing the baggage that we bring with us or the impact that it's going to have. Take the word investigation, for example, you know, to someone like me who grew up in countries where we could, you know, trust the police, countries where we could trust the courts, you know, very mature democracies, very mature civil systems. You know, that carries very positive connotations for me. It feels like getting to the truth. It feels like taking action. But when you consider that many of the people that we're helping are living in places where Transparency International's survey products would tell you that the police and the courts are the least trusted entities of all, then suddenly a word like investigation carries very different connotations. You know, it feels like fear. It feels like harassment. We're still not getting that right. We're still taking this language and these approaches rather than looking for leadership from within these locations.  

The other thing that we're doing a lot is still risk transfer, where through frankly badly written contracting arrangements, we are transferring risk all the way down a chain. So ultimately it's falling into the hands of people and organizations who probably have lower capacity and capability to manage it. 

Karen: To recap, local risk management should be a golden rule i.e. understanding the context of the communities we are serving, involving communities in risk management processes and listening and acting on their concerns. 

And, as we work on risk management, we need to think carefully about risk transfer – and avoid just moving risk from ourselves to others.

This is something Sindhy Obias also stresses.  Sindhy is the executive director of the Assistance and Cooperation for Community Resilience and Development (ACCORD), an NGO in the Philippines.  

Sindhy: One of the considerations that we really have to look into is are we putting risks or are we transferring the risk to our partner communities, especially when we do cash assistance or cash transfer programming. 

For us, it's essential that we conduct risk assessments at the very beginning in order to identify the potential security issues related, for example, to cash distribution. And we also look into the steps that we can take in order to mitigate this risk. So we undertake that risk assessments and we do it regularly, especially for contexts where communities are affected by conflicts or violence. 

We find it very important to closely work with communities, especially in understanding the risks that they face and the security measures that we can undertake based on the assessments, based on this analysis.  

Karen: For Sindhy, one of the points of risk relates to cash distribution and on this point ACCORD recognises that others can help manage the risk.

Sindhy: Our aim is to secure our distribution methods. So we look into ways on how we are able to distribute cash. 

One of the ways is we apply financial service providers. So they have the capacity to do that because it's their job in a way that's their expertise. So it's some of the things that we do to mitigate the risk. And also coordination and collaboration, it's important, whether it's the government, it's the communities, it's other NGOs or other agencies, maybe UN agencies partners, they can also provide information on the risks that are present in the community and the potential scenarios. 

We are in a way risk takers, but we're also trying to balance everything. It's important for the sustainability of the organization and at the same time, we look at that as our responsibility and our accountability also to our partners. 

Karen: Sindy’s reflections echo what Oliver said about the need for local, contextual, risk management and the need to ensure we don't just pass risks on to others.  They also take us back to our thoughts at the start of this episode, that taking risks is an inevitable part of what we do as humanitarians but needs to be managed. 

Irfan Khan, the Director of Humanitarian and International Partnerships at Muslim Hands, shared further issues they’ve faced around the perception around risks, especially from regulators and banks, and how this has held back the use of cash programming in his organization, especially in some high-risk contexts. 

Irfan: Cash is something that in the context of Muslim giving, in the context of Zakat, it used to be always provision of cash support. 

But we as an organization, why we didn't choose to go into that route was…major governance constraints, not having the clarity that if we start giving out cash support to people who are in need we might get questioned like the fund have been misused by one of the recipient for whatever reason and we get stuck in that process of getting ourselves cleared from the regulator. 

We might get questioned like the fund have been misused by one of the recipient for whatever reason. And we get stuck in that process of, getting ourselves cleared from the regulator. So, having not access to the clarity and a clear guidance or availability of clear guidance, we were not pushing it too hard and still that is one of the reasons why we are not pushing it too hard. 

Then there are other issues like sofya, the banking sector who are getting very strict when it comes to overseas payments that are going out and when they see payments which are going to be attached with the provision of cash distribution so again we because we never experience it so it's our we are risk averse we don't want to take those steps which might just jeopardize the work that we are doing in those 30 or and our countries so that's why we are a bit slow in the journey, but we are getting there.

Right now it's convenient for us because our programs are focusing on education, provision of water and sanitation, health, so we can showcase, we can give the evidence, you know, we can, there are, there are comms material available, you know, that can, that goes out on our website on the regular. But when it comes to cash, we always felt like we won't have enough information available to showcase that what the money is getting spent and how it's getting spent.

Karen: In this case, know your customer and anti-money laundering regulations are a challenge, with the difficulty of not being able to say exactly how the cash will be used by the recipients being part of what has held back the growth in the use of cash for Muslim Hands. 

Irfan also felt that, as a faith-based organization, they have faced extra scrutiny from banks. 

Irfan: Whereas on banking side, the banks are getting very risk averse as well when it comes to dealing with the charities altogether. So any... overseas payments that are going out either as part of a long-term programming in a conflict zone or in a crisis zone or countries which have got issues going on. 

There's a lot of questions that we get asked and they want to see the project documents in that case as well and they want to see you know what program that we have got in place for against the funding that we are transferring and if there is not like how the end use of money will be done or funds are going to be used then banks are not you know very much welcoming and overall the banking sector is getting very strict with the with the charitable money that is going out and especially we are facing it quite a lot as a as a faith-based institution but I know the other organizations have got troubles as well transferring funds to countries like Afghanistan and Sudan.

During the last two or three years, well, I would say not only us, but all the sector have faced a lot of problems when it comes to transferring funds to countries like Afghanistan. So it has caused a lot of frustration at all levels within the organization, both here in the UK and in countries like Sudan as well. We faced issues where funding was not getting through. The problem is a delay in a return payment which you get back from the bank or an intermediary bank.

It caused a delay of two to three months altogether because you have to you have to initial initiate the whole process again then you have to wait and then you have to just see like if the funding is going to reach out. So this two to three months that has been lost that is like a loss of support or loss of in some cases unfortunately lives you know for people because they are they are waiting for assistance from organizations like Muslim Hands and others.

Karen: As Irfan describes, alongside perception issues, regulatory issues can have a major impact.  Regulations designed for counter terrorism and anti-money laundering are, in some cases, impeding the flow of assistance. Irfan, and others, are working with the banks and regulators to try and address this.

As we head towards the end of this episode, let's hear about some positive developments happening in terms of risk management and how we can learn from them. Back to Oliver May.

Oliver: I think some of the really good things that we're seeing are things like service user advocate offices or chief beneficiary offices or whatever we're calling the role that's starting to take the views and the feedback from the people that we're helping into headquarters, into boardrooms. That's really important. It's remarkable actually that we're only just starting to see that in recent years given how long our sector has existed. We have also seen development over the last 10 or 15 years that I think is really encouraging. 

So for example, safeguarding, I recall 10 years ago, was extremely difficult to get resourcing on, extremely difficult to get on the agenda. And then we had the integrity crisis around that in 2018 and now it's much more prevalent. Very much the same with fraud. 12 or 15 years ago, no one wanted to talk about fraud in our sector and now there's a greater appreciation, a greater understanding of the risk. So, you know, I think educating to effective, you know, making sure that we're constantly broadcasting information, we're using evidence -based approaches, we are ensuring that things are staying on the agenda, we are encouraging people in all that we do, whether it's our local partners, whether it's our staff, whether it's our leaders, to treat error and variation from what was intended as useful, as genuine learning, then we'll be moving in the right direction. 

Karen: Before we hear more from Oliver, a quick plug for the next episode, in which we speak in detail with Lydia Wangechi of Give Directly where, among many other interesting points, she talks about how GIveDirectly reacted when hit by a big fraud issue.  Their experience offers key lessons for the implementers of cash in the humanitarian sector. Now back to Oliver.

Oliver: I think the humanitarian sector, and I speak from within and with love, has an attention deficit issue. We have a tendency to charge after, you know, whatever happens to be the issue of the day. And you can understand why, because all of our systems are geared up around that. ... We don't need to have you know, another crisis in order to recognize that some of the cultural issues that underpin safeguarding may also be underpinning some of those other risk areas. And taking a thoughtful approach to how we do world -class risk management that actually supports what we're trying to do and enables us to take humanitarian opportunity creates a mechanism for that. 

I do also think, though, that there is a need to make wider space in humanitarian organizations for that opportunity to sit back and think about where we're going... organizations that don't take advantage of moments to stop, think about systems, think about approaches, think about modalities, think about risks, will end up making the same mistake from emergency to emergency to emergency. And given where we are in world history right now at this moment, we've run out of time. Now is the time to reshape what we're doing to make sure that we're fit for a significantly different picture that's going to emerge over the next 10, 20, 30 years. 

Karen: It's been super interesting talking to Olvier, Sindhy and Irfan – touching on many different aspects of risk.  While we've only skimmed the surface, there's a lot to take in. 

Some of my takeaways include how the perceptions about cash risks continue to impact the way we work; there are real issues to deal with and they can be managed, but perceptions can make that harder. Local risk management is key, working with communities, and working outwards on issues to do with risk, not the other way around.

Let’s continue the conversation, we want to hear from you, feel free to share your thoughts or questions with us through our different channels indicated in the description of this episode. 

In the next episode of this series, we will talk with Lydiah Wangechi, who is a regional director at GiveDirectly. She will walk us through on how GoveDirectly has scaled-up the use of cash, how they've battled the resistance to the implementation of unconditional cash, and the role of evidence and research in this process. 

Thank you for listening and until next time!