1. Assessing Risks and Vulnerabilities: Emerging Good Practices Assessing Risks and Vulnerabilities: Emerging Good Practices Improving Development Outcomes

2. “Emerging Good Practices” IL Reform – enhanced focus on risk identification and risk management Value Chain Analysis – to identify governance and corruption risks at the sector and project level Political Economy Analysis – to identify the underlying constraints and potential entry points for achieving reforms

3. Improving Development Outcomes Operational Risk Assessment Framework (ORAF) PROJECT STAKEHOLDER RISKS 1.1 Stakeholder Risk OPERATING ENVIRONMENT RISKS 2.2 Institutional Risk (sector / multi-sector level) 2.1 Country Risk 2 IMPLEMENTING AGENCIES RISKS (including FM & PR risks) PROJECT RISKS 3.2 Governance Risk 3.1 Capacity Risk 4.3 Program & Donor Risk 3.3 Fraud & Corruption Risk 4.5 Other Risks (Top 2) 4.2 Safeguards Risk 4.1 Design Risk 4.4 Delivery Quality Risk 3 1 4 PROJECT DEVELOPMENT OBJECTIVE(S) (Key Results) Risks to Project Development Objective(s)

4. Improving Development Outcomes Governance Issues at the Sector Level Primary focus is on constraints to achieving optimal service delivery Key areas include policy and incentives, budget and resource management, and human and institutional capacity Important to distinguish between governance issues, corruption issues, and simply capacity constraints

5. Improving Development Outcomes Corruption Issues at the Project Level The Anatomy of Corruption: How it works in Bank projects Who? How much? And where does it all go? The impact: outcomes, competition, value for money, and public perceptions

6. Improving Development Outcomes ROAD MAP Puts focus on output of sector Puts focus on output of sector Identification of vulnerable points and inter-linkages Identification of vulnerable points and inter-linkages Formulation of practical remedial measures Formulation of practical remedial measures Development of measurable and actionable indicators Development of measurable and actionable indicators Puts focus on output of sector Puts focus on output of sector Identification of vulnerable points and inter-linkages Identification of vulnerable points and inter-linkages Formulation of practical remedial measures Formulation of practical remedial measures Development of measurable and actionable indicators Development of measurable and actionable indicators Mapping GAC Risks Sector: Value Chain Sector: Cross Cutting Functions: Process Flow Cross Cutting Functions: Process Flow

7. Improving Development Outcomes Health Sector example: Delivery of Essential Drugs “tailor fit” drug specifications under-inclusion or over-inclusion production of sub-standard drugs biased prescriptions (info asymmetry b/w doctor/pharmacist and patient) lengthy procedures with weak legal framework warehouse theft Prescription/Disbursement Distribution Procurement Selection Registration Manufacturing

8. Improving Development Outcomes Health Sector: Delivery of Essential Drugs Manufacturing Registration Selection Procurement Distribution Prescription & Disbursement Random inspections Monitoring based on transparent & uniform standards (WHO prequal list) Tracking systems User surveys Media coverage of drug selection committee meetings Competition & Transparency Tackling decision points vulnerable to corruption

9. Improving Development Outcomes The Life of a Log Forestry Sector: The Life of a Log $2.20 Local logger: $2.20 $20.00 Local broker: $20.00 $160.00 Foreign middle man: $160.00 Foreign lumber processor$710.00 Foreign lumber processor: $710.00 Exporter of sawn timber: $800.00 $1,000.00 US trader: $1,000.00 From illegal to legal

10. Improving Development Outcomes satellite monitoring local communities/ third party Tracking system: timber cut for export vs. exported lumber (value) IKEA Model: log certification International code of conduct Increase supply thru fast growing trees The Life of a Log Forestry Sector: The Life of a Log

11. Improving Development Outcomes Stages of the Procurement Process Contract Implementation Award of Contract Bid Evaluation Pre-qualification Advertisement Preparation Procurement Planning

12. Improving Development Outcomes Gaming the Procurement Process – How it works Bid packaging Bid specifications Bid advertising Pre-qualification/short-listing Bid opening Bid evaluation Contract Negotiations NOL or ex-post review Get under thresholds Targeted or vague Limited time/distribution Cartels and collusion Is anyone watching? Points/disqualification What’s really on the table How does it LOOK?

13. Improving Development Outcomes Drilling Down: GPE Analysis Recognizes the need to go beyond the “technical” aspects of development issues and focus on underlying political realities Leads to greater realism about possibilities for reform/where to focus limited resources GPE Analysis is “problem driven” at the country level, thematic or sector level, local or project level

14. Improving Development Outcomes Underlying “rules of the game” Stakeholder analysis Systemic problems – identified by Value Chain Analysis Identify champions/entry points/ Strategies for change Operationalizing Political Economy: A Rudimentary Guide What Why How

15. Improving Development Outcomes Strategies for Change Map stakeholders according to Level of their support or opposition to reforms Ability and willingness to influence reforms Use communications/coalition building strategies to “reposition” stakeholders Focus on: leaders/potential champions; middle mgt. of implementing agencies; and civil society/CSOs

16. Improving Development Outcomes Strategies for Change Based on political realities, determine which issues can be tackled effectively – and which cannot For those where progress is possible, determine how best to pursue – through lending operations, AAA, policy dialogue, by the Bank and/or with/by other donors Incorporate results in Bank operational programs – including project design