Strategic Risk

Strategic Risk encompasses the risk of financial losses and negative social performance related to the strategic direction of the institution. Two subcategories have been identified within strategic risk: governance risk and strategic risk.

  • Governance Risk – Governance risk is the risk of financial losses and negative social performance related to inadequate governance or poor governance structure.
  • Strategic Risk – Strategic risk encompasses the risk of financial losses and negative social performance related to the strategic direction of an institution. This includes strategic aspects such as the institution’s mission, vision, strategic plan, and mission alignment amongst shareholders. One of the most important aspects of strategic risk concerns the potential of an MFI to experience mission drift.
  • Policies
  • Limits
  • Risk Management Tools
  • Risk Monitoring Tools
Tier 3 Guidelines Tier 2 Guidelines Tier 1 Guidelines
Commitment to manage governance risk
Formal set of policies and procedures to manage governance risk, including:
Formal set of policies and procedures to manage governance risk, including:
Tier 3 Guidelines Tier 2 Guidelines Tier 1 Guidelines
Information flow to the BoD
Information flow to the BoD
Information flow to the BoD
Tier 3 Guidelines Tier 2 Guidelines Tier 1 Guidelines
  • Policies
  • Limits
  • Risk Management Tools
  • Risk Monitoring Tools
Tier 3 Guidelines Tier 2 Guidelines Tier 1 Guidelines
Not applicable
Not applicable
Not applicable