MEFMI creates awareness on Public Debt Operational Risk Management

One of the main objectives of a Government’s debt management office is to ensure that financing needs are met at the lowest possible cost with a prudent level of risk. In this regard, there is a need for debt management offices to develop policies and procedures to manage market risk (exchange rate and interest rate risk), credit risk, refinancing risk, liquidity risk, and operational risk. However, observations made through various assessments including the Debt Management Performance Assessments (DEMPA) by the World Bank on debt management operations indicate that whilst market risk, credit risk, refinancing risk and liquidity risk, are relatively well known, this is not the case with operational risk. The Bank for International Settlement (BIS) defines operational risk as the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events.

Recent assessments of debt management operations in some MEFMI member countries highlighted the lack of procedures manuals for enhancing debt data management and security, disaster recovery and business continuity plans and, in some cases, there was no segregation of duties among debt management office staff. Furthermore, the COVID-19 pandemic has further amplified some of the risks as debt management staff are working remotely, implying that some functions could not be conducted in line with sound practice.

To address the deficiencies highlighted above, MEFMI conducted a virtual training from 29 November to 1 December 2021 on Public Debt Operational Risk Management. A total of 37 officials (comprising 18 females and 19 males) from seven (7) of the 14 MEFMI member countries participated in the training, namely, Botswana, Kenya, Lesotho, Mozambique, Namibia, Rwanda, and Zimbabwe. Participants were drawn from the Ministries of Finance, Central Banks and Offices of the Auditor General. The workshop was facilitated by Mr Ian Storkey, a Public Debt Management Specialist based in New Zealand.

The workshop raised awareness and enhanced the capacity of participants on key issues relating to public debt operational risk management. The Consultant also provided templates that countries can customise as they develop their operational risk management frameworks. The training also provided a platform for peer-to-peer learning among participants. The knowledge acquired from this workshop is expected to foster the development or improvement in the existing operational risk management frameworks in the MEFMI region.

By Josephine Tito