In control statement
FMO has internal risk management and control systems that enable us to take risks and control them and that are based on international best practices.
Adequate internal risk management and control systems support the attainment of objectives in the following categories:
Realization of strategic and business objectives;
Effectiveness and efficiency of processes;
Reliability of financial reporting; and
Compliance with laws and regulations.
The Management Board regularly considers the design and effectiveness of FMO’s internal risk management and control systems (taking into account the approved risk appetite) and discusses all related significant aspects with senior management. The results of the Management Board’s monitoring of FMO’s internal risk management and control system – including significant changes and planned major improvements – and the defined risk appetite are discussed with FMO’s Audit & Risk Committee, which reports these to the Supervisory Board.
Based on our monitoring of the company’s internal risk management and control systems, and cognizant of their inherent limitations described below, we have concluded that FMO is in compliance with the requirements of best practices 1.4.2 and 1.4.3 of the Dutch Corporate Governance Code. The Management Board makes the following statement:
As Management Board of FMO, we are accountable for internal risk management and control systems within FMO.
Based upon our assessment of the internal risk management and control systems of FMO and barring unforeseen adverse external and internal conditions, we are of the opinion that:
The annual report provides sufficient insights into any failings in the eﬀectiveness of the internal risk management and control systems;
The afore-mentioned systems provide reasonable assurance that the financial reporting does not contain any material inaccuracies;
Based on the current state of aﬀairs, as explained in the Financial Performance paragraph, it is justified that the financial reporting is prepared on a going concern basis; and
The report states those material risks and uncertainties that are relevant to the expectation of the company’s continuity for the period of twelve months after the preparation of the report.
Reference is also made to the Risk management framework section in the Corporate Governance paragraph and the Risk Management section for an explanation on FMO’s risk management framework, which is organized in adherence to the three lines of defense principle.
We note that the proper design and implementation of internal risk management and control systems significantly reduces, but cannot fully eliminate, the possibility of poor judgment in decision-making, human error, control processes being deliberately circumvented by employees or others, management overriding controls, or the occurrence of unforeseeable circumstances.
Another limiting factor is the need to consider the relative costs and benefits of risk responses. Properly designed and implemented internal risk management and control systems will therefore provide reasonable, but not absolute, assurance that FMO will not be hindered in achieving its business objectives, or in the orderly and legitimate conduct of its business.
Regarding internal risk management and control systems the Management Board has identified the following areas of improvement. These are actively managed:
Based on a newly implemented Financial Economic Crime framework & Know Your Customer system and organization, we are now accelerating file remediation to comply with regulatory requirements;
Current and upcoming regulations put pressure on FMO and require significant attention and effort from its resources. New and changed regulations are being monitored on different levels and are being consolidated under a newly established regulatory monitoring framework in 2021;
Data quality issues remain an attention point, although the implementation of the new Data Warehouse has improved the situation. It will require continuous efforts in order to further improve the timely availability, consistency, granularity and quality of data throughout the organization;
FMO is in the process of further strengthening its internal control framework for front-to-end processes. An increase of the level of maturity of internal controls has been established in 2020. The gradual implementation of the Control Testing process is on the agenda for 2021;
As FMO has been adding more and complex programs with (relatively) new donors like the Green Climate Fund, the European Commission and other investors, an improved risk & control system is being implemented to monitor and steer on the progress of the programs and to monitor the quality of reporting on these programs;
As FMO faces the consequences of the COVID-19 pandemic, in combination with internal culture related areas of improvement, much attention is given to the well-being and work pressure of FMO staff by means of Working-From-Home facilitation and strengthening of the FMO- wide culture.
We have committed to ensuring, to the best of our abilities, that this report was prepared and is presented in accordance with the Integrated Reporting framework and that the integrity of all information presented can be assured. In accordance with article 5:25c sub 2 part c of the Dutch Financial Supervision Act (Wft), we state that, to the best of our knowledge:
The annual accounts give a true and fair view of the assets, liabilities, financial position and profits of FMO and its consolidated companies;
The annual report gives a true and fair view of the position on the balance sheet date and developments during the 2020 financial year of FMO and its consolidated companies; and
The annual report describes the material risks that FMO faces.
The Hague, March 19, 2021