Report of the Supervisory Board
Marked by change and transition, the year 2020 will stand out in history for quite some time. The COVID-19 pandemic has presented the world a new reality that also greatly influenced FMO and the work and circumstances of its customers.
The economic climate of the countries in which FMO operates have been severely impacted by national lockdown measures, albeit some countries more than others. FMO has had to adapt to this altering business environment, while also having to adjust to working from home and relying mostly on online communication. Thanks to FMO’s highly professional staff the organization reacted swiftly and strongly to these changes. FMO kept in close contact with its customers to understand what they needed to overcome the current crisis and support their communities. This included providing flexibility on loan terms, debt payment deferrals and emergency liquidity, although demand for the latter was lower than anticipated. In addition, FMO has offered capacity development to equip customers with the critical knowledge, connections, and leadership they need to weather the social and economic implications of the crisis. In the recovery phase of the pandemic FMO will be equally important for emerging markets, providing much needed capital while contributing towards reaching the SDGs, building back greener and more equal.
In the changing regulatory environment FMO has intensified its work in the prevention of financial economic crime. This has become increasingly anchored within the organization, essential to the contribution to local prosperity. Sustainable and responsible investments can only exist if customers and investees are who they say they are and do what they say they do. Better IT systems are now in place to support FMO’s staff in FEC and KYC remediation, of which the responsibility partly has been transferred to the investment officers, as they have the primary contact with the customers and investees. The fact that investments made by development banks are often seen as a stamp of approval by third parties, only increases FMO’s sense of responsibility in being fully compliant to the FEC and KYC requirements.
In addition to the fallout of the pandemic, FMO also experienced a challenging time internally. During 2020, we focused on the alignment of FMO’s working procedures with the broader set of societal demands that FMO is facing. In June, Peter van Mierlo decided to step down as CEO of FMO. We value the open and constructive way that the Management Board, led by Peter van Mierlo until June 2020 and subsequently by Linda Broekhuizen, has interacted with us. We also valued Peter’s professional experience that he brought to FMO.
It became clear from the dialogue processes that there was a need within the organization for improved internal connection, starting with leadership. Establishing improved engagement is an intense effort under normal circumstances, but even more so when much needed face-to-face contact is not possible. The Management Board continues to invest a lot of energy in this process, and initial outcomes are encouraging.
As Supervisory Board we focused on monitoring the general sentiment within the organization. Through the organization of Open Dialogue Sessions, we encouraged free exchange of views between FMO staff and SB members. We issued open letters to all staff sharing our views and insights. Furthermore, we intensified our exchanges with the Works Council and, through the Works Council, involved FMO staff in defining the search profile for the new CEO. The Supervisory Board ushered in and supervised an external avenue to provide additional follow-up for all employees as desired. Last but not least, the selection process for a new CEO is well underway and will have an outcome in the first part of 2021.
During this extraordinary year – in which FMO also celebrated its 50th anniversary – the relationship with the Management Board was productive and forward-looking. We intensified our meeting frequency to act as a sounding board and to share our views. Our discussions involved all topics above and more. Apart from the organization of and progress in the internal dialogue, the most dominant topics on the agenda were, the impact of COVID-19 on FMO’s balance sheet and the consequences for the operations of the organization; the procedure of choosing a new CEO; the implementation of a new governance structure, the discontinuation of the executive committee and the expansion of the Management Board from three to five members.
Although the vaccine offers light at the end of the tunnel, the degree to which the pandemic will influence the year ahead is still to be seen. For FMO we anticipate a year of stabilization. FMO’s balance sheet has stayed reasonably robust despite the bleak outlook at the beginning of the pandemic. New ways of carrying out virtual due diligence are developing at speed, possibly combined with live visits to new and existing customers. Pendant on the approval in the Senate of the Dutch Parliament, FMO’s NL Business department will become part of the new organization Invest International that will be partly owned by FMO. And we expect to welcome a new CEO soon. He or she will have the important task of guiding FMO toward its 2030 agenda, and in the shorter term in contributing to a sustainable rebuild after the pandemic: empowering entrepreneurs in a time when it is needed most and improving the lives of people where it is needed most.