Potential risks and opportunities
Considering current internal and external developments, we present an overview of several strategic challenges and the risks and opportunities these present to FMO's ability to create value in the short to medium term. The risks described present the following business risks that could impact FMO's strategic objectives and reputation: business model, ESG, regulatory, and strategy execution risks. Other risks in FMO's risk taxonomy are described in the 'Risk management' chapter in the Annual Accounts. Our strategic responses reflect tactical strategies - in line with our current strategy - that we will explore or implement in the short to medium term.
Building back business at a highly uncertain time due to the continuation of the pandemic and increased liquidity in some of FMO’s markets
• The impact of the pandemic on economic recovery continues to be uncertain, which may affect demand and supply of financing in our markets.
• Explore different ways of sourcing transactions, e.g. working with partners with local presence and know-how, improving our virtual work environment and conducting virtual due diligence.
• Review sector strategies and secure blended finance for new sub-sectors with high impact development potential that are perceived as high-risk.
Continuing to contribute towards tackling the global issues of (accelerating) climate change
• Global warming is on course to surpass the 1.5˚-degree Celsius mark, which will increase the risks to vulnerable countries and communities.
• Finance investments that directly contribute to climate mitigation.
• Explore FMO’s increased contribution to climate adaptation and resilience.
Continuing to address the global issue of (rising) inequality in countries and regions where the need, but also the risk, is greatest
• Inability to tackle areas with sustained or rising inequality may lead to criticism from stakeholders and damage FMO’s credibility.
• Enhance focus and efforts on low-income countries (e.g. fragile states) and topics such as gender and youth finance.
• Focus our efforts on countries and topics where the need is greatest and FMO is able to make a meaningful impact.
Increasing stakeholder expectations of the role of FMO
• Stakeholder expectations towards FMO are increasing and are sometimes at odds with one another (e.g. investing in fragile states vs. mobilizing private capital). Attempting to appease all stakeholders equally could result in less focus and ability to create impact.
• Continue the dialogue with the Dutch government, regulators, NGOs, and internal stakeholders on the role of FMO to strengthen our impact reporting and related frameworks.
• Engage with key stakeholders during the development of our 2030 strategy.
Increasingly complex regulatory landscape
• Data reporting requirements from regulations increase demands on capacity and infrastructure.
• Improved reputation for FMO as a trusted partner in business development in high-risk markets.
• Develop long-term digitalization / compliance architecture vision and ability to adapt to changing regulatory landscape.