Report of the Supervisory Board
For the second year in a row FMO had to deal with challenging circumstances. Externally, the organization once again focused on standing by its customers. Internally, FMO spent significant time and focus on its financial and economic crime (FEC) enhancement that included the KYC remediation process. In the face of these challenges, FMO’s staff and Management Board showed great resilience.
FMO and its customers continued to face the effects of the persistent pandemic and the constraints imposed on their operating conditions. Staff were restricted to the home office for the larger part of the year and it was hard for the investment teams to do business with new customers. Within the Supervisory Board we discussed the challenges staff faced situations and how best to address them, and how impressed we were with the results reported on mobilized and public funds. While, it fell short of its target for FMO new investments, we would like to commend FMO’s staff and Management Board for showing flexibility, strength and persistence during these difficult circumstances.
The same is true for the way FMO handled the FEC enhancement and KYC remediation project. The fact that this coincided with the pandemic gave FMO more room to focus on further aligning on regulatory requirements. We maintained the bi-weekly meetings with the MB, which were started in 2020 to act as a sounding board, to exchange views and to monitor the progress of the KYC remediation exercise. The KYC project team led the exercise well, keeping a close eye on time and capacity and engaging third parties when necessary. Overall, the KYC remediation project was supported by the entire organization. Important sacrifices were made by staff to ensure FMO fulfilled the commitments communicated to the DNB. FMO is now in a much better place as a result of it. The focus on KYC means it is an even more integral part of the investment process, from onboarding customers to continuously monitoring developments over the lifetime of a customer relationship.
FMO has a clear mandate: investing where commercial parties do not due to the higher risks involved. To achieve high-quality impact, the importance of KYC in FMO’s target countries cannot be overstated. In its engagements with for instance civil society, FMO needs to take criticism to heart and fully understand its background. Even more so when working in fragile states, where local partnerships and a firm grip on contextual risk are most crucial. Equally important is the fact that defining and mitigating risk is not the same as fully eliminating risk. Problems will occur and mistakes will happen. It takes a bold and resilient organization to invest where others don’t. The challenge is to assess and manage such risks and articulate them clearly to stakeholders and civil society more broadly.
In 2021, the Supervisory Board also devoted significant attention to finding new leadership for FMO. We are very grateful to Linda Broekhuizen for keeping FMO on track through turbulent times as the interim CEO. We would like to repeat the words that we spoke during her farewell-event – that focused on biodiversity: “You have showed relentless interest in the content of your work, just like you excelled in turning words into action. FMO will miss you.’’
In Michael Jongeneel we found a new CEO who can further shape the future of FMO. Michael brings with him a great deal of positivity, new perspectives and has a good understanding of the people and their thinking. We are pleased to see that the open dialogue to enhance internal connection – with the leadership team on the forefront – has been ongoing. To strengthen the Management Board further, two additional members will be appointed in 2022.
One of the main challenges for Michael and his team will be to guide FMO towards its 2030 agenda. A consultation round with FMO’s stakeholders provided valuable insights on what they define as FMO’s main challenges, what FMO’s priorities should be, and how these could be reached best. A few of the questions that will be answered in the updated strategy are how FMO can further develop its role as an innovative organization within development finance, e.g. in the area of market creation; how to further shape collaboration with EDFIs to enlarge impact; how to better shape interaction with stakeholders; and how to be more transparent on achieved impact and the balancing of different interests.
At the beginning of 2022, we see signs that the pandemic is easing up, which will mean FMO staff can resume visits to customers, perform due diligence on new prospects and initiate projects. At the same time, the world faces a new challenge. The ongoing war in Ukraine creates a humanitarian crisis and is already influencing energy and food prices globally. It makes the support FMO can give to emerging markets even more urgent.