Potential risks and opportunities

Below is an overview of the challenges, risks and opportunities we see in the short to medium term. The risks that could impact our strategic objectives and reputation relate to our business model, ESG, regulatory compliance and strategy execution. Other risks are described in the 'Risk management' chapter in the 'Consolidated Financial Statements'. Our responses reflect tactics that we will explore or implement in the short to medium term.

Strategic challenge	Risks	Opportunities	Our response towards 2030
Maximize impact in a challenging macroeconomic environment.	• Insufficient growth of FMO's investment portfolio due to challenging macroeconomic conditions. • Lower impact as customers focus on other pressing issues caused by economic recessions and/or lower productivity.	• Greater additionality for FMO in markets where other investors perceive risks as too high. • Market creation in nascent and fragile states, innovation and ecosystem development to increase impact. • Leverage public funding for high-risk investments.	• Pilot a market creation approach. • Focus business development on impact opportunities within our core sectors and countries. • Increase the scale of our operations by leveraging partnerships. • Grow transaction sizes in line with GDP growth.
Manage more projects exposed to higher ESG and investment risks.	• Increasing our exposure in nascent and fragile markets leads to higher ESG and investment risks that could deteriorate the quality of FMO’s investment portfolio and potentially lead to incurring greater losses. • Insufficient resources available to manage such projects effectively, adversely impacting communities and FMO.	• Support customers to improve their business practices in line with international standards, thereby lowering their risk and improving their performance. • Identify and intensify partnerships on the ground to mitigate adverse impacts.	• Strengthen engagement with stakeholders to gain knowledge and access to networks. • Selectively and gradually, increase our local presence and establish new offices to enable better engagement with local communities and relevant partners. • Improve FMO's capacity to work in LDCs and fragile states. • Continue to integrate human rights and sustainability considerations in our investment process.
Incorporate EU-driven and focused regulations in an emerging market context.	• EU/Dutch regulation that is applicable to FMO may conflict with some of our high-impact ambitions (e.g. market creation in fragile states). • Increased administrative burden as a result of more stringent regulation may affect customer satisfaction and cause them to seek financing from other (non-regulated) investors.	• Customers become more attractive to other (commercial) investors as a result of compliance with more stringent regulations.	• Strengthen our culture and systems related to integrity and risk. • Strengthen engagement with authorities to ensure regulations account for regional differences. • Achieve more efficient and effective compliance and reporting.
Implement an ambitious organizational change agenda, while continuing business as usual.	• Insufficient focus and dispersed attention, getting stuck in Business as Usual or complex change management initiatives. • Inability to achieve material efficiencies and change due to ineffective change management. • Inability to attract and retain people with the right skillset might hinder the implementation of FMO’s change agenda.	• Develop new in-house capabilities. • Investing in change will allow FMO to adapt to, stay competitive and meet customer demands.	• Phase the implementation of our strategy so change becomes manageable. • Enhance our efforts to hire and retain people as well as develop the skills and knowledge we need. • Improve our approach to managing change and our resources. • Appoint dedicated change management staff.