Solid risk management framework
FMO has a solid risk management framework in place reflecting its banking license, AAA rating and mandate to do business in high-risk countries. The Management Board keeps regular oversight over risk processes, and considers risk-based delegated authorities to the risk departments. There are three lines of defense in place, with the role of the Front Office being balanced by the Risk departments and an Internal Audit department, which performs assessments as to whether processes are controlled well.
FMO has a Risk Appetite Statement in place, which is updated on an annual basis, approved by the Management Board and subsequently by the Supervisory Board. Adherence to the Risk Appetite Statement and existing risk limits is continuously managed by the Asset and Liability Committee (ALCO) and the Investment Committee (IC).
FMO’s largest credit and ESG risks are embedded in its emerging market debt and equity portfolio. To allow for this, FMO ensures diversification of credit risk in its portfolio through risk limits per country, sector and product.
In addition, it has developed a set of investment criteria which set minimum standards for the acceptance of credit and ESG risks. These standards have been guided by a number of standards, among them the IFC Performance Standards, OECD Guidelines and the UN Guiding Principles on Business and Human Rights. If an investment entails a severely increased risk, the project is transferred to the Special Operations team. FMO applies a conservative capital management framework and avoids financial risks other than credit risk as much as possible, in particular interest rate risks and foreign currency risks.
To promote fair business practices and increase public trust in the private sector, FMO is dedicated to fighting money laundering, terrorist financing, corruption and bribery. We actively support Transparency International’s Netherlands branch in order to encourage dialogue between Dutch corporates on best practices in doing business. FMO is also guided by the OECD Convention on Combating Bribery, the UN Convention against Corruption and the Financial Action Task Force (FATF) recommendations on combating money laundering and the financing of terrorism.