Risk Management for the Developing World

Developing WorldRisk management for the developing world takes on a global scale and unprecedented challenges. Developing countries face social and governmental instability while trying to compete in a global economy.

These countries often have large amounts of debt and foreign exchange reserves, which exposes them to interest and exchange rate risks. They also often rely on commodity exports and energy and food imports. All these uncertainties make development exponentially more difficult, exactly where it is most needed. The smallest disruption can have devastating ripple effects.

The worst hit by all these risks are the people who are struggling in poverty without their basic needs being met. Poor people in developing countries tend to be hit the hardest by risks because the resources they have to manage risks are few and far between. Therefore, there must be improved risk management in developing countries if poverty is to be mitigated and development encouraged.

Risk management for the developing world can be an amazingly effective resource for development and has the ability to create security and prosperity. Effective risk management protects the poor and also gives them greater opportunities for a better life. For example, farmers in developing countries who have insurance against flooding are able to safely increase their investment in farming supplies for future crops.

Most developing countries fail at mitigating risk due to a lack of proper information or belief in the wrong information, few resources, a corrupt or hindered market, inability to procure necessary goods and services, and social instability.

For example, steps to prevent the spread of sexual diseases, such as safe sex methods and tools, are taught but never properly implemented. So risk identification is not effective by itself. There must be prioritization, strategic implementation, and effective follow through.

Risk management for developing countries requires action at all levels of society, from the household, the government, and the financial sector. Only then can risk management programs succeed.