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Why Assessing Contextual Risks Matters: How Understanding the Context Contributes to the Effectiveness of Operations

February 7, 2024 por Daniela Morra - Christel Saab Leave a Comment


In the realm of development interventions, where efforts aim towards addressing multifaceted challenges such as poverty alleviation and infrastructure development, the Inter-American Development Bank (IDB) plays a pivotal role.

Recently, the IDB updated its Environmental and Social Policy Framework, emphasizing the importance of fostering inclusive and prosperous societies in Latin America and the Caribbean (LAC), highlighting the intricate connection between economic development and environmental and social sustainability.

Development operations are typically executed in diverse and complex contexts, shaped by unique social, political, economic, environmental, and cultural factors. These contextual elements are often dynamic, making it imperative to understand them comprehensively. This understanding facilitates the adoption of tailored strategies, recognizing the need for flexible and context-specific solutions. This approach aims to enhance development initiatives’ effectiveness and long-term sustainability, ultimately leading to improved performance during project execution.

Context-specific approaches are crucial in challenging settings, such as fragile and conflict-affected regions. In such environments, the risks associated with development operations are magnified due to the absence or weakness of government institutions and limited civic engagement capacity. When evaluating contextual risks, spatial and temporal dimensions must be considered to ensure that assessments account for pertinent inherent risks. For instance, previous conflicts, even if no longer active, can significantly impact stakeholder dynamics and engagement, making their inclusion in the analysis crucial for successful execution.

The IDB assesses operations using various indicators, including environmental and social impact classification, provided during project preparation, and the Environmental and Social Risk Rating (ESRR), which specifically includes contextual risks. This risk assessment is continually reviewed throughout project execution, enabling proactive and adaptive risk management. Recognizing the dynamic nature of the operating environment allows for context-specific mitigation measures, ultimately improving the effectiveness of risk management and project outcomes.

Understanding contextual risks

When planning an operation, several assessments are conducted to identify potential or current environmental and social impacts on the environment and communities. The IDB’s Environmental and Social Policy Framework requires operations to consider impacts on vulnerable populations and implement measures to prevent the adverse impacts from disproportionately affecting them.

Contextual factors include the specific history of the project area, prevailing governance, law and order, peace and security conditions, history of infrastructure development and social services, and the society and livelihoods of affected people. While these risks are inherent to

the project area and beyond the control of the operation, their association with the project can impact its success and exacerbate adverse impacts.

Contextual risks should be considered before project-level risks, informing project design and risk management approaches. They require continuous assessment throughout project execution to ensure effective risk mitigation.

How contextual risks add value to operations.

1. Maximize Effectiveness and Sustainability: Failing to consider contextual risks can impact performance and pose financial and reputational risks. Projects must align with the social context and adhere to socio-environmental safeguards and human rights obligations to achieve sustainable outcomes.

2. Understand Impact Significance: Assessing impact significance is crucial in determining whether a risk is acceptable or beyond the operation’s tolerance level, influencing project decision-making.

3. Shape Stakeholder Engagement: Understanding contextual risks provides insight into potential factors that may affect stakeholder engagement, leading to more effective engagement strategies. Stakeholder engagement outcomes are highly context-specific and sensitive to social, political, economic, and cultural factors.

4. Identify Systemic Barriers: Contextual risk assessment helps operations identify and address systemic barriers preventing vulnerable groups from participating fully in development initiatives. Identifying these barriers is essential to developing relevant strategies and approaches.

In conclusion, assessing contextual risks is pivotal for achieving meaningful and sustainable development outcomes, effective stakeholder engagement, and addressing systemic barriers. The IDB’s commitment to understanding and managing contextual risks reflects its dedication to supporting the development of inclusive and prosperous societies in Latin America and the Caribbean.


Filed Under: Climate change

Daniela Morra

Daniela is a social safeguards consultant at the Environmental and Social Risk Management Unit (ESR). She supports the quality of integrating social policies for lending operations in preparation and execution. Daniela possesses more than 10 years of international experience working in emerging economies, conducting due diligence and providing advice to country clients for high-risk operations on social and environmental risks, ensuring compliance with relevant policy frameworks and international best practice. Prior to joining IDB, she was a Social Development Specialist in AfDB, supporting operations in Southern Africa, and was an E&S Safeguards Specialist with the Food and Agriculture Organization of the UN in Latin America.

Christel Saab

Christel Saab is the Chief of the IDB’s Environmental and Social Risk Management Unit in the Office of Risk Management. The Unit provides oversight and quality assurance of environmental, climate change, disaster, biodiversity, social, and governance risks throughout the project lifecycle and at the portfolio level. Christel has over 20 years of experience in socioeconomic development, ESG & climate change risk management, portfolio management, and innovation in different international organizations (MDB, NGO & private sector). She holds a Master's in Economics and Public Administration from the University of Bordeaux IV, France, as well as Master's in Business Administration (MBA) from the University of Houston, Clear Lake, Texas, USA. She is certified as a Project Management Professional (PMP) from PMI and has been part of the Emerging Women Leaders Program of the IDB and the Emerging Leaders Program of the OECD.

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Sustainability

This blog is a space to reflect about the challenges, opportunities and the progress made by Latin American and Caribbean countries on the path towards the region’s sustainable development.

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