Risk Mitigation

As part of its organizational realignment, the Bank created the Office of Risk Management (RMG), reporting directly to the President and Executive Vice President. RMG is in charge of assessing credit, operational and market risks. RMG is also responsible for strengthening the Bank’s capacity to identify, measure and manage the credit risks of the Bank in the non-sovereign-guaranteed loan portfolio and its treasury activities, including derivatives. It also manages the Bank’s exposure to market and operational risks and credit risks of the sovereign loan portfolio.

The new Office of Strategic Planning and Development Effectiveness (SPD) is defining an integrated methodology for managing environmental, social and fiduciary risks, and reviewing initiatives, products and strategies and policies that have risk implications.

In addition, various Bank units are responsible for carrying out discrete risk mitigation activities. The Office of the Auditor General (AUG) focuses on corporate risk management, with an emphasis on financial reporting. The Bank’s Office of Institutional Integrity (OII) focuses on promoting an environment of integrity throughout Bank operations and in member countries through the detection, investigation and prevention of fraud and corruption in Bank-financed activities.

Other Bank units, such as the Operations Procurement Office, provide technical advice to project teams on matters related to national capacity in the areas of procurement, financial management and managing country portfolios through results and risk management practices. Also, the Environmental Safeguards Unit (ESG) evaluates and promotes mitigation of environmental and social risks in Bank public and private sector operations, incorporating environmental and social safeguards in projects and providing advice on environmental and social risk mitigation.

Finally, the Office of Oversight and Evaluation (OVE) plays a dual role, evaluating overall Bank activities and conducting studies on country-level, thematic, sectoral and policy- and instrument-related issues.

Corporate Governance

During the year, AUG continued to collaborate with Bank oversight units on governance issues. In the operational departments and Country Offices, it focused on the realignment of the Bank, conducting assessments of the control environment of the Country Offices and identifying initial issues related to the realignment, among other activities. Country Office audits also covered high-risk control activities that would not be significantly impacted by the realignment.

At headquarters, AUG monitored the selection, implementation, upgrade and operation of computers and network infrastructure and applications. AUG also monitored the development of the Information Technology Strategy and the implementation of the new information technology governance structure. In addition, as part of the Bank’s adoption of the COSO (Committee of Sponsoring Organizations of the Treadway Commission) internal controlintegrated framework and the annual report on the effectiveness of internal controls over financial reporting, AUG tested Bank-wide controls and business processes. It also performed audits of several key systems and processes, including payroll, the Staff Retirement Plan, non-sovereign-guaranteed operations and the Multilateral Investment Fund.

During the year, OII continued its work as the focal point for matters related to integrity within Bank-financed activities. At the outset of 2007, OII had 123 allegations open and under investigation. Through December 31, 2007, OII received 212 new inquiries, leading to 136 investigations. Of the allegations received, 84 percent related to fraud or corruption in Bank-financed activities and the remaining 16 percent to staff misconduct involving alleged violations of the Code of Ethics or other staff rules. During this period, OII completed more than 162 reviews and investigations.

During 2007 the Office of the Vice President for Finance and Administration coordinated the preparation and approval of a new Code of Ethics and Professional Conduct that consolidated the Code of Ethics and the Respect in the Workplace Policy into a single code and merged the Ethics Committee and the Conduct Review Committee into a single committee. This streamlined mechanism, supported by the appointment of an Ethics Officer and the establishment of an Ethics Office, enhances staff access to Bank resources for reporting cases of misconduct and unethical behavior, and simplifies and expedites their resolution. The revised code also contains improved definitions of misconduct, particularly harassment and domestic and workplace violence, and establishes specific sanctions for wrongdoing.