8

Sa-Dhan Patrika

Volume 7,

Issue 2, December 2006

Types of risks

Credit Risks (default, liquidity, new clients)

Operational

●

Criminal Risks (fraud, theft, etc.)

Risks

●

Transactional Risks (transportation of funds, branch security)

●

Personnel security (work accidents, civil liability, etc)

●

Management Information System (not reliable, delays,

Information

●

uninformed staff)

related Risks

Accounting system (inadequate procedures, implementation

●

problems, poor quality)

Decision-making procedures (reliability, relevance, regularity)

●

Personnel risks (clarity of responsibilities, positions)

Organizational

●

Management risks (maintaining good managers, encouraging

Risks

●

loyalty)

Risks related to internal control procedures

●

Communication, relationships with outside stakeholders

●

(cohesiveness, quality)

Legal texts (institutional type, management and

Strategic

●

representative bodies)

Risks

Funding (savings, refinancing, equity, shareholders)

●

Product development policy (products match clients' needs)

●

Competitive environment (saturation, competition)

●

Vision and mission (contradiction between this discourse and

●

the reality)

Climate - Political / Economic

Environmental

●

Risks

MFIs of all constitutions and the institutions

Changing Leadership Styles in Growing

face similar risks and need to set in place

Organizations

The visionary

structures and systems that are best able

leader can no

to manage them. It needs to be explicitly

Management  literature  clearly

longer be the

stated here that the aim is not to

identifies the different phases in the

single point of

eliminate or to minimize risks; the

growth of an organization and the

overarching objective is to take

contact for all

corresponding leadership styles4.

cognizance of risks (quantify them as

decisions and

possible) and to best manage them.

professional

Most institutions start because an

Given  the  above,  the  essential

managers need to

entrepreneur finds an idea of a new

requirements of good governance for an

be introduced

product or service he/she feels

MFI are not likely to be different from any

passionate about bringing into the

other institution. Key is protecting the

market. This person is driven by his/her

interests of all stakeholders by having in

visionary zeal and brings together a

place

small team of like-minded people and

o

an effective and functional

asks his/her friends to support him/her

board that is able to guide the

by providing capital or advising him/

executive management and

her on his/her strategy. Governance in

oversee the operations of the

such an organization is a simple process

MFI.

as the key stakeholders work closely

together, driven by their combined

o

effective internal control systems

mission and vision and the leadership

and processes.

style that is highly creative. If the idea

works and the organization grows, the

Indeed, given the nascent stage of the

size of the team increases and this

microfinance industry in India, most MFIs

informal,  creative  environment

would need to invest energies on all

becomes restrictive. The visionary

parameters of governance to match

leader can no longer be the single

benchmarks within or in comparison with

point of contact for all decisions and

other sectors. Nonetheless, the single

professional managers need to be

most critical factor that will aid best

introduced. The leadership style

governance practices to emerge would

required here is directive and typically

be the evolution of a healthy and

a functional organization structure is

effective relationship between the

introduced and systems and processes

executive management and the Board.

are established. As the institution grows

4

The section of the paper dealing with the growth of firms draws from a paper by Larry Greiner,

Evolution and Revolution as Firms Grow, published in the Harvard Business Review in 1998.