Caribbean Development Bank (CDB) President, Dr. Gene Leon, urges countries in the region to take an integrated approach to risk mitigation to improve risk profiles, as a way to create more fiscal space to pursue Sustainable Development Goals (ODD).
Dr. Gene Leon posited that currently, Caribbean countries identify and mitigate risks primarily in isolation, lacking critical linkages, which perpetuates the region’s vulnerability to the impact of shocks leading to high-risk profiles.
“Currently, international investors demand high returns for investments in the Caribbean to offset these relatively high risks. These high returns translate into high financing costs for Caribbean governments, which puts pressure on fiscal sustainability and reduces the fiscal space for achieving the SDGs,” explained Dr. Leon.
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“Another way of looking at this is that the implementation of appropriate risk mitigation policies improves risk profiles and, by extension, credit ratings; furthermore, the improvement in the risk profile has a permanent effect on creditworthiness, which improves access to more affordable financing. This perspective provides a solution that entails a permanent impact on our ability to access more affordable finance while reducing reliance on temporary impact, lower rate concessional finance,” he added.
The CDB Chair noted that an effective country risk management approach must recognize the interconnectedness of risks and that the integrated enterprise risk management frameworks used by institutions, including the CDB, to address existing and emerging risks can also be used by countries.
“These tools are also applicable at the sovereign level for use by governments to put in place a robust integrated framework that combines climate and non-climate risks. It is important that government leaders embrace this new way of thinking when it comes to sovereign risk management. Using this integrated approach is the only way to effectively conduct risk mitigation, which, as noted, is crucial to achieving the Sustainable Development Goals,” said Dr Leon. “In this context, risk mitigation can be a catalyst towards achieving the SDGs, by creating more fiscal space from lower financing costs to pursue the SDGs, or by accessing more affordable capital to pursue the SDGs. SDGs.However, risk reduction cannot be achieved without adopting an integrated approach to risk management.Therefore, risk mitigation policies become a basis for lower risk profiles and potential improved to achieve the SDGs.
The CBD Chair was speaking at the Caribbean Regional Risk Conference, a joint initiative of the CBD and CCRIF SPC.
The two-day event addressed the myriad of risks facing Caribbean countries, including climate change, economic, geopolitical, environmental, societal, technological and natural risks, which continue to impact the outlook for development of the region.