PRINCIPAL RISKS AND UNCERTAINTIES

The circumstances in which Islamic Relief Worldwide operates can be complex and challenging, including areas of desperate need whose economies are fragile or failing, and conflict zones where sanctioned organisations are active. Some risk is inevitable for our operations in the context of the security, political and financial challenges we face. With over 40 years of institutional knowledge and experience in over 40 countries, we have in place an active assurance framework and risk management protocols to manage and mitigate risk across the charity and our areas of operation. Our operational risk management is supported strongly by our Board of Trustees: their active oversight ensures that we do all we can to safeguard our people and the communities we serve, as well as to protect the funds and assets entrusted to us and the reputation of Islamic Relief Worldwide.

Our Board is supported by a dedicated Audit and Finance Committee (AFC). The AFC is responsible for ensuring that Islamic Relief Worldwide has robust systems of internal control, financial compliance, safeguarding, complaints management and audit to manage risk and to take advantage of emerging opportunities. Assessing and mitigating risk is central to our governance and management. Risks are regularly reviewed, reported and acted upon at Board of Directors level, divisionally and in country office teams. In 2022 we further strengthened our risk mitigation measures by raising staff awareness through internal campaigns about fraud and cybersecurity risks and establishing dedicated and regular counter-fraud reporting directly to the AFC. We also have an independent Internal Audit function reporting to the AFC. This ensures that there is professional oversight and assurance of adherence to risk management policies and procedures, as well as effective mitigation actions when needed.

We conduct risk and assurance assessments periodically in every country office and functional division, alongside the strategic level leadership of the senior executive and Board of Trustees. We are assisted in this by our use of a comprehensive risk management solution across all our offices in the UK and internationally, ensuring a consistent and coherent approach to risk monitoring, reporting and mitigation. Our key processes include:

• carrying out quarterly risk management reviews at both executive and operational levels, with oversight from Internal Audit, reporting to the Audit and Finance Committee
• periodic review of the charity’s strategic risks by the senior executive team
• regular audits undertaken by the Internal Audit function, in addition to statutory annual audits and external audits mandated by institutional funders
  reporting of the results of all internal and external audits to the Audit and Finance Committee, which oversee the implementation of recommendations by the senior executive team
• a dedicated team working to enhance our protocols to ensure that our people, and those we serve and work with, are kept safe and secure. This team also manages and responds to complaints, safeguarding concerns and whistleblowing
• monthly financial reporting, the results of which are reported to and appraised by both the senior executive team and the AFC.

We have identified the following significant risks at an organisational level. The executive monitors specific indicators relating to each risk, and implements specific actions with oversight from Internal Audit, the AFC and the Board of Trustees.

A significant risk to Islamic Relief’s operations and potentially also to the fundraising that underpins them has been the sharp increase in food insecurity across the world in 2022. Supply chain and living costs have been adversely affected by global economic stagnation, rising inflation and the effects of the war in Ukraine on the availability of food and fuel. The impact on Islamic Relief’s operations has included:

• rising costs for food items, and for the logistics required to deliver food aid
• increased demand for food and livelihoods support from affected communities both in the southern hemisphere and in traditional fundraising countries, with a significant rise in the use of food banks in the UK
• question marks over some aspects of future project delivery, requiring either additional funds to meet the needs of the affected communities or a reduction in the scope and reach of some programmes
• question marks over the potential to maintain the strong income growth achieved in recent years, as donors see a tightening of disposable income. We are responding to these challenges in a number of ways:

• • • reviewing and adjusting the content and size of food packs for seasonal food distributions, to ensure higher costs are factored in while optimising our support for affected communities
    • advocacy and fundraising activities internationally and in the UK to raise awareness of global hunger and food insecurity and inspire positive action by policy makers and by institutional and individual donors
    • an increased focus on, and resourcing for, domestic food security programmes to meet increased demand from affected communities in traditional fundraising countries, and to ease the hardships of donor communities.

Islamic Relief believes safeguarding is important to ensure a thriving environment for the people we support and our staff. To this end, the organisation continues to work hard to embed safeguarding in all aspects of our work.

A Community of Practice (CoP) was set up following the Safeguarding Training Summit in Istanbul in 2022. There, 27 Safeguarding Focal Points (SFPs) from country offices gathered to receive face-to-face training on all aspects of safeguarding, safe programming and project delivery, and safeguarding case management. This CoP meets online every two months to discuss issues and challenges and share good practice, as well as to keep abreast of current developments in safeguarding. Topics discussed have included safer programmes, the challenges in incorporating safeguarding into distributions and how to develop Community Hope Action Teams in remote areas.

A ‘Safe Organisation Checklist’ has been developed for SFPs to use as a guide in developing a robust safeguarding infrastructure at country office level. The Istanbul Summit used this as a tool for action learning. Safeguarding Project to assess safeguarding at country level through the ongoing two-year Safeguarding Project, showed that the tool was being used to good effect. The two-year project has a particular focus on engaging faith leaders and CHATs. Focus group discussions (FGDs) held with these groups have identified a good knowledge of safeguarding and a commitment to building safer environments. The FGDs also highlighted how community-level referral mechanisms within Islamic Relief projects were enabling safeguarding of survivors of abuse and vulnerable women and children.

A comprehensive programme of training has been completed in 2023. Following analysis of safeguarding cases, feedback from the people we serve, and from an employee survey, a bespoke training webinar was designed. Feedback had indicated that staff needed a better understanding of issues such as workplace bullying and harassment, as well as the clear message that safeguarding applies to all in Islamic Relief – from senior managers, to drivers, cleaners, and cooks, as well as to direct and indirect rightsholders. The webinar included scenario activity, videos, and small group work activity, ensuring it was interactive and encouraged the active involvement of staff. During the webinar, our Director of International Programmes reiterated the importance of safeguarding as an integral part of Islamic Relief’s work.

Over 2022 and 2023, the webinar was delivered to all country offices. Some larger country offices such as Yemen, Afghanistan and Pakistan, were provided with three webinars, to ensure that key staff from the field also attended. Evaluation of the webinar programme shows that it was very well received. Staff felt more knowledgeable about integrating safeguarding into their work, particularly into project delivery, and more confident in raising awareness of safeguarding in the communities they serve.

The trust of communities, rightsholders and staff in Islamic Relief’s safeguarding processes is evident in the rising number of cases reported year on year. A total of 71 cases were reported in 2023. Of this number, 11 were not safeguarding issues, though reported to us; they were fraud and human resource related issues. Fourteen cases were either out of Islamic Relief’s jurisdiction (in areas where we do not operate, or which are not related to our activity) or did not elicit further information upon enquiry. Seven cases related to children, of which one involved a member of staff. Upon enquiry this case lacked credible information to be addressed. The remaining six cases were related to the rightsholder communities themselves. Three cases were malicious and of the eight cases that were upheld, three resulted in warnings being issued and five in dismissals. The cases reported provide clear evidence that a strong safeguarding infrastructure has been integrated into country offices, and that beneficiaries and staff have the knowledge and confidence to report safeguarding concerns.

In 2023, we continued to strengthen our security measures to safeguard our data and infrastructure. As cyber threats become more advanced and frequent, we regularly assess our defences, including the effectiveness of our countermeasures, with a special emphasis on high-risk assets and data.

As we undergo our digital transformation, our IT systems play an increasingly vital role in achieving our mission. We acknowledge that our operations could be disrupted by IT system failures or cyber attacks. As a result, we provide ongoing cyber awareness training to our staff and routinely evaluate our IT and security risk at the Board level.

At Islamic Relief Worldwide, we recognise that good governance is crucial for effectively fulfilling our mission in line with our values and the expectations of the communities we serve, as well as those of our staff, donors, and other stakeholders. We operate in a complex and ever-changing international environment, which necessitates maintaining high standards in our global governance and consistently implementing progressive governance reforms.

To address this risk, we are committed to sustaining momentum in implementing and monitoring the effectiveness of our global governance model, which was introduced in 2020. We also actively work on enacting complementary plans across all Islamic Relief offices to ensure the delivery of good governance. Furthermore, we aim to enhance our governance by implementing additional reform recommendations derived from ongoing assessments and evaluations.

Since 2022, Islamic Relief Worldwide has taken significant steps towards enhancing its governance practices. The International General Assembly, responsible for electing and overseeing the Board of Trustees, appointed two independent members through a competitive public recruitment process. These members were selected from a pool of candidates unlinked to any Islamic Relief member entities, ensuring impartiality and diversity within the board.

Furthermore, in 2023, the independent International General Assembly members transitioned to the Board of Trustees after serving a year in their previous roles. This process contributes to enhance the diversity and overall accountability of the board. To support effective governance, all trustees undergo rigorous and customised induction programmes, along with ongoing governance training.

Given the fragile and turbulent international context in which we operate, managing threats to Islamic Relief Worldwide’s reputation is of utmost importance. We understand the significance of being proactive in protecting our reputation and actively addressing any potential reputational risks that may arise.

Islamic Relief Worldwide remains committed to upholding its reputation and safeguarding its standing among stakeholders. The organisation diligently refutes false or misleading adverse media reports to protect its own reputation as well as that of its partners. This entails actively challenging media outlets to rectify or remove erroneous content. Additionally, Islamic Relief seeks suitable prominence to exercise its right of reply when addressing inaccurate information.

To mitigate this risk, we prioritise open and accountable communication with our key external stakeholders. We strive to provide them with accurate information and necessary assurances regarding governance and reputational matters. Moreover, we are dedicated to being transparent in addressing any concerns or false information that may affect our reputation.

By upholding high governance standards and proactively managing reputation risks, Islamic Relief Worldwide aims to foster trust and confidence among stakeholders and ensure the continued success of our mission.

Moreover, Islamic Relief ensures that stakeholders are provided with accurate information to set the record straight when necessary. This commitment to maintaining transparency and correcting misconceptions plays a vital role in preserving Islamic Relief Worldwide’ s reputation.

By prioritising strong governance practices and actively managing reputation risks, Islamic Relief Worldwide aims to ensure the trust and confidence of its stakeholders, donors, and partners.

Islamic Relief Worldwide acknowledges that the risk of fraud is a persistent challenge in the humanitarian sector. To address this concern, we have implemented several measures to mitigate and manage fraud risks.

Complaint accessibility: We have enhanced complaint accessibility by launching a new online portal, enabling individuals to report suspected fraudulent activities easily and securely.

Investigation and accountability: We are committed to investigating credible concerns in line with the Core Humanitarian Standard. Appropriate actions will be taken against individuals found guilty of fraudulent behaviour to ensure accountability and prevent future occurrences.

Counter Fraud Working Group: We have established a dedicated counter fraud working group, tasked with continuously identifying and improving our approach to fraud prevention. This group actively anticipates and responds to fraud issues before they arise, ensuring prompt action when necessary.

Counter Fraud Strategy: In 2024, we will launch a comprehensive counter fraud strategy, building upon our existing efforts. This strategy will further strengthen our ability to proactively address fraud risks and enhance our fraud prevention measures.

Awareness and empowerment: Our dedicated counter fraud unit conducts workshops in countries where we operate, aimed at increasing staff awareness of fraud risks. These workshops empower staff to recognise, report, and work collaboratively to prevent fraud.

Our commitment to combating fraud, bribery and corruption remains resolute, and we will continue to prioritise vigilance, transparency, and accountability in all our operations. By doing so, we aim to minimise the impact of fraud, bribery and corruption and safeguard the resources entrusted to us for the benefit of those we serve.

Islamic Relief recognises that maintaining financial resilience is crucial for the sustainability of our organisation and our ability to deliver effective humanitarian aid programmes. While we strive to ensure sound financial management, we are aware of various risks that can impact our financial resilience. This section provides an overview of the principal risks related to financial resilience that Islamic Relief faces, along with the measures taken to address these risks.

    1. Regulatory and compliance risks:
Islamic Relief operates in a complex regulatory environment governed by various national and international laws, regulations, and sanctions regimes. Compliance with these regulations is essential and the evolving nature of financial regulations poses a risk of non-compliance and potential disruptions in transferring funds.

Mitigation measures:
a) Our Treasury team actively monitors changes in regulations and maintains a comprehensive understanding of compliance requirements.

b) Islamic Relief’s participation in the UK Home Office’s Tri-Sector Group provides us with valuable insights and knowledge from leading aid agencies, banks, and government representatives. This collaboration enables us to address sanctions challenges and overcome financial hurdles in transferring funds.

    2. Funding risks:
Islamic Relief relies on donations, grants, and funding from various sources. Any significant reduction or interruption in funding could affect our ability to carry out our programmes and projects effectively.

Mitigation measures:
a) We maintain diversified funding sources, reducing our dependence on a single donor or funding stream.

b) Islamic Relief maintains strong relationships with international donors and partners to ensure ongoing support and collaboration.

c) We implement robust tracking and reporting mechanisms to monitor and manage funding streams, ensuring transparent and efficient allocation of resources.

    3. Foreign exchange and currency risks:
Islamic Relief operates in multiple countries, which exposes us to foreign exchange risks. Fluctuations in exchange rates can impact the value of our assets, liabilities, and income, leading to potential financial losses.

Mitigation measures:
a) We assess and manage exposure to foreign currencies through hedging strategies to minimise the impact of exchange rate fluctuations.

b) Islamic Relief conducts regular risk assessments to identify potential vulnerable areas and takes appropriate measures to mitigate currency risks.

    4. Economic and financial market risks:
The global economic environment, financial market conditions, and political events can have a significant impact on the financial resilience of Islamic Relief. Economic downturns, interest rate fluctuations, and market volatilities may affect our funding sources, investments, and the overall financial stability of our organisation.

Mitigation measures:
a) Islamic Relief maintains a robust financial planning and budgeting process to ensure adequate financial reserves, contingency plans, and prudent resource allocation.

b) Our finance team actively monitors economic and financial market developments, employing risk management strategies to mitigate potential risks.

Islamic Relief recognises the importance of maintaining financial resilience to fulfil our mission and effectively respond to humanitarian needs. While inherent risks exist, we remain committed to diligent financial management, regulatory compliance, and proactive mitigation measures to ensure that we can continue to deliver impactful programmes and projects to those in need.

Islamic Relief aims to remain financially resilient by staying informed about the economic environment, fostering relationships with financial partners, and effectively managing their reserves to support our charitable objectives.