How we operate
Institutionally, BSTDB operates in compliance with the principles of effective corporate governance relevant for a multilateral financial institution. The approved set of strategies, policies, regulations, methodologies and procedures governing essentially all Bank activities form the core body of internal legislation ensuring corporate governance in line with best practices.
Operationally, BSTDB adopts a flexible strategy allowing quick response to changes in economic and market conditions in its countries of operation. The Bank’s business activities are guided by principles of consistency with its mandate and sound banking practices, fair and rapid consideration of any business proposal, efficiency and flexibility, and focus on clients’ needs.
Project cycle
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1Project Initiation
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2Appraisal & Due Diligence stage
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3Board Approval and Signing stage
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4Implementation Supervision and Monitoring stage
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5Completion & Evaluation stage
1. Initiation stage
The Initiation stage, whose goal is to identify operations that may enter the Bank’s Operation Cycle, includes the following sequential steps:
- Identification of the operation
- Eligibility Review
- Clearance of the operation’s concept by the Credit Committee
The Bank accepts proposals from public agencies, private sector firms, and other entities, including special purpose companies, financial institutions and non-governmental agencies. The Eligibility Review will determine whether an operation’s objectives and benefits are consistent with the Bank’s main eligibility criteria specified in the Establishing Agreement and in the Rules and Regulations for Financing Projects and Commercial Activities.
Upon approval of the Eligibility Review, the Operation Leader will request from the relevant Bank departments and units the provision of all necessary support in a timely manner in order to prepare the Concept Clearance Document (CCD), which includes preliminary information on the operation’s feasibility and consistency with the Bank’s mandate, country and sector strategy. The CCD has a validity period of nine months.
Following CCD approval by the Bank’s Credit Committee, the Operation Leader will send to the client a formal letter, the Mandate Letter, confirming the Bank’s interest in considering the financing request and establishing that the costs incurred by the Bank will be paid for or reimbursed by the client, regardless of whether the Bank proceeds with the client’s financing or not.
Until the CCD is approved and the Mandate Letter (Request Letter for public sector operations) is signed, the Bank will refrain from devoting substantial resources for the preparation of an operation.
2. Appraisal & Due Diligence stage
Once an operation passes Concept Clearance and the Client has signed and returned the Mandate Letter/Request Letter, the Operation Leader carries out the operation’s appraisal and due diligence, which is designed to:
- define the Bank’s prospective involvement;
- identify and elaborate upon key issues, including necessary information on the operation, the client, the financing plan, the market, and;
- capture all major risk areas and ensure they are properly evaluated.
To assist the Bank’s review of technical, financial, legal and other aspects of the Operation, the Operation Leader may utilize appropriate external consultancy services, following selection in accordance with the Bank’s relevant policies. The principal output of the Appraisal and Due Diligence stage is the Final Review Document (FRD), which includes detailed information about:
- operation objectives/targets;
- the client, sponsors, guarantors, and co-financiers, including an assessment of their creditworthiness;
- analysis of the market;
- terms, conditions, and covenants of the Operation;
- implementation arrangements;
- creditworthiness and financial returns;
- economic development and regional cooperation impact;
- presentation of the risks, risk mitigants, and security arrangements, and
- other key strategic issues involving shareholder value, procurement, environmental issues, corporate governance issues, etc.
The FRD is presented to the Credit Committee for approval, accompanied by the signed Term Sheet, which includes the principal terms and conditions under which the Bank is prepared to provide financial support to the operation. A completed and signed Letter of Information (LOI), describing the financial condition of the client, its legal structure and principal directors as well as the nature of the requirements for financing should also be in the Bank’s possession at this stage.
3. Board Approval and Signing stage
Upon approval of the Final Review Document by the Credit Committee, the Operation Leader prepares the submission of the operation to the Board of Directors for approval or rejection. Board approval is valid for a period of nine months, during which time the signing of the Operation must take place for the approval to be considered valid.
Following Board Approval, the Office of the General Counsel, in coordination with the Operation Leader, works to finalize the legal documentation for the operation. If, during the preparation of the legal documentation, material changes arise to the terms, conditions, and covenants presented for Final Review to the Credit Committee, and, subsequently, to the Board of Directors, the Credit Committee and the Board of Directors must approve the changes and authorize final negotiation of the operation’s legal documentation.
Following finalization of the operation’s legal documentation, the Bank and the Client will proceed with the signing of the operation. The essential purpose of the operation’s legal documentation is to achieve the best legal protection of the Bank’s interests and to represent accurately the legal structure of the operation, as described in the Term Sheet. The legal documentation may include, without limitation, any of the following:
- Operation Agreement (e.g. loan or equity agreement, guarantee facility agreement, fund agreement)
- Security Agreements
- Co-financing Agreement
- Agency Agreement
- Other contractual arrangements
For public sector operations, effectiveness is declared when the conditions of effectiveness set out in the legal documentation have been fulfilled. No drawdown is made until the relevant legal documentation has been declared effective. For private sector operations, the disbursement of the Bank’s funds takes place when all provisions of the relevant legal documentation, including fulfillment to the Bank’s satisfaction (or waiver) of conditions precedent.
4. Implementation Supervision and Monitoring stage
This stage covers the period between the effectiveness of a public sector operation - or disbursement of a private sector operation - and the completion of the operation (or termination of a revolving facility). Completion of the operation is generally defined as the date at which the technical execution, or physical implementation, of the operation is completed.
Because of the need to monitor repayments and the fulfillment of all financial obligations, supervision and monitoring will continue until the Closing Date of the operation. Closing Date is defined as the date at which any liabilities of the Bank, and liabilities or financial obligations of the Client(s) to the Bank, have been fulfilled (e.g. full repayment of a loan, completion of exit from an equity investment, or expiration of a guarantee).
The main activities on the part of the Bank during this stage involve:
- review and ‘no-objection’ processes in accordance with the legal documentation;
- execution of the disbursement schedule;
- supervision and monitoring of the implementation;
- remedial actions where the quality of an operation or the financial status of the Client (Sponsor/Guarantor) is deemed to have deteriorated below an acceptable level;
- being aware of possible fraudulent practices, with procedures and inspections geared to detecting and reacting to unusual or suspect events, decisions or documents.
The Client will prepare regular reports on the implementation of the operation, which may conform to its own formats and standards, but which must contain the required information concerning the implementation of the operation. The Bank will prepare regular internal Supervision and Monitoring Reports (SMRs) on the basis of information provided by the Client and information received during supervision trips to the site by the Operation Leader as well as information obtained from sources within and outside the Bank.
5. Completion & Evaluation stage
Following Operation Completion, the Bank undertakes a post-evaluation assessment of its operational performance. This provides an independent analysis of the outcome of completed operations against the objectives and results envisaged at the time of appraisal. Post-evaluation serves two key functions:
- accountability to the Bank’s Management and Boards that reveals the level of fulfillment of BSTDB’s mandate and
- learning-based improvement of future operations through the feedback of lessons learned from evaluated operations.
The evaluation process has two aspects:
- self-evaluation, performed by the operation teams and outlined in Operation Completion Reports, typically within 2 years of operation repayment;
- independent evaluation, conducted by the Evaluation Office and outlined in Operation Performance Evaluation Reports and respective Annual Evaluation Overviews, presented to the Management and Boards.
This Operation Performance Evaluation Reports and the Annual Evaluation Overviews provide comprehensive information on the following:
- relevance vis-à-vis the Bank’s mandate and strategies;
- success in reaching the operation’s main goals and objectives, i.e. operation effectiveness;
- the cost of achieving operation effectiveness, i.e. operation efficiency;
- the development, cooperation and other impacts;
- the operation’s commercial viability/sustainability;
- feedback and recommendations on possible improvements;
- achievements and shortcomings attributable to the Bank and its clients;
- lessons learned and recommendations relevant to future similar operations.
Strategies
The purpose of Long-Term Strategies, Medium-Term Strategies and Business Plans, Country Strategies, and Budgets is to ensure that the purpose and functions as set forth in Article 1 and 2 of the Establishment Agreement are observed and fulfilled.
- The Long-Term Strategy formulates BSTDB’s mission, vision, values, objectives and goals over a ten-year planning period.
- The Medium-Term Strategy and Business Plan (MTSBP) details the Long-Term Strategy’s objectives and goals and sets specific targets over a four-year period. It is comprised of strategic, operational and financial plans and represents a key strategic document of BSTDB.
- The purpose of the Country Strategies is to define areas of priority action and identify needs and business opportunities with respect to the mission of the Bank over the planning period in individual Member States.
- Short-term strategies, operational targets, work programs and financial statements are included in the Budget. Budgets are structured on an annual basis and serve the purpose of updating and implementing medium-term strategies and reporting financial and operational results of the Bank, as appropriate, to the Management, to the Board of Directors, to the Board of Governors and the public at large.
Policies
BSTDB follows best international practices in adopting documents which provide guidance for its main activities. The policy framework adopted by BSTDB is based upon the broad guidelines laid out in its statutory documents, and together with its strategies, form the Bank’s most important directional documents for undertaking initiatives and working in various areas.
Risk Management
The Risk Management Department (DRM) is responsible for the analysis, measurement, and mitigation of all aspects of risk pertaining to BSTDB’s banking operations. In the course of these activities, DRM ensures compliance with the Bank’s limits (country, single obligor, single project, sector, etc) in addition to having direct input into the structure of operations, including pricing, tenor, and security. DRM is also responsible for the assignment of provisions under IFRS 9 on a semi-annual basis, as well as the performance of impairment tests, as required, on operations considered “at risk”. DRM also regularly reports to the Senior Management on the state of the Bank’s portfolio. Moreover, DRM assigns limits to Treasury counterparties and monitors Treasury exposure as per the specifications found in the Bank’s Treasury policies. Finally, DRM is BSTDB’s point of contact for all interactions with the Rating Agencies.
Procurement
The Bank permits businesses, whether firms or individuals, from any country, to offer goods, works and services for Institutional Purchasing and Bank-financed projects, regardless of whether the country is a member of the Bank, and to tender or submit proposals independently or participate as subcontractors. Businesses from developing countries as well as from the Bank’s Member States are encouraged to participate on equal (or otherwise stated) terms and thereby assist their own country’s development process.
The procurement process is governed by rules and principles depending on the nature of the corresponding purchase, as follows:
- Project procurement relates to the solicitation of goods, works and services for Bank-financed projects
- Corporate procurement relates to the solicitation of goods, works and services for institutional use by the Bank
- Consultancy services relate to the selection and employment of consultants that provide the Bank with services of an intellectual and advisory nature
Current solicitations, over the minimum threshold established in the corresponding rules of the above categories, are presented below. In the exceptional case of a Bank’s fixed asset sale, the respective announcements are also included among these solicitations.
- PROJECT PROCUREMENT
- CORPORATE PROCUREMENT
- CONSULTANCY SERVICES
Project procurement
Public sector operations
Clients are responsible for implementing Bank-financed projects, including all aspects of the procurement process from the planning stage through the award of contracts as well as the administration of the contracts themselves. The Bank may advise and assist clients in the procurement process and institutional development for specific projects and require provisions as a condition of financing, but it is not a party to the resulting contracts.
The Bank's review of the procurement and contract administration processes will focus on critical steps that are necessary to ensure eligibility of the contract for Bank financing, in particular the procurement plan, the tender documents, the tender evaluation and contract award recommendations, and material changes and claims during execution of the contract.
Private sector operations
For private sector operations, the Bank will encourage its clients to use procurement methods that lead to a sound selection of goods, works and services at fair market prices, and to make their capital investments in a cost-effective manner. Businesses often achieve these aims by following established commercial practices other than formal international competitive tendering for their procurement.
Nevertheless, wherever appropriate, the Bank will encourage the use of international competitive tendering methods by such clients, particularly for large contracts. Careful procurement planning that takes into account the particular needs of the project is essential for the Bank's evaluation and agreement. In operations involving private-public partnerships, the Bank will seek to review contractual arrangements and procurement procedures, according to the best practices adopted by the Multilateral Development Banks, as per the documents below.
Corporate procurement
Purchasing of goods, works or services by the Bank (excluding consulting services and staff employment) is set out in the Bank's Rules for Internal Purchasing. The objective is to purchase goods, works or services fit for the requestor's stated purpose in a manner that balances the Bank's requirements for efficiency, economy, transparency, fairness and accountability.
Purchasing contracts are awarded as a result of competition or direct selection.
The methods for tendering depend on the estimated cost of each purchase, as follows:
- Over €200,000 - International Competitive Tendering (ICT)
Tenders are normally invited through international competitive tendering procedures and conducted in a fair, open and transparent manner consistent with such comparable procedures the Bank requires of its public sector borrowers when using Bank funds. Tenders are publicized on the Bank’s website; and, if the cost is reasonable, in periodicals published in the Bank’s member states. Other methods of tendering may be used in special circumstances. Such circumstances and all relevant details of the purchase are reported to the Bank’s Board of Directors. - Between €50,000 and €200,000 - Limited Competitive Tendering
Tenders are normally invited through simplified competitive tendering procedures consistent with ICT that are open to businesses from any country - with a notice published on the Bank’s website. However, where practicable, a restricted list comprising a minimum of five qualified vendors may be invited to tender when the purchase satisfies at least one of the following reasons: the required goods, works, or services are highly specialized and complex or are urgently needed; there is only a limited number of vendors for the goods, works, or services required; other circumstances limit the number of vendors that are able to meet the requirements. - Under €50,000 - Shopping
Wherever practicable, written quotations are invited or valid published prices obtained from a minimum of three qualified vendors. Where the estimated cost of single or annual cumulative purchases in a goods, works, or services category is not more than €10,000, purchasing is normally through Vendor Lists, comprised of competitively selected qualified vendors.
General principles of competitive contracting
When International Competitive Tendering or Limited Competitive Tendering is used, all tenders are evaluated and compared only on the basis of the evaluation criteria set out in the tender documents. The tender evaluation process up to the award of the contract is, and remains, confidential. Contracts are awarded, within the period of tender validity to the tenderer whose tender has been determined to be substantially responsive; who has submitted the lowest evaluated tender in terms of the specific evaluation criteria set forth in the tender documentation; and who has been determined to be fully capable of undertaking the contract. When quotations are requested, awards are made to the vendor who has been determined to be qualified; whose quotation meets the specified minimum requirements; and who represents the best value for money. No business submitting a tender or quotation is allowed or asked to change its offer, nor required to accept new conditions during evaluation or as a condition of award. The terms and conditions of the contract shall not materially differ from those on which tenders/quotations were invited.
Direct contracting for goods, works or services is only applied where the selection of the vendor is fully justified and the purchase satisfies at least one of the following reasons: for standardization of equipment, spare parts and supplies which renders further competition impractical; to purchase items from a particular supplier as a condition of guarantee of performance; where the required goods, works, or services are proprietary and obtainable only from one source; by taking advantage of a special discount arrangement that offers lower prices than otherwise available; as a matter of urgency; or the cost of the purchase is not more than €1,000.
The Administrative Services Department has the functional authority and responsibility for the Bank’s internal purchasing, carrying out all operations related to the purchase of goods, works or services for the Bank. This centralization of the purchasing operations leads to operational efficiency, corporate understanding of the marketplace and the development of skilled capability, consistent dealings with vendors, economies of scale and the potential for standardization.
For control purposes, the Bank has also established a Purchasing Review Committee, which performs a prior review of every contract award estimated to cost more than €50,000, approves vendor lists, and carries out quality and process reviews of awarded contracts.
Current Solicitations for Goods, Works and Services
Currently there are no solicitations.
Consultancy services
The Bank uses consultancy services of an intellectual or advisory nature to complement the Bank’s capabilities in areas, such as institution building, restructuring, policy advice, management, legal, financial and procurement services, analysis and research, identification, preparation and implementation of projects and training. Consultancy assignments regarding selection and employment of consultants by the Bank’s clients are guided by the Bank’s Procurement Principles and Rules.
The main selection principles are: high quality services, economy and efficiency, encouragement of development and use of national consultants from member countries, and transparency in the selection process. There are no country eligibility restrictions on the selection and hiring of consultants, subject to prohibition by a decision of the United Nations Security Council taken under Chapter VII of the Charter of the United Nations.
Selection method
The Bank considers that the need for achieving an acceptable balance reflecting the above-mentioned selection principles, may best be addressed through competitive selection procedures between suitably experienced, qualified consultants, though direct selection shall often be appropriate for contracts of lower values. For consultancy assignments up to EUR 75,000 both direct and competitive selection procedures are allowed. For assignments over EUR 75,000, competitive selection procedures shall be followed. The Bank shall publish on its website all procurement notices for employment of Consultants on its own account, where the estimated cost of the assignment is more than EUR 150,000. In assignments over EUR 75,000, the selected short-list of consultants shall be published on the Bank’s website.
The consultant selected for contract award shall be the experienced consultant that has been determined as being capable of performing the contract satisfactorily and, where competitive procedures were used, that who submitted the highest ranked submission strictly in response to the terms and conditions stated in the invitation.
Professional standards
Consultants shall be contractually required to:
- observe the highest standard of ethics during the selection and execution of Bank-financed contracts;
- provide professional, objective, and impartial advice;
- hold the Bank’s interests paramount at all times, without any regard for future work;
- strictly avoid conflicts with other assignments or their own corporate interests.
No consultant, nor any of its affiliates, shall be hired for any assignment where there may be a conflict with another assignment past, present or to be carried out by the consultant, unless any such conflict can be resolved to the Bank’s satisfaction.
Consultant registration
The Bank maintains a database of consultants to provide a long-list of consultants to Bank staff and borrowers for their use in projects financed by the Bank or for internal purposes. Consultants interested in registering with the Bank’s Database of Consultants are kindly requested to fill the Consultants Questionnaire and send it to procurement@bstdb.org
The Bank is committed to the protection of your personal data in accordance with its Policy on the Protection of Personal Data (www.bstdb.org/privacy)
Current Solicitations for Goods, Works and Services
Currently there are no solicitations.
Internal Audit
The Bank's Internal Audit is an independent, objective, assurance, and consulting activity that examines and evaluates the activities of the Bank and promotes a ‘control awareness’ culture throughout the organization, based on best practices and professional standards. The primary objective of Internal Audit activity is to independently assess the achievement of the Bank’s objectives by fostering a systematic, disciplined approach to evaluate and improve effectiveness of risk management, control, and governance processes.
The Internal Audit Department coordinates and/or manages/conducts, independently, the following activities, which complement one another in an effective and synergistic manner:
- Risk-Based Internal Audit Reviews
- Enterprise Risk Management
- Independent Accountability – Complaints Mechanism
- Risk-based internal audit reviews
- Enterprise risk management
- Independent accountability - Complaints mechanism
Risk-based internal audit reviews
Recognizing that the business environment of a developing international financial institution requires an appropriately dynamic and responsive audit philosophy, the Internal Audit Department has developed a suitable audit approach based on best practices and professional standards.
Central to this audit approach, it is essential to work with all Divisions of the Bank on a “real time” basis, leveraging their own control-risk self-assessments, to commonly identify and evaluate risks, anticipate emerging issues and to initiate measures to prevent problems before they occur.
It is also a goal to detect deviations from controls as early as possible, employing suitable audit techniques to continuously audit and assess the effectiveness of controls over the key risks and significant exposures in each business or functional component of the Bank. Within this framework of on-going auditing and consulting service, the Internal Audit Department carries out audit reviews as appropriate, and also makes recommendations on most new or revised policies, procedures or manuals from a risk and control perspective and reviews operations, as plausible and appropriate.
Such a holistic enterprise risk management/risk-based audit approach is in line with the global Standards for the Professional Practice of Internal Auditing, as well as with the Committee of Sponsoring Organizations (COSO).
The Bank’s audit approach has been designed with the aim of providing a comprehensive, integrated framework of audit coverage for each business unit and for the Bank as a whole. Through continuous audit monitoring, arising from the Bank’s on-going Enterprise Risk Management exercise, the approach interacts more dynamically with changing business conditions, it helps build and maintain more effective and efficient systems of internal controls and enables auditors to respond quickly to the Bank’s needs and areas of concern.
As dictated by international best practices, the entire audit process is seen as a collaborative effort designed not just to ensure compliance to rules, mandates or internal processes, but to further enhance and improve operations and overall efficiency and effectiveness.
The Internal Audit Department reports functionally to the President, in his capacity as Chairman of the Board of Directors, and directly to the Audit Committee. It carries out its work according to the Standards for the Professional Practice of Internal Auditing issued by The Institute of Internal Auditors (IIA) and The Information Systems Audit and Control Association (ISACA). Its authority and responsibility is defined in the Bank’s Internal Audit Charter
Risk-based internal audit reviews
Recognizing that the business environment of a developing international financial institution requires an appropriately dynamic and responsive audit philosophy, the Internal Audit Department has developed a suitable audit approach based on best practices and professional standards.
Central to this audit approach, it is essential to work with all Divisions of the Bank on a “real time” basis, leveraging their own control-risk self-assessments, to commonly identify and evaluate risks, anticipate emerging issues and to initiate measures to prevent problems before they occur.
It is also a goal to detect deviations from controls as early as possible, employing suitable audit techniques to continuously audit and assess the effectiveness of controls over the key risks and significant exposures in each business or functional component of the Bank. Within this framework of on-going auditing and consulting service, the Internal Audit Department carries out audit reviews as appropriate, and also makes recommendations on most new or revised policies, procedures or manuals from a risk and control perspective and reviews operations, as plausible and appropriate.
Such a holistic enterprise risk management/risk-based audit approach is in line with the global Standards for the Professional Practice of Internal Auditing, as well as with the Committee of Sponsoring Organizations (COSO).
The Bank’s audit approach has been designed with the aim of providing a comprehensive, integrated framework of audit coverage for each business unit and for the Bank as a whole. Through continuous audit monitoring, arising from the Bank’s on-going Enterprise Risk Management exercise, the approach interacts more dynamically with changing business conditions, it helps build and maintain more effective and efficient systems of internal controls and enables auditors to respond quickly to the Bank’s needs and areas of concern.
As dictated by international best practices, the entire audit process is seen as a collaborative effort designed not just to ensure compliance to rules, mandates or internal processes, but to further enhance and improve operations and overall efficiency and effectiveness.
The Internal Audit Department reports functionally to the President, in his capacity as Chairman of the Board of Directors, and directly to the Audit Committee. It carries out its work according to the Standards for the Professional Practice of Internal Auditing issued by The Institute of Internal Auditors (IIA) and The Information Systems Audit and Control Association (ISACA). Its authority and responsibility is defined in the Bank’s Internal Audit Charter
Enterprise risk management
Enterprise Risk Management (ERM) is a fundamental approach for the management and control of an organization. Based on the landmark work of the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in the 1990s, its Internal Control – Integrated Framework and Enterprise Risk Management - Integrated Framework, have become primary tools for organizational risk management. The value of enterprise risk approach is well recognized and stands as a requirement for well-controlled organizations.
A longstanding requirement of organizations to maintain systems of internal control, requiring management to certify and independent auditor to attest to the effectiveness of those systems, has become even more compelling in recent years.
An organization needs internal controls to provide greater assurance that they will achieve their operating, financial reporting, and compliance objectives.
Internal Control, according to the definition established by COSO, is a process, effected by an entity’s board of directors, management and other personnel, designed to provide assurance regarding the achievement of objectives in the effectiveness and efficiency of operations, reliability of financial reporting, compliance with applicable laws and regulations.
A robust system of internal controls ensures that the policies, procedures, and practices designed and approved by management and the Board of Directors are functioning properly and as designed.
Recognising the need for effective internal controls, the Bank has established a functioning, consolidated and on-going mechanism to be able to certify as to the effectiveness of internal controls over external financial reporting, using the COSO’s Internal Control Framework and Enterprise Risk Management, as a basis. Furthermore, the Bank’s ERM mechanism encompasses all key products, processes and systems, facilitating a Bank-wide system of controls, including automated information controls.
The Enterprise Risk Management exercise is implemented following COSO’s Internal Control Framework and Enterprise Risk Management methodology, as a basis. The exercise is broken down and executed in 5 phases, as indicated in figure 1.
The definition of internal control (Phase 1) applicable to the Bank’s environment and objectives was established, after thorough analysis of the Bank’s internal environment and research on international standards, COSO Internal Control – Integrated Framework, COSO Enterprise Risk Management –Integrated Framework and IT Governance Institute’s Control Objectives for Information and related Technology (CoBIT). In defining the internal controls, emphasis is given to the five control components to the COSO integrated framework: Control Environment, Risk Assessment, Control Activities, Information & Communication, and Monitoring.
A Working Group with representatives from all Bank Divisions has been established (Phase 2), to assist in the documentation of internal processes and the evaluation of the internal controls’ mechanism.
The evaluation phase commences by considering internal controls at the organization or corporate governance level. Internal controls at the entity level are identified, documented and evaluated (Phase 3).
According to COSO ERM, risk assessment allows an entity to consider the extent to which potential events have an impact on achievement of objectives. Factors that are considered during the overall risk assessment are the following:
- The size and complexity of the organization
- The nature of the organization’s operations
- The purpose for which monitoring is being conducted, and
- The relative importance of the underlying controls in meeting the organization’s objectives
Internal processes assessed to be significant as a result of materiality analysis of the Bank’s financial statements and having taken into consideration the risk assessment criteria of COSO, are evaluated at a process, transaction and application level (Phase 4).
The major processes in scope of the Enterprise Risk Management (including Internal Controls over Financial Reporting) exercise are the following: Banking Operations (Project Finance, Operations following Expedited Procedures), Equity Investments, Financial Management & Accounting, Treasury Operations, Information technology and Human Resources.
Each process is analysed in several sub-processes and controls are identified to facilitate the evaluation of the design and operating effectiveness of each business cycle. All controls identified are verified to evaluate design effectiveness and all key controls are tested to evaluate operating effectiveness.
Finally, an overall assessment of the effectiveness and efficiency of internal controls is performed; a remediation plan is produced to include all weaknesses identified which are monitored through the established monitoring system.
Upon the overall assessment of the effectiveness of internal controls over financial reporting, an annual certification statement is issued, signed by the President and the Vice President Finance, subject to review and an attestation by the Bank’s external auditors.
The external auditors review and offer their opinion on management’s assertion as to the effectiveness of internal controls over financial reporting. This opinion is given as a separate report to the audit opinion on the Financial Statements and is published in the Bank’s Annual Report (Phase 5).
Understand the definition of internal control
Organize a Project Team to conduct the evaluation
Evaluate internal controls at the organization level
Understand and evaluate internal controls at the process, transaction, or application level
Evaluate overall effectiveness, identify matters for improvement, and establish Monitoring System
Figure 1 - Enterprise Risk Management - Phases
Independent accountability - Complaints mechanism
The Bank’s Complaints Mechanism was established in 2009, as per the “Procedure for the receipt, retention and treatment of complaints”, under the coordination and management of the Internal Audit Department. It is the institution’s Independent Accountability Mechanism (IAM) for the receipt, retention and treatment of complaints received by the Bank from any source, either internally or externally, in connection with any project/operation, accounting, internal control or other matters. The process followed (approved by the Board of Directors) is described in the Procedure for the receipt, retention and treatment of complaints.
The Complaints Mechanism is primarily intended to provide proper independent means and process for reviewing allegations received from people affected or feeling affected by a decision or practice of the Bank or by an operation funded by the Bank and to ensure their effective treatment. It has also been proven to serve as a useful and effective tool for improving internal processes, as regards the Bank’s operations and its internal administration.
The mechanism’s set-up and functioning is in accordance with best practices and in line with similar mechanisms of other International Financial Institutions (IFIs) and it is viewed positively by the Bank’s counterparts, including by rating agencies, co-financiers and other stakeholders. All complaints received (internally or externally) are reviewed and/or investigated in detail as per the Bank’s procedure.
The Internal Audit Department, representing the Bank, is a member of the “IFIs Independent Accountability network”. The network’s objectives include identifying current accountability trends, good practices and knowledge, exchanging views, sharing experiences, contributing in supporting institutional capacity building in accountability and exploring the possibility of greater harmonization among the IFIs’ Accountability/Complaints mechanisms.
Furthermore, in order to raise awareness and cooperation among stakeholders, public/ outreach events are organized in Member States, usually jointly with other IFIs. The objective of such events is to share information about independent accountability mechanisms (IAMs), exchange views with Civil Society Organizations on their experiences and listen to concerns, and discuss ideas from the participating organizations about promoting accountability and redressing harm.
For the submission of a Complaint or for any questions regarding the Bank’s Complaints Mechanism you may contact the Internal Audit Department, preferably by using the form below or alternatively by mail, e-mail, fax or telephone. Please mark any correspondence as “CONFIDENTIAL”.
Before submitting a Complaint, please read carefully the Procedure for the receipt, retention and treatment of complaints.
To file a Complaint, please follow the link: File a complaint
Independent accountability - Complaints mechanism
The Bank’s Complaints Mechanism was established in 2009, as per the “Procedure for the receipt, retention and treatment of complaints”, under the coordination and management of the Internal Audit Department. It is the institution’s Independent Accountability Mechanism (IAM) for the receipt, retention and treatment of complaints received by the Bank from any source, either internally or externally, in connection with any project/operation, accounting, internal control or other matters. The process followed (approved by the Board of Directors) is described in the Procedure for the receipt, retention and treatment of complaints.
The Complaints Mechanism is primarily intended to provide proper independent means and process for reviewing allegations received from people affected or feeling affected by a decision or practice of the Bank or by an operation funded by the Bank and to ensure their effective treatment. It has also been proven to serve as a useful and effective tool for improving internal processes, as regards the Bank’s operations and its internal administration.
The mechanism’s set-up and functioning is in accordance with best practices and in line with similar mechanisms of other International Financial Institutions (IFIs) and it is viewed positively by the Bank’s counterparts, including by rating agencies, co-financiers and other stakeholders. All complaints received (internally or externally) are reviewed and/or investigated in detail as per the Bank’s procedure.
The Internal Audit Department, representing the Bank, is a member of the “IFIs Independent Accountability network”. The network’s objectives include identifying current accountability trends, good practices and knowledge, exchanging views, sharing experiences, contributing in supporting institutional capacity building in accountability and exploring the possibility of greater harmonization among the IFIs’ Accountability/Complaints mechanisms.
Furthermore, in order to raise awareness and cooperation among stakeholders, public/ outreach events are organized in Member States, usually jointly with other IFIs. The objective of such events is to share information about independent accountability mechanisms (IAMs), exchange views with Civil Society Organizations on their experiences and listen to concerns, and discuss ideas from the participating organizations about promoting accountability and redressing harm.
For the submission of a Complaint or for any questions regarding the Bank’s Complaints Mechanism you may contact the Internal Audit Department, preferably by using the form below or alternatively by mail, e-mail, fax or telephone. Please mark any correspondence as “CONFIDENTIAL”.
Before submitting a Complaint, please read carefully the Procedure for the receipt, retention and treatment of complaints.
To file a Complaint, please follow the link: File a complaint
Evaluation
Evaluation is the process of assessing operations, programs, activities and strategies through systematic and rigorous analysis of their outputs, outcomes and impact against expected results and the overall mission of the Bank. BSTDB, like other development banks, has an independent Evaluation Office, which performs a wide spectrum of evaluations presented in various forms, including Operation Performance Evaluation Reports, Annual Evaluation Overviews, Evaluation Studies, etc. The results of those reports and studies are regularly presented to the Bank’s management, Board of Directors and Board of Governors. Various evaluation results are also available to outside partners and the public.
The evaluation function has two basic objectives, serving the overall purpose of assessing mandate fulfillment and drawing lessons for improved future operations: (i) Accountability – to reveal the results of the Bank’s operations/activities, both intended and otherwise, and assess their contribution to the Bank’s mission; and (ii) Quality Management Improvement – to derive significant lessons learned from past experience and using them for improving future operations. A detailed information on the evaluation function and its products is contained in the BSTDB’s Post Evaluation Policy, approved by the Bank’s Board of Directors.
Environmental and social sustainability overview
BSTDB aims to promote environmental and social (E&S) sustainability in its Member States. Therefore, the Bank commits to applying sustainability principles to its business management and requires its clients to follow these also. These principles relate primarily to:
- pollution prevention and mitigation;
- respect for fundamental human rights in the working environment;
- protection of the Black Sea against pollution;
- addressing climate change;
- promoting sustainable use of natural resources,
- protection and conservation of biodiversity;
- disclosure of information on E&S performance of its operations.
Prevention and combat of financial crime and prohibited practices
The Bank is committed to the prevention and combat of: (a) money laundering, (b) terrorist-financing and (c) prohibited practices, such as fraudulent, corrupt, coercive, collusive and obstructive practices. The definitions of the above can be found in Anti-Fraud, Corruption, Money Laundering and Terrorism Financing, and Domiciliation of BSTDB Counterparties Policy.
In this framework, the Bank is committed to ensuring that the above risks are reduced to the lowest possible levels, both internally and in its dealings with external parties. Through focused due diligence on individual counterparties, the Bank can be a force for positive influence at the systemic level and, at the same time, avoid exposure to unnecessary risks in individual operations. This approach could enable the Bank to play a role in the international and regional effort against money laundering and terrorism financing.
Furthermore, the Bank also expects all its officials and staff to observe the highest standards of ethics and to provide the Bank with any help, information and support in this respect. The related detailed obligations of the Bank’s officials and staff may be found in Code of Conduct .
The Bank’s Compliance and Operational Risk Management Office (DCR), which is a unit independent of the business activities of the Bank, reporting to the President of the Bank and the Board of Directors, through its Chairman, is responsible, inter alia, for: (a) the drafting and review of the related rules, (b) the relevant training of staff, (c) ensuring compliance with the related rules and (d) the investigation of related incidents.