The note complements ADB’s Guidance Note on Urban Water Supply Sector Risk Assessment and offers a framework for mapping governance risks to inform the preparation of future country partnership strategies.

Such a framework covers institutional aspects (policy, legal framework, and regulation); organizational aspects (planning, financial management, procurement, and human resources); and sector operations. While the note has identified entry points for mapping risks to development effectiveness in the sector, lessons from evaluations can augment ongoing efforts for mitigating these risks at institutional, organizational, operational, and project levels; and enhance the development effectiveness of ADB assistance in the sector.

These lessons are drawn from actual independent evaluations, self-evaluations (project and/or program completion reports), and the Evaluation Information System. They are intended to be illustrative and not meant to be prescriptive or interpreted as recommendations. The challenges and solutions cannot be generalized as they are typically different from one scenario to another given the country and sector contexts.

As per the note, risks that can impair ADB’s development effectiveness in the urban water supply sector are multidimensional. This highlights the sector’s vulnerability to risks in the absence of appropriate mitigating measures. Such risks can emanate from (i) capacity weaknesses in policy making, regulation, partnerships, sector planning, and management; (ii) unresponsive systems (water resource management, financial management, and procurement); (iii) poor governance, which hampers stakeholder participation, transparency, and accountability; and (iv) weak project design, management, and evaluation, among others.

Financial management systems and operating environment that are unable to provide returns on invested capital and adequate revenue streams for facility maintenance can seriously undermine new investments, jeopardize service quality, and threaten the viability of sector operations. Lack of stakeholder commitment to sector improvements can also seriously compromise sustainability. Overall, fragile links in the chain of policy, planning, financial management, project management, and results-based evaluation can work against development effectiveness. 

Various lessons drawn from the experience of ADB in the urban water supply sector call attention to the diversity and varying complexity of risks. A careful understanding of the risk environment is a must, with due regard to specific contexts in which risks occur, the arrangements that can mitigate these risks, and the extent to which stakeholders and stakeholder alliances can affect policy, planning, and implementation processes. Where sector reforms are required, assessing roadblocks to collaboration as well as potential areas for engagement is crucial. Differences in stakeholder responses and the interplay of institutional, organizational, and capacity-related factors often shape development outcomes. 

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