Due to the constantly changing business environment, the need for an effective risk management framework for remittance service providers (RSPs) cannot be over-emphasized. Through effective risk management, RSPs must be able to mitigate risks and optimize their risk-return trade-off for the safety and soundness of the remittance sub-sector within the broader financial market. In response to the ever-changing business environment, a more risk-based approach (RBA) to remittance services must be adopted, one that focuses on identifying risks and assessing the management of the risks. To enable this, regulators must put forward a guide to provide a framework to all RSPs on the minimum requirements for risk management practices. Moreover, regulators must be able to come up with an appropriate risk assessment methodology that can be used for supervision of the RSPs.
The main objective of this framework is to assist policymakers in policy formulation and regulators in issuing guidelines to market players in the remittance space for identifying, evaluating, monitoring, and controlling key risks facing the RSPs. This framework can also be used as a supervisory tool for regulators and help to strengthen the policymakers’ capacity to develop gender-responsive and risk-based remittance policies that enhance market competition and innovation while safeguarding against risks to financial stability.