Up for an extra challenge: pioneering in the turbulent markets...

In the spotlight with Daniela Luppi,
Finance and Risk Manager at Cordaid Investment Management
In the spotlight with Daniela Luppi, Finance and Risk Manager at Cordaid Investment Management
17 November, 2022

"I've always wanted to work for an organization like Cordaid, which has a passion for creating social impact. Because of the challenges we face in fragile countries, we must push ourselves to do impeccable work. Be highly professional, as those markets we operate in do not forgive mistakes. We strive for excellence." Daniela Luppi, Finance and Risk Manager at CIM, discusses the challenges and intrinsic rewards of operating in fragile markets and adhering to the high standards this work demands. 

Why did you choose the impact investment industry?

The impact industry allowed me to combine my education, personal interest, and work experience. I have a degree in Political sciences and a master's degree in Development Management. But my career has gravitated toward finance, and I worked for one of the largest banks in Italy for ten years. And yet I needed a challenge; I wanted to make a difference.

I pursued an impact investment path and worked with the industry’s major players, but I prefer smaller companies like CIM. In larger organizations, perhaps you get used to the same way of working. You repeat the same process over and over again. But for a pioneer investor in fragile countries, having stringent procedures and one fit all approach is nearly impossible. From one day to another, you have a coup d'état, financial sanctions, protests, and all sorts of economic and political instability you must work around.

It seems there's never a dull moment... 

Absolutely. Every day we need to be flexible and creative: the situation is so volatile that we constantly need to reassess and reevaluate how we do things. We can not predict the future, but we must learn to react fast and think out of the box. 

That doesn't mean we rely on gut feeling and don't have procedures in place. No, I believe if you work in very challenging contexts, you need to have higher standards. To solve unique problems, you have to be even more professional.

We aspire to prove that investing in fragile markets is possible and impactful. Having at our disposal de-risking instruments like first-loss grants and credit guarantees facilitates our work. And yet the countries’ risks and the high cost of working in those markets require careful analysis and attention to efficiency.

What allows CIM to navigate the uncertainty of fragile countries? 

We are a small team, and that allows us to be more dynamic. As soon as the investee's realities change, we sit down together to find a solution. Conceivably a big organization would have some delays in acclimating to the changing situation.

Another advantage we have is coming through our affiliation with Cordaid. For example, we can travel to places other organizations may be reluctant to go. Cordaid has a presence on the ground and local networks we can leverage.

Cordaid Investments has done a fantastic job over the past decades, being a front-runner. It is now a moment to leverage this legacy and update our knowledge in the changing environment. 

Would you say CIM is also changing as an organization?

We are indeed evolving. For instance, as it refers directly to my job in CIM, the role of risk has increased. When I joined three years ago, we had one colleague in the risk unit - today, we have three. We work on offering external investors not only impact but also the assurance that risks are carefully assessed.

I believe if you work in very challenging contexts, you need to have higher standards. To solve unique problems, you have to be even more professional.

And what about the field of compliance?

We are bringing more attention to compliance, as the field has many regulations and laws. Asset managers must keep up, as this field is moving quickly. Nowadays, many more risks are involved with financing the wrong kind of company.

In well-regulated markets, checks are in place on who receives a loan and how it is used.  But when you work in some unstable post-conflict countries, local or international control is less effective. The microfinance sector undergoes more regular scrutiny, while the risk is higher when financing SMEs that are mostly lacking some sort of institutionalized control. In the end, it is our responsibility towards the external investors, who trust us to reach both impact and financial targets, to have all the controls and checks in place. 

Do you think it is worth working in a fragile environment despite the challenges and risks? 

I would have stayed at the bank if I wanted to go mainstream. There are countries where everyone is investing because it is relatively easy and profitable; in any case, these investors are doing a good job, which I appreciate. But if you are up for an extra challenge, you pioneer investing in the difficult, turbulent markets. The hope is that other investors will follow, or even better, the local financial sector will open up to provide opportunities to local companies.

Ultimately, it is incredibly rewarding, and I came to Cordaid Investment Management for that. 


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