RISK MANAGEMENT

RISK MANAGEMENT. WEEK 1.

Introduction: Why Risk Management?. International Obligations.

In this course we introduce the broad subject of Risk Management including the concepts of ‘risk’ and ‘risk management’ and examine the use of risk management in the customs context..

Increase in workload across all areas of activity fuelled by technological advances that have revolutionised trade, transport and transmission of information..

International Obligations. World Trade Organization (WTO) WCO SAFE Framework WCO Revised Kyoto Convention (RKC).

Following are some roles and responsibilities that are performed by Agencies, if not Customs, at the Border:.

As you can see from the breadth of agencies’ roles and responsibilities at the border, the concept of risk is prevalent in all aspects of border management with particular government policies designed to mitigate a wide variety of risks to policy objectives..

While maintaining cross-border control is non-negotiable, the way in which it is achieved should also ensure the provision of appropriate levels of facilitation..

Napoleon Bonaparte, the famous French General and self-crowned Emperor once said:.

In effect, risk management is simply about anticipating what might happen in the future and putting in place plans to minimise the undesirable outcomes whilst maximising the desirable ones..

ESTABLISH THE CONTEXT.

Establish the Context Risk Assessment Risks Analyse Risks Assess & Prioritise Risks Treat Risks.

Determine the situation within which something exists or happens, and that can help explain it..

The most important consideration from a risk management perspective is to ensure that the relevant risk has been properly identified, therefore, establishing the context is probably the most important step in the risk management cycle..

Having established and clearly articulated the agency’s objectives, it is important to consider relevant aspects of the agency’s internal and external environment that may have an impact on the achievement of its objectives..

Objective: To be punctual to work every day by arriving at work 10 minutes before 8am.

In erna Environmen Ex erna Environmen • • Hours of operation at ports and airports The number and competencies of staff Staff responsibilities and accountabilities Administrative framework, including practices and procedures Agency infrastructure at the border including systems and technology Quality and timeliness of head office support Internal communication and reporting mechanisms • • • • Geographic setting General facilities and infrastructure at the border (both private and public) The nature of international trade, transport and travel The volume of international trade and travel Treaties and international obligations Quality of government legislation and policy Interagency agreements and level of cooperation.

GROUP ACTIVITY. In your Groups, as you consider establishing the context with regard to the above area objective, discuss what the internal and external environment would look like in your Administrations. Be prepared to present your answers to the class..

Any Questions?.

IDENTIFY THE RISK.

Establish the Context Risk Assessment Risks Analyse Risks Assess & Prioritise Risks Treat Risks.

Identify Risk. Having established the context, we then move to assess the risk. This involves three elements – risk identification, risk analysis and risk evaluation. We begin with Risk Identification. In order to identify risks, we must consider what can happen and how and why it can happen. For example, in case of duty payment, possible risks may include things such as undervaluation, mis-description, mis-classification, incorrect preference claims, overclaiming refunds or drawbacks, etc. So how could these things happen? Factors may include lack of knowledge of the regulations, unclear legislation, unintentional errors, inadequate systems and procedures, or even blatant fraud.

Identify Risk. Identifying risk is therefore a two-step process, which essentially involves answering two questions: What could happen that may have an impact on the agency’s objectives? How and why could it happen? The first question helps to clarify the nature of potential risk while the second provides valuable information about potential causes. The potential causes can be diverse. For this reason, it is important for a knowledgeable group of people to devote resources to the risk identification process, and indeed to other aspects of the risk management process To this point, we have used relatively high-level examples, and while these can help our understanding of the process of managing risk, it is often not until more specific, operational examples are used that we fully appreciate the benefits of the process..

Identify Risk. What can happen? How can it happen? Unsafe goods enter the domestic market Customs relies on border referrals, but potentially non-compliant goods are not being referred to them by other border agencies Import regulations are inadequate, e.g. newly identified consumer hazards are not reflected in national legislation Importers have not been advised of the latest standards and/or procedures Importers seek to deliberately circumvent regulatory controls The administration's post-clearance audit regime is ineffective • Customs staff do not possess the necessary knowledge and skills to identify non-compliant goods.

Identify Risk. • • • What can happen and how can it happen? Objective: What can happen and how can it happen? Objective: What can happen and how can it happen? Importers may pay the incorrect amount of duty on particular commodities due to undervaluation Protect the country from visitors who pose a criminal risk Visitors with criminal records that preclude them from gaining entry into the country may use a false name and passport to gain entry Protect citizens against illicit drugs Travellers may attempt to import drugs in their baggage.

Identify Risk. Clearly there are many more potential risks to the achievement of these particular objectives. However, the above examples provide an insight into the types of issues that should be considered in the process of identifying risks. The above examples identify risks resulting from a range of potential weaknesses in regulatory controls, including: failure to detect and prevent the importation of high-risk goods; inadequate methods of dealing with goods that have already been imported; and failure to prevent and detect criminal activity..

Identify Risk. Benefits of Identifying Low Level Risks Businesses and individuals with a good record of compliance require a lower level of scrutiny than those with a history of poor compliance, or those about which little is known. This concept is integral to a number of ‘trusted trader’ and ‘authorised economic operator’ programs which promote a range of benefits for certain businesses by virtue of their low risk status. These programs reflect sound principles of risk management by identifying low risk members of the international trading community, thereby reducing the size of the ‘risk pie’, and in turn aiding the deployment of resources towards potentially high-risk operators..

Identify Risk. Benefits of Identifying Low Level Risks Their level of compliance is generally assessed by way of an audit which is intended to assess the degree to which a company is complying with the relevant regulatory requirements and not, as some assume, simply to detect errors in a company’s regulatory dealings. The important point here is that such an assessment, regardless of the result, assists in determining where future compliance and enforcement resources should be directed A corollary to this is that an auditor’s finding of compliance is equally as good a ‘result’ as a finding of non-compliance. This is often overlooked, as regulatory auditors generally base their effectiveness on identified instances of non-compliance..

Identify Risk. Case Study: Customs Revenue — Identifying risks Objective A fundamental objective of customs administrations throughout the Pacific is to collect the appropriate amount of revenue on imported goods. What can happen? Importers or their agents may pay the incorrect amount of duty on particular consignments. How can it happen? There are several ways in which this could happen. Three common reasons include: Undervaluation of goods • Misclassification of goods • Improper claims of origin to gain a preferential duty rate. We will use this example again as we examine subsequent elements of the Risk management Framework..

Identify the Risks. Objective: To be punctual to work every day and to arrive at work 10 minutes before 8am: What can happen? Arriving after 8am to work How can it happen? Late for the 7.10am bus Traffic jam caused by an accident Bus break down/accident Bus didn’t turn up on time or at all Bus was full.

Identify Risk. Group Exercise 2 – Identifying Risk Objective: Another fundamental objective of Customs administrations throughout the Pacific is to protect and secure its borders. In your Groups, discuss and fill out the two questions below: What can happen? (Choose two risks that can happen) How it can happen? (List as many as you wish).

Questions?.

The End.