Technical Assistance Consultant’s Report · 2020. 12. 16. · CSF Critical Success Factor DIQ...

Technical Assistance Consultant’s Report

This consultant’s report does not necessarily reflect the views of ADB or the Government concerned, and ADB and the Government cannot be held liable for its contents. All the views expressed herein may not be incorporated into the proposed project’s design.

Project Number: 52049-002 August 2020

Islamic Republic of Pakistan: Preparing the Trade and Competitiveness Program

Prepared by

Sovereign Border Solutions

Cape Town, South Africa

For Pakistan Federal Board of Revenue

of 62

29 Bell Crescent, Westlake Business Park, Cape Town, South Africa

Pakistan Integrated Risk Management System Deliverable: Integrated Risk Management Framework

Executive and Management Summary

August 2020 TA-9580 PAK: Preparing the Trade and Competitiveness Program - Integrated Risk Management System (52049-002)

ADB – Pakistan Integrated Risk Management System- Integrated Framework

Page 2 of 62


TABLE OF CONTENTS

1 GLOSSARY OF TERMS ...................................................................................................... 4

2 INTRODUCTION .................................................................................................................. 7

3 EXECUTIVE SUMMARY ...................................................................................................... 9

3.1 Overview ........................................................................................................................................ 11

3.2 Main Observations ......................................................................................................................... 15

3.3 The Framework for PSW IRMS ..................................................................................................... 16

3.4 IRMS Dependencies and Critical Success Factors (CSF) ............................................................ 22

3.5 Recommendations ......................................................................................................................... 23

3.6 Benefits of Risk Management ........................................................................................................ 25

3.7 Way Forward for an Integrated Risk Management System ........................................................... 28

4 MANAGEMENT SUMMARY............................................................................................... 30

4.1 Risk Management Overview .......................................................................................................... 30

4.2 Current Risk Management Capability Assessment ....................................................................... 40

4.3 Volumetrics .................................................................................................................................... 44

4.4 Governance Model ........................................................................................................................ 49

4.5 Technical Solution Design ............................................................................................................. 55

4.6 IRMS Roadmap ............................................................................................................................. 59

Copyright © 2020 Sovereign Border Solutions (SBS)

All rights reserved. This document is meant solely for use by SBS and its contracted clients. No part of this

document may be reproduced, distributed, or transmitted in any form or by any means, including photocopying,

recording, or other electronic or mechanical methods, without the prior written permission of SBS.


Page 4 of 62


1 GLOSSARY OF TERMS

Abbreviation Description

ADB Asia Development Bank

ANF Anti-Narcotics Force - Ministry of Narcotics Control

AQD Animal Quarantine Department - Ministry of National Food Security & Research

BPM Business Process Management

BPMN Business Process Modelling Notation

COE Centre of Excellence

COO Country of Origin

CRM Customer Relationship Management

CSF Critical Success Factor

DIQ DiagnostIQ: SBS bespoke tool for conducting diagnostic analysis

DPP Department of Plant Protection – Ministry of National Food Security & Research

DRAP Drug Regulatory Authority of Pakistan - Ministry of National Health Services, Regulations, & Coordination

FBR Federal Board of Revenue

FDB Fisheries Development Board - Ministry of National Food Security & Research

FSC&RD Federal Seed Certification & Registration Department - Ministry of National Food Security & Research

GA Government Agencies

GC Governing Council

GD Goods Declaration

GOP Government of Pakistan

HS Harmonised System

ICT Information and Communications Technology

IFC International Finance Corporation

IRMS Integrated Risk Management System

ISO International Organisation for Standardisation

KPIs Key Performance Indicators


Page 5 of 62


LPCO Licenses, Permits, Certificates and Others

MNC Ministry of Narcotics Control

NOC No Objection Certificate

NSW National Single Window

NTC National Targeting Centre

OGA Other Government Agency – Refers to agencies other than Customs and Revenue

PCs Phyto-sanitary Certificates

PCSIR Pakistan Council of Scientific and Industrial Research - Ministry of Science and Technology

PEC Pakistan Engineering Council - Ministry of Science and Technology

PMO Program Management Office – Customs Wing of FBR

PNAC Pakistan National Accreditation Council - Ministry of Science and Technology

PSI Pre-shipment Inspections

PSQCA Pakistan Standards & Quality Control Authority - Ministry of Science and Technology

PSW Pakistan Single Window

PSWC Pakistan Single Window Company

QA Quality Assurance

RA Risk Assessment

RACI “Responsible, Accountable, Consulted and Informed” Matrix

RM Risk Management

RMC Risk Management Committee

IRMS Integrated Risk Management System

SAFE Framework of Standards to Secure and Facilitate Trade

SBS Sovereign Border Solutions

SLA Service Level Agreement

SPS Sanitary and Phytosanitary

STA Strategic Threat Assessments

TEU Twenty-foot Equivalent Units

TFA Trade Facilitation Agreement


Page 6 of 62


TIP Trade Information Portal

UML Universal Modelling Language

UNCEFACT United Nations Centre for Trade Facilitation and Electronic Business

WCO World Custom Organisation

WTO World Trade Organisation


Page 7 of 62


2 INTRODUCTION

Pakistan ratified the WTO’s Agreement on

Trade Facilitation (2013) on 27th October 2015

and as such committed to the establishment of

Pakistan Single Window (PSW) as a ‘Category

C’ commitment with an implementation timeline

of five years with effect from 22nd February

2017. Pakistan Customs has been designated

as the ‘Lead Agency’ by the Office of the Prime

Minister’s for the development of this important

reform initiative. Accordingly, Pakistan

Customs- Federal Board of Revenue (FBR)

has established a Program Management Office

(PMO) in the Customs Wing to coordinate and

supervise this initiative.

A national single window (NSW) is a facility that

allows parties involved in trade and transport to

lodge standardised information and documents

with a single-entry point to fulfil all import,

export, transit and trade-related regulatory

requirements. The Pakistan SW (PSW) will

help reduce the time and cost of doing business

in Pakistan and make trade-related business

processes more efficient, transparent and

consistent. Pakistan Customs, with the

assistance of local and international experts,

developed the National SW (NSW) Roadmap

for implementation of this initiative. The experts

conducted a Situation Analysis, from

November 2017 to February 2018, to assess

the state of readiness of the Other Government

Agencies (OGAs) involved in regulation of

cross border trade that will be included in the

PSW in the first phase. These OGAs, to varying

degrees, apply regulations on trade which

generally are in the form of, or relate to,

issuance of licenses, permits, certificates, other

(exemptions and import / export or transit

approvals).

The situation analysis found that, while

Pakistan Customs uses an automated system

for risk management (RM) to apply risk-based

selectivity criteria for control of goods across

the international borders (in accordance with

1 World Bank Ease of Doing Business Report published in 2018 and PRAL data

WCO and WTO recommended best practices),

OGAs generally do not use any RM information

technology (IT) systems and only employ basic

techniques with regard to selectivity criteria.

Instead the OGAs generally rely on an intrusive

sampling and inspection system covering all

import/export and transit cargo, requiring multi-

layer verifications and approvals that

considerably slow down cargo clearance times.

On average, cargo clearance time and costs

per Twenty-foot Equivalent Unit (TEU) are as

follows: 216 hours and USD 417 for imports;

and, 113 hours and USD 406 for exports to

process the approximately 2.4 Million Twenty-

foot Equivalent Units (TEUs)1.

Efficacy of any developed NSW will remain a

serious concern if the OGAs and Customs

continue to function in isolation without

effective coordination in terms of risk-based

controls and inspections. In a SW environment,

all participating agencies must apply a system

of risk-based selectivity derived from a

structured Risk Management (RM) framework

to better target consignments posing a potential

risk, to ensure optimal and judicious utilisation

of resources for effective regulatory control.

Recognising this requirement, the PMO

supported by the International Finance

Corporation (IFC) engaged a consortium of

experts including Sovereign Border Solutions

(SBS) to develop the design document for

PSW. This document offered a framework to

progress the development of the PSW by

delivering the following:

1. Governance and operational business model;

2. Functional model and technical architecture;

3. Revenue model and fee structure; 4. Legal gap analysis and recommendations; 5. Change management &

communications/publicity strategy & plan; and


Page 8 of 62


6. Design of an implementation and procurement plan.

Following on the previous project and

contracted by the Asian Development Bank

(ADB), SBS was appointed as the prime

consultant to deliver the framework for the

Integrated Risk Management System (52049-

002) (“the Project”). The Project commenced

on November 2019 and was initially scheduled

to end in May 2020 but was extended (following

a delay due to the COVID -19 global

pandemic). The following Ministries and

Departments were covered under the scope of

the project:

1. Ministry of National Food Security & Research Department of Plant Protection (DPP), Federal Seed Certification &

Registration Department (FSC&RD), Animal Quarantine Department (AQD), Fisheries Development Board (FDB)

2. Ministry of National Health Services, Regulations, & Coordination Drug Regulatory Authority of Pakistan

(DRAP) 3. Ministry of Science and Technology

Pakistan Standards Quality Control Authority (PSQCA),

Pakistan Engineering Council (PEC), Pakistan Council of Scientific and

Industrial Research (PCSIR), Pakistan National Accreditation Council

(PNAC)

4. State Bank of Pakistan

5. Ministry of Narcotics Control (MNC)

Anti-Narcotics Force (ANF)

6. Federal Board of Revenue (FBR)

Pakistan Customs,

Inland Revenue

The Project commenced where the prior single

window project left off by conducting a gap

assessment of the risks faced by each

individual OGA (with particular emphasis on

those that make up 90% of the transaction

volume in terms of LPCOs and physical

inspections of cross border trade) and provide

an analysis of the capabilities each has with

regard to managing its respective risk.

The figure below presents an overview of the

nine milestones and deliverables of the project

which provide a logical progression that

includes, inter alia, the development of a

strategic risk matrix across all of the agencies,

a review of associated data to validate

conclusions and assumptions and to serve as

a basis for fact-based decision making, a

review of available solutions on the market, the

development of business requirements, high-

level solution design to support a “buy or build”

strategy, and finally, a framework, governance

model and implementation strategy and plan.

Further details on each deliverable within the

Project are depicted in Figure 1 below.

Figure 1: Summary of Deliverables

Environmental Gap Assessment1

Gap assessment report between current risk approaches (Customs and listed OGAs) and best practice capability risk management framework.

Deliverable: Gap Assessment Report

Pro

ject

Man

agem

en

t a

nd R

ep

ort

ing

10

R

ele

vant R

eport

Inputs

C

lient engagem

ent a

nd d

eliv

era

ble

ove

rsig

ht

Strategic Risk Matrix2

Strategic Risk Assessment overview and understanding across OGAs, including institutional awareness and treatment of threats and risks.

Deliverable: Strategic Risk Assessment

Data Analysis3

Data Analysis report on customs and OGA commodity, trader, volume and value data based on established methodology and references of similar exercises. This will include a stratified analysis of all goods imported, exported and transited through Pakistan in order to support enhancement of existing risk frameworks, profiles and rules. Deliverable: Data Analysis Report

High-Level Solution Design6

Technology agnostic high-level solution design and functional architecture for IRM solution.

Deliverable: Solution Design & Functional

Architecture

Implementation Roadmap9

IRMS implementation strategy and plan aligned with PSW roadmap and implementation plan incorporating case studies, analysis and assessment of various options, and recommendation on the optimal strategy.

Deliverable: Implementation Roadmap

and Plan

Business Requirements5

Business requirements specification incorporating risk related business requirements of all listed OGAs based on legislation, procedures

Deliverable: Business Requirements

Specification

Business Model7

Governance and operating model for Integrated Risk Management under the NSW including structure, reporting lines, required resources etc.

Deliverable: Business Model

Market Assessment4

Market assessment of available risk management solutions applicable to PNSW context using established methodology with references of similar assessments

Deliverable: Market Assessment Report

Integrated Risk Management Framework8

Integrated Risk Assessment/Management Framework and Policy Guidelines containing selectivity criteria for clearance of goods (import/export/transit) pre, during and post clearance that include key risk indicators etc. aligned with internationally accepted best practices and supported by an objective/verifiable analysis of the anticipated benefits in terms of time and cost savings for trade and for the relevant regulatory authorities post implementation

Deliverable: Integrated IRMS Framework

ADB – Pakistan Integrated Risk Management System- Business Requirements Document

Page 9 of 62


3 EXECUTIVE SUMMARY This document is the culmination of the project deliverables and serves to combine the assessment

results, outcomes and recommendations from the subsequent deliverables to present a structured way

forward for the IRMS project within the PSW program. It is presented in 2 separate documents in the

form of an overview and executive summary, followed by a management summary of each section.

The following table provides a navigation guide for each section of the document:

Executive Summary Highlighting the main outcomes, observations and strategic

recommendations, and benefits of Risk Management

Main Observations Presenting the main observations of the

assessment and analysis.

IRMS Framework

A summary of the framework required to

govern the IRMS as well as the business

requirements and technical solution design

Recommendations

Strategic, tactical and operational

recommendations resulting from the overall

analysis

Benefits of IRMS

The PSW will benefit all entities involved in the

cross-border trade supply chain, and similarly

the IRMS will offer specific benefits to these

entities.

Critical Success

Factors

In order for the IRMS to succeed, there are a

few critical factors that have to be fulfilled.

Management

Summary

Providing an overview of the IRMS framework and high-level details on

each deliverable.

Risk Management

Overview

An overview of RM principles and an

integrated solution within the context of the

PSW

Current RM Situation

Assessment

An assessment of the current environment to

measure the capability of the cross-border

GAs from a risk management perspective

Customs DPP PSQCA AQD DRAP FSC&RD NCD ANF

Adoption of RM Policies

RM Framework in Place

Risk Assessment Capability

Adequate RM Staff

Inspection Capacity

RM System

✓ ✕ ~ ✕ ~ ✕ ✕ ~

~ ✕ ✕ ✕ ✕ ✕ ✕ ✕

✕ ✕ ✕ ✕ ✕ ✕ ✕

~ 3 None DedicatedNone

Dedicated

None

DedicatedNone

DedicatedNone

DedicatedNone

DedicatedNone

Dedicated

Under

capacity

Under

capacity

Under

capacity

Under

capacityUnder

capacityUnder

capacityUnder

capacityUnder

capacity

✓ ✕ ✕ ✕ ✕✕ ✕ ✕

Current RM Process

CustomsElectronic

Declaration

Automated

Selectivity

R isk based port

Inspections

DPP, AQD, FSC&RD Manual application

Subjective verification

100% port Inspections

PSQCA, DRAP Manual application

Subjective

filter ing

Imp/Exp based

inspections

ANF Manual manifest review

Subjective filter ing

Selected port inspections

Uncoordinated assessment and inspection process result ing in multiple inspections for single consignment;

No RM framework or risk based inspections for OGAs;

Resulting in additional costs and time for traders;

Description Unimpeded Impeded

GD Release 4 days 11 hrs 5 days 0 hrs

Gate out 9 days 3 hrs 10 days 17 hrs

Average Clearance Times

~

Recommendations

Strategic Tactical Operational

Governance model

Legislation and rules

Benefits realisation

management

Publicity plan

Capacity building

Project management

Business process re-

engineering

Systems development

Tariff code rationalisation

and extension

Risk management training

National Targeting Centre

Data Management

Joint inspections

Change Champions

Systems Documentation

and Upgrade

Government

Government Agencies

Trading Community

Trade Information Portal

Registration

Integrated Tariff Book

Consolidated Data Set

Single-form Development

PSW Core Development

IRMS15

Project 1: Governance Model

3

Project 2: Capacity Building

5

Project 3: Risk Assessment

4

Project 4: IRMS System

11

Project 5: Joint Inspection

6

TRADE FACILITATION SAFETY AND SECURITY

Increasing legitimate

Trade

Decreasing illegitimate

TradeRISK

MNGT

138

109

23 00

50

100

150

N/C Basic Standard Advanced

Cross-Agency Capability

Totals


Page 10 of 62


Volumetrics

A data analysis of the cross-border trade

environment to provide empirical validation for

the current state assessment.

Market Assessment

Presenting the outcomes of a survey of

solution providers that could potentially

provide a RM solution that meets the PSW

functional and technical requirements

Governance and

Operating Model

The PSW risk management Governance and

Operating Model establishes a framework and

structure that integrates the process for

managing risk in the organisation’s overall

strategy, planning, management, reporting,

policies, values, and culture based on the

generally accepted best practice with respect to

risk management and those set out in ISO

31000.

Technical Solution

Design

The IRMS is fundamentally a new way of

operating driven by an automated and technical

solution. This solution, or system, can be

developed in a number of ways. In order to

guide the PMO and the PSW project, a

technical review was conducted of the current

technical systems available in Customs as well

as the OGAs in order to determine the best way

forward.

Business

Requirements

Specification

Building on the governance model and

considering the suggested technical solution

design, the business requirements

specification was prepared in order to provide

a technical starting point for the development

team to commence design and development

of the IRMS.

IRMS Roadmap

The IRMS roadmap is perhaps one of the

most critical aspects of the overall project. It

will be dependent on a number of factors,

including time, human resources, budget and

other strategic considerations. The roadmap

takes these into account and proposes

projects, tasks and deliverables.

Company/Solution Survey

Sent

Survey

Response

Demo

Workshop Comments

Industry Specific &

Generic Enterprise

Risk Solutions 20+

(See Annexure C)

N N/A N/A No solutions found fit for purpose

3CE Y Y N Provides commodity/HS solution tools only

Cotecna N N/A N/A No longer active in the domain and was never

considered a key player.

Crimson Logic Y N N

Interfront Y N N

SGS N N/A N/A SGS uses technology partners for IT and does not

develop their own solutions (e.g., Crimson Logic)

TTEK Y Y Y Demo at WCO ICT Conference

Cupia-UNIPASS Y N N/A Solution is not “modular” and requires complete

installation of entire SW system

Webb Fontaine Y Y Y Demo at WCO ICT Conference

PSW Risk Management Team

PSW Governing Council

PSW Risk Management Committee (Interagency)

Analyses & Targeting Manage PerformanceTreatment Feedback

Risk Management Solution & Tools (Process, Technology)

Center of Excellence (COE)

PSW COMPANY GOVERNMENT AGENCIES

OGA RISK Management

GA Risk Management Team

Risk Analyst Risk/Data AnalystRisk Analyst Data Analyst Compliance

Secretariat

PSW RM TeamVendorsOGA Seconded Domain Expert

Risk ManagerOGA Liaison

Risk Analyses Understand Risk Objectives Set:

1. Risk Rule ID

2. Threat Rule Set

3. Decision Table

4. Document Type

5. Weighting

Capture Risk Conditions

Condit ion 1 Condi tion 2Condi tion 3

Condition 4

Condition 5

Conditio

n 6

Generate Risk Rule Set

Risk Committee

Establish Risk

Management Strategy and

Framework

Define Risk PoliciesDefine Risk Operating

Procedures

Model and Test Risk Results

Data Inputs

Risk Management Objectives Risk Thresholds and Priorities KPI’s and SLA’s

Risk Parameters & Rule Sets

Test Results

Create/Maintain Risk

Parameters & Rules

Review & Monitor

Risk Feedback

Iterative Delivery Model

4. Implement

2. Pilot/Test

3. Amend/Align/ Integrate

1. Build/Procure

Business Process Re-engineering

Wo

rkstr

eam

s

Change Management

Draft and Publish Legislation

Project Management

PSW Development Bu ild , Test and Implement

OGA Development Build , Test and Implement

IRMS Procure /Development Build , Test and Implement

PCS Procure/Development Build , Test and Implement

S upport Systems Procure/Deve lopment Bu ild , Test and Implement

Tasks

an

d M

ilesto

nes

Phase 0: Development & Build Phase 1: SW Lite


PSW Workflow

Phase 2: SW Core

Support Systems

PSW Core Workflow PSW Advanced Workflow

Phase 3: SW Advanced

6- 9 Months 18 -36 Months Beyond

Regulatory Info Integrated Tariff

OGA Workflow

Application/review/approve

Value added services

Ramp-up and Advanced processing

Regist ration

Some back-end processing

PSW integrated Workflow

Establish PSW Company

Solution Planning and Design

Establish Project Office

Define Program Plan (Master)

Secure Funding

Recruitment

Benefits Realisation Mngt

Solution Specification and Development Core and Support Workflow Systems:

o Business Requirements Specifications,o Functional Specifications,o Technical Specifications,

Development Plans:

o Language and coding,o Define and establish standards,o Database infrastructure and specifications,o Test strategy,o Deployment strategy.

IRMS, CRM, Financial Mngt, Performance Mngt, Reporting, BI, etc

Integrated processing across support systems

Advanced features and functionality

Statistical and performance reporting

PCS Integration

Cargo reporting and status tracking Pre-planning and automatic release

Interfaced processing


Page 11 of 62


3.1 OVERVIEW

CURRENT STATE

In the past few years, Pakistan has made progress in improving

cross-border trade processing but has also fallen short in some

areas – attested to by the global indicators in Figure 2

alongside.

One of the key determinants of these rankings is a country’s

ability to treat cross-border trade with the appropriate level of

scrutiny and intervention required to enable differentiated and

facilitated treatment for those that qualify. This principle lies

at the core of RM.

Amongst the many organisations responsible for managing cross border trade, Customs is one of the

few that operates under the principles of RM. RM is well understood in the organisation, structures do

exist, and a software system is in place that makes use of advanced risk management tools. Other

government agencies have a varied approach to managing their risks, some more formalised than

others, but none with a formulated, structured strategy, plan and policy in place for RM.

Exploring the problem statement

for the project, the analysis

indicated there are areas requiring

general as well as more specific

functional and technical

improvement, including

operational policies and practices,

automation and monitoring, and

control. Overall there is limited

capability within OGAs in terms of

RM principles, know how, human

resources and IT (e.g., most

agencies are paper-based) and

tools. Most OGA interventions are

based on science-based

interventions, regulatory guidelines, revenue-based objectives, historic practices, and rudimentary

tools (e.g., reference lists based on trader, Certificate of Origin, HS code etc.) and do not incorporate

RM principles (e.g. 100% intervention). For example, some agencies that apply science-based

interventions do so on a 100% basis under the assumption that all shipments pose a risk and must be

physically inspected.

Contrary to the Revised Kyoto Convention, and other best practice guidelines, there is too much

discretion accorded to inspectors to make subjective decisions on operational decisions and inspection

results are not audited in terms of quality assurance (QA), performance, or integrity. The concept of

“Compliance Management” is generally not practiced leading to general lack of trade facilitation.

Due to these inefficiencies, traders are able to present different ‘versions’ or data sets to different

Agencies depending on what is required. This is a problem as there is no validation that the data is

the same so it can be manipulated to suit the regulatory requirement and contribute to fraud. The

general lack of a consolidated and standardised approach to managing traders and trade processes

makes it difficult if not impossible to implement a trade facilitation approach to cross-border trade

management, requiring a complete risk management based re-engineering of how interactions and

Figure 2: Global Indicators

Figure 3: Current Environment

Regulatory EnvironmentMultiple ‘Faces’ of Traders

GA 1

GA 2

Banks

Customs

Ports

Non RM based Processing

• Unstructured & Manual

• Subjective

• Mainly transaction

based

• Independent

• Automated • Subjective rules

• Mainly transaction based

• Independent

RM based Processing


Page 12 of 62


interventions are conducted between traders and regulatory agencies to address the entire trade

transaction value chain.

FUTURE STATE

Customs and OGAs involved in cross border trade have been considerably impacted by globalisation

and the expansion of international trade over the last several decades. Trade volumes have increased

dramatically, and government resources have not grown in parallel, resulting in a situation whereby

regulatory authorities “must do more with less”. For agencies involved with cross border trade, it is

paramount that the balance between trade facilitation and regulatory enforcement and revenue

collection is balanced in a manner that does not harm the economy. This requires timely facilitation of

trade while at same time, maintaining more sophisticated border controls in order to deal with an

environment that provides more sophisticated levels of non-compliance and fraud, requiring a unified

approach between Customs and OGAs to conduct collective risk management activities (risk scoring,

consignment targeting, interventions and investigations). A single system that incorporates

requirements of both Customs and OGAs is thus the cornerstone of both integrated risk management

and targeting as well as the PSW.

The PSW provides a consolidated platform for single submission of information for a cross border

transaction – which means no repetition of information, no duplication of documents, no back and forth

with multiple parties, in other words a “single version of the truth” about traders and transactions. This

‘single trader view’, in which Pakistan Customs and OGAs and stakeholders will have a consolidated

view of the traders’ information and transaction data is the key to unlocking the ability to implement an

integrated risk management approach.

An Integrated Risk Management Solution (IRMS) must be configurable to support a variety of different

cross border trade procedures, both in real time (transaction-based) and batch. These include, inter

alia, trader accreditation, clearance, pre-clearance, anti-smuggling, audit case selection, passenger

screening and the generation of intelligence information.

Based on this single version of data and integrated approach, a consolidated assessment can be

conducted on the transaction, leading to risk-based direction of operational resources and processing.

This concept is depicted in Figure 4 below.

Figure 4: Future-State Risk Managed Processing

The following table provides an overview of the various aspects of IRMS showing the common practice

prior to the implementation of PSW, and the more integrated comprehensive approach to risk that is

SINGLE TRADER PLATFORM

TRADERS

GA 1

GA 1

Banks

Customs

PSW

Ø Trade Info Portal

Ø Registration

Ø Case management

Ø CRM

Ø Payments

Ø Reporting

Module

Module

Ports


RISK MANAGEMENT

Ø Automated

Ø Holistic approach

Ø Multi-dimensional &

simultaneous risk

analysis

Ø Consolidated and

shared view

Ø Feedback

Ø Continuous

improvement

Strategic and Tactical Risk Management

OPERATIONAL RM + TARGETING

RISK PROFILES

Trader COO

Agent Known Threat

HS Code 1s t Time

CPC Other

OTHER TOOLS

3rd Party Data

Compliance Analysis

Intelligence

AI, Other

UNIFIED RISK SCORE

Green Yellow Red Orange Blue Purple

Release Docs Inspect NII AEO/PCA Query

TREATMENT

Release Amend Detain

IRM Solution


Page 13 of 62


aimed at facilitating trade as well as protecting revenues normally adopted within a modern SW

environment:

Practice Type Current Practice Risk Based Practice

POLICY

Balance between facilitation and control

Optimisation of both facilitation and control

Mistrust of supply chain actors Trusted collaboration of supply and transport chain partners

Limited customer segmentation Customer treatment based on compliance history, differentiation and service culture

Limited incentives for compliance Strong incentives for compliance

Focus on physical border controls Focus on virtual border controls

Adversarial relationship with trade Constructive partnership with trade

Limited cooperation and data exchange

Extensive collaboration and information sharing

Application of controls at the time of clearance

Pre-arrival and post clearance controls

PROCESSES

Output-based functional model (e.g. # of inspections)

Outcome-based process model (e.g., # of infractions, revenue yield etc.)

Focus on documents Focus on collective information

Single treatment for all clients Flexible solutions for different clients

Agency specific risk management Cross-agency, intelligence-driven RM

High levels of silo based physical inspection

Intervention by exception (resource-based joint inspection controls)

Paper-based, subjective Automated and directed

Transaction-based procedures

Exception-based procedures and audit-based controls

PEOPLE Physical control at the border System based limited engagement at border with pre arrival and post clearance controls

Limited transparency Full transparency

Organisational performance monitoring Clear measures of individual and collective performance

Standard training, mainly administrative

Capability modelling, commercial and administrative

IT

Proprietary systems developed on an evolutionary model without adequate documentation and reliant upon development team

Extensive use of best practice – bespoke or open source software systems with full documentation and open to external auditing and review

Isolated data capture and information processing

Service-orientated architecture


Page 14 of 62


National silo-based data architecture Regionally integrated common solutions

ICT security limited to intrusion protection

Business continuity assured through security and contingency arrangements

Emphasis on back-office transaction processing

Move toward self-service, front-office solutions and direct access to trade systems

INFRASTRUCTURE & FACILITIES

Agencies operating on a standalone basis

Interagency collaboration

Individual trader integration with multiple agencies

One stop solution

Predominance of in-house build and deliver solutions

Value-added outsourcing

Output-based procurement Outcome-based procurement

The ultimate objective for the IRMS is the facilitation of legitimate trade in an environment with better

controls whilst reducing costs and creating efficiencies for all stakeholders. The desired outcomes

include:

Figure 5: IRMS Desired Outcomes

All these outcomes drive towards a more fluid and facilitated trader experience realised through the

implementation of the PSW solution driven by a risk management framework.

Consolidated whole-of-government approach

to managing cross-border trade risks

Proactive

Improved Detection

Better Analysis

Better PlanningResource Allocation

Improved Enforcement

Stakeholder Trust

Oversight

Improved Control

Better Data

Resilience

Improved Compliance


Page 15 of 62


3.2 MAIN OBSERVATIONS

3.2.1 Limited Use of Risk Management Tools

Current situation: Pakistan Customs is one of the few organisations that operates on the basis of risk

assessment. While OGAs may

employ RM principles, albeit

subconsciously, they do not have an

explicit RM framework or information

technology system in place.

Current constraints include

difficulties with targeting scarce

enforcement resources that are

located close to where biggest risks

lie; risk interventions focusing solely

on consignments and not entities;

and the inherent integrity issues that

arise when officers have discretion in

selecting targets.

Key dynamics that need to be managed from a RM perspective rest in the development of a responsive

set of risk rules; and managing officers’ outdated approach to risk and fears around losing control of

case selection.

Key messages to be incorporated across all stakeholders include how RM enables better targeting and

thus less or more directed intervention of trade. It is also important to stress that a risk system is not

meant to replace operator intuition but looks to provide the information and intelligence to the operator

to make informed decisions thus leading to higher strike rates. Risk based enforcement is aimed at

reducing interventions through targeting thereby increasing compliance.

Critical success factors in respect of risk management include linking it to an explicit compliance risk

management philosophy; incorporating officer experience in developing the risk rules; creating a

feedback loop for continuous improvement of risk rules; and showcasing improved outcomes from

using risk management.

Impact on trade environment: Most OGAs (other than Customs) are using subjective and unstructured

application of RM techniques which result in either unnecessarily high levels of intervention or not

enough targeted interventions to ensure success of identifying and mitigating risks. The introduction of

the IRMS will mean the way in which OGAs engage and interact with traders will change, not only in

terms of interventions but also in the way these are processed.

3.2.2 Focus on Revenue/Regulation, Not Trade Facilitation

Current situation: Historically, Government agencies have focused primarily on generating revenue

(Customs) or regulating trade (OGAs) to meet their respective targets or KPIs. This inadvertently meant

that Government processes rarely considered impact on traders and trade. With the advent of trade

facilitation as a key global and government objective, the focus has shifted to now consider traders

and how government processing impacts their businesses. Proper RM allows Government to facilitate

business, in a cost-effective manner, without losing focus of its revenue generation and regulation

objectives.

Customs DPP PSQCA AQD DRAP FSC&RD NCD ANF

Adoption of RM Policies

RM Framework in Place

Risk Assessment Capability

Adequate RM Staff

Inspection Capacity

RM System

✓ ✕ ~ ✕ ~ ✕ ✕ ~

~ ✕ ✕ ✕ ✕ ✕ ✕ ✕

✕ ✕ ✕ ✕ ✕ ✕ ✕

~ 3None

DedicatedNone

Dedicated

None Dedicated

None Dedicated

None Dedicated

None Dedicated

None Dedicated

Under capacity

Under capacity

Under capacity

Under capacity

Under capacity

Under capacity

Under capacity

Under capacity

✓ ✕ ✕ ✕ ✕✕ ✕ ✕

Current RM Process

Customs Electronic Declaration

Automated Selectivity

Risk based port Inspections

DPP, AQD, FSC&RD Manual application

Subjective verification

100% port Inspections

PSQCA, DRAP Manual application

Subjective filtering

Imp/Exp based inspections

ANF Manual manifest review

Subjective filtering

Selected port inspections

Uncoordinated assessment and inspection process resulting in multiple inspections for single consignment;

No RM framework or risk based inspections for OGAs; Resulting in additional costs and time for traders;

Description Unimpeded Impeded

GD Release 4 days 11 hrs 5 days 0 hrs

Gate out 9 days 3 hrs 10 days 17 hrs

Average Clearance Times

~

Figure 6: Relative Maturity of Risk Management Practices


Page 16 of 62


Current constraints: include the fact that simplicity, speed and efficiency are not key drivers of activities;

and the high compliance burdens negatively impact on exports, which in turn effectively reduce

willingness to invest in Pakistan.

Key messages: that need to be incorporated across all communications include how a move to trade

facilitation simply means helping traders who want to comply to do the right thing; how a focus on trade

facilitation does not mean taking a “soft” approach; how it virtually guarantees an increase in revenues

and compliance; and how enforcement activities will still target at-risk traders and consignments.

Critical success factors: in respect of moving towards a stronger trade facilitation process include

developing robust performance measures and indicators; linking trade facilitation to an explicit

compliance risk management philosophy; and showcasing how other countries benefited from a

stronger bias to trade facilitation.

Impact on trade environment: Traders will most likely welcome the trade facilitation approach but will

have to understand that this means displaying adequate levels of compliance to receive any related

benefits. This will need to be managed through guided forums of engagement and relationship

management to ensure the intended compliance frameworks are understood and adhered to.

3.2.3 Current Resources Not Adequate to Support a RM Solution

Current Situation: The lack of resources or dedicated resources for RM was identified early on in the

project assessment and has held true throughout. This applies not only from a development and

solution implementation perspective but also from an operational perspective in terms of the officers

on the ground intended to implement the revised automated business processes.

Current constraints: Without adequate resources applied to the development and the operationalisation

of the IRMS by all impacted stakeholders it will not achieve the desired results.

Key message: This is not a solution that can be imposed on GAs, it has to be designed, developed

and implemented by them. This message is mainly for internal consumption but can also be reflected

in external communication to display government commitment to trade facilitation.

Critical success factors: include ensuring that the required outcomes as identified in the operating

model are sources, trained and adequately supported in their designated roles.

Impact on trade environment: A commitment by GAs to the RM approach by dedicating the required

resources to the initiative will be seen and felt by the traders in their engagements and interactions and

would have a positive effect on their view of the solution having a cascading effect on their willingness

to comply.

3.3 THE FRAMEWORK FOR PSW IRMS

A framework refers to the set of structures and rules used when trying to solve a problem. The outcome

of the current state analysis and the data analysis identified challenges across the cross-border trade

environment but also high-lighted where the focus should be in order to progress the PSW towards a

risk driven and managed environment.

The development of the framework for the PSW IRMS was guided by a few resources, primarily the

ISO standard: 31 000, generally accepted as best practice upon which a number of other standards

are based. These standards provide a common set of definitions and understanding of risk

management and established the framework.


Page 17 of 62


The analysis and design work culminated in the framework for the IRMS which presents the

Governance structure, the technical solution design and the business requirements specification, all

foundational elements to the next phase of development, and building of the IRMS solution. Summaries

of which are presented here with further detail contained in the Management

Summary section below. 3.3.1 Governance and Operating Model

Figure 7: IRMS Governance and Operating Model

The governance and operational model provides the necessary structure required to ensure there is

adequate accountability and oversight of the IRMS solution. It identifies the roles and responsibilities

required to implement, manage and maintain the IRMS and defines the terms of reference for each.

The model is based upon the concept of a Centre of Excellence (COE) for RM within the structures of

the PSW Company.

The COE will be supported strategically by the Governing Council (GC) and the RM Committee (RMC)

providing direction, guidance and oversight of the RM solution. At a tactical level, the model proposes

setting up RM teams within each GA to assist the PSW COE with the creation, maintenance and review

of risk rules. Operationally, treatment of the identified risks will be handled by the current operational

teams (expanded as needed), working within the PSW system and providing feedback for monitoring

and oversight. With this structure in place, the project can move to the next phase of development and

building the overall PSW and IRMS solution.

3.3.2 Technical Solution Design and Business Requirements Specification

Based on the ISO 31000, risk is broken down into 5 fundamental steps, 1) Establishing the context,

followed by Risk Assessment made up of…? 2) Risk Identification, 3) Risk Analysis and 4) Risk

Evaluation and finally 5) Risk Treatment: These steps are supported by communication and

consultation as well as monitoring and review.

PSW Risk Management Team

PSW Governing Council

PSW Risk Management Committee (Interagency)

Analyses & Targeting Manage PerformanceTreatment Feedback

Risk Management Solution & Tools (Process, Technology)

Center of Excellence (COE)

PSW COMPANY GOVERNMENT AGENCIES

OGA RISK Management

GA Risk Management Team

Risk Analyst Risk/Data AnalystRisk Analyst Data Analyst Compliance

Secretariat

PSW RM TeamVendorsOGA Seconded Domain Expert

Risk ManagerOGA Liaison


Page 18 of 62


Figure 8: ISO 31000 Risk Management Model

Within the context of this model, not all risks are the same and GAs need to balance the consequence

of a threat against its likelihood in allocating risk mitigation resources. It is important to establish context

for the risk by initially assessing its importance. The relative importance can be understood by

observing environmental drivers and trends, legal mandate and requirements, organisational culture,

current capabilities and capacity and goals, objectives, scope and activities. Once the context for the

risk is established, it is important to understand what the sources of risk are and ask: “What can

happen?” and identify areas of impacts, events, causes and potential consequences, including knock

on effects.

Risk Assessment for cross border trade is a complex subject especially when including OGA risks,

commodity-based risks together with the standard Customs risks that mainly concern the protection of

revenue and the general security of goods. It is therefore essential that an IRMS must be both easy to

understand and use. It is also important that the system is flexible because one of the primary

requirements when creating risk rules for cross border trade is to have the ability to continually refine,

test and change them.

The following figure illustrates the risk assessment process in the IRMS. These will be based on a

collaborative process between the Risk Committee that will establish and formalise the policies and

procedures, provide guidance and oversight, the risk administrator responsible for initially setting up

and maintaining the rules and approvals and the risk analyst (team) responsible for generating the

rules, creating the conditions, testing the results and eventually creating and maintaining the rules. The

Risk Committee will also perform the RM function by defining the risk policies that are to be applied

using the maintenance function. The cycle will be completed with a feedback loop from the risk system

and analyst team back to the committee in order to review, monitor and where required adjust the risk

management strategies, policies and objectives.


Page 19 of 62


Figure 9: Risk Assessment

Risk analysis involves understanding the risks through classifying and categorising the risks (including

quantifying sources and causes) and quantifying and qualifying consequences.

The design concepts used when developing an IRMS are therefore vital to its success. If it is seen as

difficult, complicated to use, expensive or time consuming to change it will not achieve its required

objectives. Using this system, a competent risk management team will continually be developing,

refining and testing new risk rule requirements in the pre-production environment, especially during the

initial implementation of an IRMS.

Figure 10: Risk Analysis Process

The development of Risk Rules and their refinement will involve some form of a testing arrangement

to ensure that the Risk Rules being used in the ‘production’ environment will meet their required

objectives. The output results from these tests will be reviewed by the Risk Analyst who will then

possibly have to adjust or refine the rules and perform the test again until they are sure that the risk

rule is meeting its required objectives i.e. identifying the required risks and assigning the appropriate

score i.e. priority. Once a Risk Rule has been tested fully and appears to be meeting its objectives, it

can be introduced into the production environment, but even at this point it may require further

refinement.

All these requirements emphasise the need for a simple, flexible and easy to use system that can be

easily understood where Risk Rules can be maintained and tested by a Risk Analyst that is more

focused on the domain and operations than the technical system. It is therefore essential that these

requirements should avoid the need for program code or database changes to the core IRMS System

and can be enacted at a user level based on common language commands or actions.

Risk Analyses Understand Risk Objectives Set:

1. Risk Rule ID

2. Threat Rule Set

3. Decision Table

4. Document Type

5. Weighting

Capture Risk Conditions

Condition 1 Condition 2

Condition 3

Condition 4

Condition 5

Conditio

n 6

Generate Risk Rule Set

Risk Committee

Establish Risk

Management Strategy and

Framework

Define Risk PoliciesDefine Risk Operating

Procedures

Model and Test Risk Results

Data Inputs

Risk Management Objectives Risk Thresholds and Priorities KPI’s and SLA’s

Risk Parameters & Rule Sets

Test Results

Create/Maintain Risk

Parameters & Rules

Review & Monitor

Risk Feedback

Data Analytics

Hypothesis

Modeling/ Testing

Data Onboarding

Receive Data

Verify Data

Data QA

Create Rules

Create condition

Create/Maintain

Pre-ProductionDeploy

Feedback

Monitoring

Performance

Production

Desired Outcomes

Targeted Interventions

Resource Optimisation

Performance Measurement

Continuous Improvement

Voluntary Compliance

Measure

Evaluate

Scoring

Treatment

Review

Approve


Page 20 of 62


The ability to fully comprehend the scope of requirements for an IRMS at its outset would be ideal, but

a more practical approach would be to build in some form of future proofing, when designing the

system. This can take on many different forms but one way to ensure the overall stability and

sustainability of the system is to allow additional routines2 i.e. program code to be added through an

interface that can be maintained by the Risk Administrator, without the need for program code changes

to the core IRMS function. This will be provided through a configurable IRMS maintenance facility that

will allow a Risk Administrator to either add additional routines or to replace existing routines through

a standard on-line maintenance function.

Risk evaluation, or what can be done to address a risk, drives decision making. This understanding

helps to establish priorities and identify appropriate treatment measures which are developed based

on risk tolerance levels. Further analyses may be required as situations change.

Risk treatment entitles selecting an option to treat or eliminate the risk and evaluating what was done

to address the risk. Treatment can include increasing the tolerance level of the risk (e.g., more to green

channel). Treatment options are not mutually exclusive and can be layered through assessing the

effectiveness of a treatment measure and taking into consideration treatment resources.

Essentially, RM, and the functionality that supports it, – the IRMS modules, – are the core of any NSW

and cannot be assessed separately from the PSW. The risk framework is based on introducing an

automated risk system to manage 3 functional areas; 1) RM of traders, 2) LPCO applications and 3)

declaration processing.

This approach to Risk

Management,

understanding it is the

core of any transaction

processing system, was

made clear in the PSW

Design document. The

two figures below, taken

from page 118 of the

PSW final design

document, describes the

interactions referred to

above.

2 The meaning of a routine in this context refers to a completely independent piece of program code that has been written, compiled and tested separately to perform a specific function.

Figure 11: IRMS Technical Design

1. Trader Management & Registration

2. LPCO Risk Validation / NTM Monitoring

3. Declaration Risk Management

Strategic and Tactical Risk Management

OPERATIONAL RM + TARGETING

RISK PROFILES

Trader COO

Agent Known Threat

HS Code 1st Time

CPC Other

OTHER TOOLS

3rd Party Data

Compliance Analysis

Intelligence

AI, Other

UNIFIED RISK SCOREGreen Yellow Red Orange Blue Purple

Release Docs Inspect NII AEO/PCA Query

TREATMENT

Release Amend Detain

IRMS SOLUTIONPSW Solution Architecture

IRMS Risk Functions


Page 21 of 62


Figure 12: High Level Processes and Application

As per Figure 12, all risk testing functions for the PSW run through the IRMS, as does the processing

of declarations through WeBOC by Customs. The Figure above is further described on a module by

module basis in this section. As illustrated in Figure 13, the centrality of risk management is

emphasised, with a significant portion of all OGA assessment and scoring taking place inside the IRMS

‘box’, with those activities being processed by the various IRMS modules.

Figure 13: Risk Management at the Centre of Workflows

Drilling into Figure 13 even further shows that each time data is added or amended within the system,

one or more of the risk management modules would re-examine the data or changes made, making it

an iterative and progressive process, which could have a different outcome based on the information

available at a particular point in time. Simply, a transaction starting out as low risk early in its lifecycle

may then change to a high risk based on new information that is supplied to the IRMS.

Process LPCO Application

Process Customs

Declaration

Process Cargo Release

Plan Examination

Plan Examination

Conduct Examination

Process Payment

Conduct Risk Assessment




Schedule Examination

WeBOC

Terminal Operator (PCS)

Terminal Operator(PCS)

Banks

PSW Application

WeBOC

OGA Application

PCS Bank

IRMS

Submit Pre-Arrival Info

LPCO Query & Application

Goods Declaration Payment Release

Validate Information

Query Tariff Requirements

Validate Declaration

Process Release

Examination

Schedule Examination

Prepare Invoice

Registration

Process Registration

Terminal Operator (PCS)

Validate draft application and supporting docs

Query LPCO requirements

Draft LPCO Application

Attach required supporting documents /information

Review application

Receive LPCO application responseT

rad

er

NS

W O

GA

NS

W

Risk Assessment

Query tariff regulatory

requirements

Query tariff duty & taxes

Ris

k M

ng

t

Respond to Trader with

LPCO or request more info

Conduct required validations/ verifications

No Risk – automatic generation of LPCO

Some Risk


Page 22 of 62


3.4 IRMS DEPENDENCIES AND CRITICAL SUCCESS FACTORS (CSF)

Figure 14: Factors affecting IRMS

To complement the recommendations above the following dependencies and success factors inter-

alia have been identified as critical to the success of the IRMS (detailed in section 4.6):

1. Trade Information Portal (TIP): Although not a critical dependency for IRMS, establishing a

TIP for Pakistan and the PSW will be a critical step in rationalising the legislation, policies,

procedures and processes required for cross-border trade and will add significant value to the

overall PSW offering. It will provide a single reference point for traders, GAs and other

stakeholders regarding cross-border trade aiding in the transition to a RM approach.

2. Registration: A project that will focus on establishing the registration requirements of all GAs

involved in the PSW in order to consolidate it onto a single platform and process. The trader

base will be a critical input to the development of the PSW and the IRMS risk rules.

3. Customer Relationship Management (CRM): Linked to registration but not a critical

dependency for IRMS, this functionality refers to overall management of registered traders of

the PSW system, from compliance history, tracking, account management, fault logging, etc.

This service will be the primary platform for traders.

4. PSW core workflow: Refers to the critical components and infrastructure required for the first

phase of the PSW, and will include the basic application workflow (submit, review, approve),

declaration submission and tracking as well as consolidated payment processing.

5. Integrated Tariff Book: Integrating, rationalising and (where necessary) extending the tariff

book to include the requirements of all OGAs will improve the ability to identify, assess and

target risk, and will reduce unnecessary operational processing.

6. Consolidated Data Set: Creating a consolidated data set across all GAs and aligning it with

international standards (WCO data model, UNCEFACT, etc) will assist the PSW IRMS to utilise

internationally available information as risk inputs with minimal manipulation required and

enable cross-border inter-operability and information sharing.

7. Single-Form Development: Using the above mentioned data-set, a consolidated and

harmonised form should be developed for the processing of PSW applications or declarations.

This implies that there will be a master form (and data) from which selected fields will be

rendered based on the specific transaction. This will prove critical for standardisation and inter-

operability for the PSW solution and is a critical input to IRMS.

The following Critical Success Factors (CSF) have been identified:

Political Commitment and Sponsorship: The IRM solution is dependent upon a cohesive and

collaborative strategic, tactical and operational environment coming together to focus on


Registration

Integrated Tariff Book


Single-form Development

PSW Core Development

IRMS15

Project 1: Governance Model

3

Project 2: Capacity Building

5

Project 3: Risk Assessment

4

Project 4: IRMS System

11

Project 5: Joint Inspection

6


Page 23 of 62


identifying, analysing and treating risks. This will require fundamental change in the

understanding of the GAs involved in this process as well as the trade environment. Without

adequate political support the program will stand a slim chance for achieving its goals.

Change Management: Organisations that have tried to achieve major business and technology

transformations have found that the process of implementing change will in most cases lead to

a temporary drop in productivity. Change Management helps to minimise the depth and length

of the disruption brought on as a result of a major change. The introduction of an integrated

RM for PSW will involve some major changes to a number of GAs actively involved in cross-

border trade requirements. It is imperative that these changes are communicated openly and

that they feel involved in the changes from the outset. Assessing risks in a more coordinated

and controlled manner will also require intensive training and on the job experience for the

people who are finally selected for the integrated RM Team. It is therefore essential that

effective change management practices are employed to help minimise the time and energy

that is required to align the people, processes and technology aspects of this change during its

transition

Business Process Re-engineering (BPR) : Any major IT system implementation requires the

re-engineering of current business processes and practices in order to obtain the maximum

benefit in terms of their performance, productivity, and quality. This is especially true when

introducing integrated RM within an NSW System.

Interoperability: Interoperability is the ability of different information technology systems and

software applications to communicate, exchange data with one another as well as use the

information that has been exchanged to meet the end goals as agreed and defined by the

parties involved. It will be critical to the success of the PSW implementation. Any electronic

exchange of data between the integrated RM System and any other government system (e.g.

WeBOC) should conform with the current interoperable framework standards that should have

been defined as part of the Pakistan Government’s e-Government or Digital Strategy.

3.5 RECOMMENDATIONS

The following recommendations are suggested to achieve the risk managed framework for the PSW.

These have been summarised below with further details elaborated upon in the

Management Summary and detailed deliverable sections. 1. Governance and operational model: as mentioned above the political commitment is a critical

success factor for the IRMS. Adopting the proposed model will provide the fundamental basis

for establishing accountability and responsibilities for the various role and functions required

across the solution. Included with this would be the definition and enforcement of performance

contracts and service level agreements (SLAs).

2. Define IRMS Rules and procedures to support PSW Law: a significant challenge for many

NSW solutions is not having the legislative backing to be able to implement, as they are

challenged at every level of operations. The PSW Act provides the legal mandate for the

proposed solution and should be promulgated to enable the derivation of subsequent rules and

procedures to enable the IRM solution.

3. Benefits realisation management: Benefits Realisation Management (BRM) is a process of

identifying, planning, managing and evaluating the intended benefits of an investment. In the

case of the PSW, it would be the intended benefits to the GOP, the GAs and other stakeholders.

This should have been covered in the early stages of the program but can still be detailed now

to ensure proper tracking of intended benefits of the PSW for all stakeholders.


Page 24 of 62


4. Publicity plan: An important step for the PSW and IRMS progression will be the Publicity

Strategy which entails the way in which users, traders and other stakeholders will be

communicated with, informed, educated and generally kept up to date with the progress of the

PSW program. Although some progress has been made in this regard, it is recommended that

this strategy is formalised and resources are dedicated to its fulfilment such that the objectives

can be realised.

5. Capacity building: As mentioned above, the IRM solution necessitates a paradigm shift in the

way GAs think and process their work. This shift will trigger a significant change management

effort requiring motivated and trained resources across all levels of the organisation. We are

cognizant of the resourcing challenges of GAs and therefore recommend adopting a dual role

approach where existing resources will be assigned risk management and operational roles in

order to build the initial momentum for the IRM solution. These roles could also be

supplemented by the PSWC until such time the GAs are able to transition the resources to their

structures.

6. Project management: The roadmap has proposed 5 key projects to be undertaken to deliver

the IRMS. It is recommended that a project manager be assigned to manage, drive and ensure

delivery of these projects aligning with the PSW master plan. This recommendation extends to

the PSW as well as originally proposed in the design document.

7. Business process re-engineering: There are a few BPR exercises currently underway. It is

critical that the outcomes of these exercises are reviewed against best practice and measured

against the design principles and requirements of the various development and build initiatives

underway.

8. IRMS systems development: The current primarily manual processing environment allows for

a robust design of the IRMS technology solution. The design of the PSW IRM solution can

explore the possibilities of introducing best practice functionality without the constraints of

having to integrate or accommodate any existing RM systems or processes. The PSW has

elected for a bespoke development of the core processing workflow and the OGA modules,

but it has become apparent that the development team would be hard-pressed to deliver on

these and the other core elements including the IRMS and the PCS solutions. To mitigate this

challenge, it is recommended the PSWC engage external assistance to augment their

development skills in order to bring in required technical skills and meet project deadlines.

9. Tariff code rationalisation and extension: Pakistan Customs is currently using an 8-digit HS

code nomenclature. 6-digits as per the prescribed and an additional 2 digits for National use.

As observed with a number of OGAs, this limits the ability to distinguish products to a

significantly detailed level to allow for proper risk analysis resulting in a number of requests for

NOC being requested. This process is unnecessary and time consuming, adding no value to

the end-to-end process, or managing the risks associated with these consignments. The

following has been recommended not only from a RM perspective but also for the general PSW

workflow perspective:

a. Recommend moving to 12 digits with a check digit (alpha or numeric)

b. Suggest making the change now by introducing 0000 at the end and making changes

to actual tariffs as required and enabled by law

c. This does not imply a complete re-definition of the tariff book, but only for HS codes

requiring change and when required.

10. Risk management training: Each OGA will require training on the RM framework and

methodology to be able to identify, score and eventually manage their own risks. This project

has already provided basic training on the principles and practices of RM but additional training

will be required. This must tie in to the larger PSW RM capability and can be achieved through

a train-the-trainer capability. 2 phases:

d. General RM methodology training to the PSW RM team and OGA representatives,


Page 25 of 62


e. Followed by more detailed training for the OGAs who are unable to/do not have

resources to do it themselves

11. National Targeting Centre (NTC): FBR Customs has introduced an NTC division. Analysis was

done on the strategy and mandate of the division and concluded that there is significant over-

lap between the NTC objectives and mode of operations and the PSW IRMS solution (detailed

in Section 4.4.3). It is recommended these units be merged, either strategically or tactically to

ensure maximisation of resources and alignment of goals.

12. Data Management: Data, its availability, accuracy and integrity are critical to the IRMS. The

environmental analysis and data analysis revealed that the data required to be able to define

risk rules for the GAs is not readily available. Even though elements of this are being addressed

through other initiatives it is recommended that focus is placed upon, and a concerted effort is

made to identify, collect and rationalise the required data.

13. Joint Inspections: A critical outcome of a Single Window solution is to facilitate and ideally

manage joint inspections. A pre-cursor to joint inspections is an integrated and coordinated

approach to identifying, assessing and directing treatment for risk across all impacted GAs.

The IRMS will provide this facility by conducting a unified assessment of all GA risk so that risk

treatment could occur with a single intervention. It is recommended that the practical

implications of this be assessed in terms of infrastructural viability and that the planning for the

eventual solution commence on a phased delivery approach.

14. Change Champions: The PSW and by default the IRMS will require motivated resources on

the ground to drive the changes required within their organisations. In addition to the RM

resources identified above, it is recommended that influential operational officers be identified

within each impacted GA who could undergo specific PSW and IRMS training so that they

could become operational champions for the solution.

15. Systems Documentation and Upgrade: The current Weboc system does not have adequate

documentation and architectural designs to enable easy integration or upgrading. It is

recommended that the development team that is recruited should perform this task as a matter

of training and familiarisation with the existing systems prior to engaging any upgrade to the

system for PSW purposes.

3.6 BENEFITS OF RISK MANAGEMENT3

Benefits of introducing an IRM Solution and conducting cross-border trade according to RM

principles are numerous and have been grouped into 3 in the section below. The benefits of RM flow

from the government to all stakeholders involved in the PSW.

Benefits to Government with the mandate to

stimulate the economy by making processing

more efficient;

Benefits to Government Agencies with the

mandate to facilitate trade whilst also ensuring

safety and security; and

Benefits to the Trading Community seeking to

conduct business with the lowest costs and

least amount of time.

3 Adapted from: Facilitating Trade: In the OIC Member States Report

Government

Government Agencies

Trading Community

Figure 15: Benefits of RM


Page 26 of 62


3.6.1 Benefits for Government

A comprehensive and integrated RM process can support many new opportunities to facilitate trade

and improve Government’s ability to improve the economy:

Benefit Details

The ability to coordinate the risks posed

for any given consignment across all the

agencies involved in cross-border trade.

Will provide a much more effective and efficient use of risk

assessment resources while also providing a more

comprehensive and complete analysis for the setting and

monitoring of risk profiles. This should both improve the hit

rate for seizures while allow low risk items to pass through

the cross-border trade process in far less intrusive manner.

The ability to perform a risk assessment

of a consignment before the goods have

arrived.

A detailed assessment of the risks posed by a given

consignment can be performed prior to the arrival of the

goods at the port or border. This gives the authorities more

time to the assess the risks and thereby allow low risk

consignment to pass through the cross-border process

immediately they arrive at the port/border.

The ability to provide a single point in

time for consignment risks to be

assessed by all required government

agencies in a coordinated and

collaborative environment.

1. Improve the use and efficiency of scarce risk assessment

resources,

2. Improve the general efficiency and effectiveness of the

risk assessment processes.

The implementation of a modern

approach to compliance management.

Moving away from the old ‘Gatekeeper’

approach to solely protect revenues to a

more modern longer-term strategy of

facilitating trade.

This will speed up the cross-border trade process and grow

cross border trade volumes in the longer term.

More use of Post Clearance Audit

procedures to investigate some risks

that maybe posed by some

consignments.

Again, this will speed up the cross-border trade process and

also improve the use and efficiency of scarce risk

assessment resources.

3.6.2 Benefits for Government Agencies (GA)

Benefit Details

Improved resource allocation

A benefit gained by implementing RM is improved allocation of

resources. Working with limited human, physical, technical and

financial resources while facing increased movements of goods and

means of transport, drives GAs into “strategic thinking” mode. Under

such circumstances, these agencies can decide the allocation of the


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limited resources to the border crossing points where the risk is

higher. Improved allocation of resources, especially human, will

ensure that the existing skills and experience in the administration is

effectively used and will yield better results in achieving the main

objectives.

Ability to better manage and

control the quality of work of

GA resources

By implementing RM, GAs prepare themselves for the future. The

quality of controls is improved by analysing and predicting risks and

focusing the most critical resources on the areas of highest risk.

Superficial control of everything and anything will be replaced with

exhaustive controls over those movements and shipments that pose

highest risks. A RM that embraces evaluation of outcomes and

control feedback will allow management to identify operational

weaknesses and improve current control procedures to increase

operational efficiency.

Increased revenue collection

and improved protection,

security and safety of society

RM that results in improved quality of control is beneficial for the

Governments as GAs involved in cross border trade are critical

authorities in revenue collection and protection of society against

prohibited or restricted goods.

Improved perception and

public credibility

Effective RM guarantees equal implementation of laws and

regulations for all domestic and international legal entities and

persons. This will boost the public’s confidence in GA activities. The

public would trust agencies more if they used clear criteria to identify

acceptable and unacceptable levels of risk.

3.6.3 Benefits for the Trading Community

Benefit Details

Lower operational costs for the

private sector

RM is a central aspect of building a trusted partnership between

traders and GAs, as it rewards compliance. Traders obtain the

benefits of lower inspection rates, lower cost and time for customs

formalities, in return for their investments into compliance. Having a

solid basis of RM and compliance management enables customs

administrations to adopt schemes such as authorised economic

operator, which provides various simplification measures for traders

meeting multiple criteria of good compliance and record management.

Improved supply chain security

The development of partnership programs with other parties to the

overall supply chain is a RM tool that helps minimise disruptions to

the supply chain. The emerging principles underlying a public-private

partnership approach to cargo security can be summarised as a

“trusted supply chain partner program.” This is similar to the C-TPAT:

Customs-Trade Partnership Against Terrorism, of the US Customs

and Border Protection program through which the administration

works with trade to strengthen international supply chains and, at the

same time, improve border security. The main actors in such a

program can be companies managing the global supply chains; port


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and border crossing authorities who have the responsibility for

clearing cargo and for its loading/unloading; and local, regional and

national agencies, including those who have the responsibility for

assuring security at various levels, including responding to threats

and abnormal conditions.

Reduced supply chain costs

and time

Time and costs remain important determinants of companies'

competitiveness and ability to integrate into regional and global value

chains. The physical infrastructures for trade, roads, and ports, have

an impact on the time and costs for traders.

Current studies on trade facilitation and trade costs do not measure

the impact of RM as a single factor. Instead, RM is considered to be

one of many possible trade facilitation reform measures that can

significantly reduce the trade costs as described in the WTO Trade

Facilitation Agreement (TFA) article 7.4. WTO economists calculated

the aggregated financial benefit of implementing the TFA including

the obligations regarding RM and concluded, "Trade costs could be

reduced by an average of 14.3% and boost global trade by up to $1

trillion per year, with the biggest gains in the poorest countries".

Trade costs are divided into two segments. The first segment is

related to the expenses that are liable for external factors rather than

policy choices such as the distance to market, (international and

national); transport and insurance costs; transit fees, charges, and

time; expenses related to the transport and the insurance; and

membership in the same economic community, international

agreements etc.).

Technical Assistance Consultant’s Report · 2020. 12. 16. · CSF Critical Success Factor DIQ...

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