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About About

Risk ManagementRisk Management

Risk ManagementRisk Management

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What is Risk Management?What is Risk Management?


Who uses Risk Management?Who uses Risk Management?

Who uses Risk Management?Who uses Risk Management?

How is Risk Management used?How is Risk Management used?

How is Risk Management used?How is Risk Management used?

Risk Management in CustomsRisk Management in Customs

Risk Management in CustomsRisk Management in Customs

How do you use it in Customs?How do you use it in Customs?

How do you use it in Customs?How do you use it in Customs?

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Good management practice

Process steps that enable improvementin decision making

A logical and systematic approach

Identifying opportunities Avoiding or minimising losses



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Risk Management is the name givento a logical and systematic methodof identifying, analysing, treatingand monitoring the risks involved in

any activity or process.



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Risk Management is a methodology

that helps managers make best use oftheir available resources



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Risk Managementpractices are widely used

in public and the privatesectors, covering a widerange of activities oroperations.

These include:

Who uses Risk Management?Who uses Risk Management?Who uses Risk Management?Who uses Risk Management?

Finance andInvestment

Insurance

Health Care

Public

Institutions

Governments

Finance andInvestment

Insurance

Health Care

Public

Institutions

Governments

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Effective Risk ManagementEffective Risk Managementis a recognised and valued skill.

Educational institutions have formalstudy courses and award degrees in RiskManagement.

The Risk Management process is wellestablished. (International RM processstandards.)


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Risk Management isnow an integral part of business

planning.


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The Risk Management

process steps are ageneric guide forany organisation,regardless of the

type of business,activity or function.

How is Risk Management used?How is Risk Management used?How is Risk Management used?How is Risk Management used?

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There are

77stepsin the RMprocess

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The basic process steps are:

Establish the contextEstablish the context

Identify the risksIdentify the risks

Analyse the risksAnalyse the risks

Evaluate the risksEvaluate the risks

Treat the risksTreat the risks

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Risk is dynamic and subject to constantchange, so the process includescontinuing:

Communication & consultationCommunication & consultation

Monitoring and reviewMonitoring and review

and

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The Risk Management process:

The strategic and organisational context

in which risk management will takeplace.

For example, the nature of yourbusiness, the risks inherent in your

business and your priorities.

Communicate & consultCommunicate & consult


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Communicate & consultCommunicate & consultMonitor and reviewMonitor and review

Defining types of risk, for instance,Strategic risks to the goals andobjectives of the organisation.

Identifying the stakeholders, (i.e.,whois involved or affected).

Past events, future developments.


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How likely is the risk event to happen?

(Probability and frequency?)What would be the impact, cost orconsequences of that event occurring?(Economic, political, social?)

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Rank the risks according to

management priorities, by riskcategory and rated by likelihood andpossible cost or consequence.

Determine inherent levels of risk.

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Develop and implement a plan with specificcounter-measures to address theidentified risks.

Consider:

Priorities (Strategic and operational)

Resources (human, financial and technical)

Risk acceptance, (i.e., low risks)

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Document your risk management plan anddescribe the reasons behind selecting the

risk and for the treatment chosen.

Record allocated responsibilities, monitoringor evaluation processes, and assumptions on

residual risk.



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Risk Management policies and decisionsmust be regularly reviewed.

Risk Management policies and decisionsmust be regularly reviewed.

Monitor and reviewMonitor and review

In identifying, prioritising and treating risks,organisations make assumptions and decisionsbased on situations that are subject tochange, (e.g., the business environment,trading patterns, or government policies).

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TheRisk Management process:

Risk Managers must monitor activities andprocesses to determine the accuracy of

planning assumptions and the effectivenessof the measures taken to treat the risk.

Methods can include data evaluation,

audit, compliance measurement.


Monitor and reviewMonitor and review

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Treat the risksTreat the risksMonit

or

ing

and

rev

iew

Moni

tor

ing

and

rev

iew

Commu

nic

atio

n&

consu

ltatio

n

Commu

nic

atio

n&

consu

lta

tio

n

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Customs administrations have turnedincreasingly to Risk Management as aneffective means of meeting nationalobjectives.

Administrations provide facilitation whilemaintaining control over the internationalmovement of goods and persons.

Risk management helps in matching CustomsRisk management helps in matching Customspriorities to resources.priorities to resources.

Risk Management in CustomsRisk Management in CustomsRisk Management in CustomsRisk Management in Customs

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International Organisations encourage andInternational Organisations encourage andsupport the adoption of modern Customssupport the adoption of modern Customscontrol techniques, using Risk Managementcontrol techniques, using Risk Management

principles., e.g.,principles., e.g.,WTO/Kyoto Convention.WTO/Kyoto Convention.

APEC Sub-Committee on CustomsAPEC Sub-Committee on Customs

Procedures.Procedures.

Transport Industry representative bodies.Transport Industry representative bodies.


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Risk management within Customs can beRisk management within Customs can bestrategic, operational or tactical.strategic, operational or tactical.


Strategic:Strategic: Risks toCustoms goals and objectives,

e.g.,prohibitions and

restrictions, (social oreconomic), health,revenue, environment.

Strategic:Strategic: Risks toCustoms goals and objectives,

e.g.,prohibitions andrestrictions, (social or

economic), health,revenue, environment.

-usuall

ylonge

rtermstra

tegies

-usuall

ylongerterm

strate

gies

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Operational:Operational: Decisionsand action plans

on measures taken to deal

with the assessed risks.Deployment of resources;monitoring and review.

Operational:Operational: Decisionsand action plans

on measures taken to dealwith the assessed risks.

Deployment of resources;monitoring and review.-m

ediumtermstrate

gies

-mediumterm

strategie

s

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Tactical:Tactical: Used byofficers at their workplace,

to deal with immediate

situations, working withinset parameters andto approved procedures.

Tactical:Tactical: Used byofficers at their workplace,

to deal with immediatesituations, working within

set parameters andto approved procedures.

-shortterms

trategies

-shorttermstra

tegies

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Economic benefits, by facilitating theEconomic benefits, by facilitating the

movement of goods, ships, aircraft andmovement of goods, ships, aircraft andpeople when rated low risk.people when rated low risk.

Makes more effective use of existing skillsMakes more effective use of existing skills

and experience giving better results.and experience giving better results. Improves the quality of Customs controls Improves the quality of Customs controls information and accountability.information and accountability.


Why you should use Risk Management:Why you should use Risk Management:

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The process helps AdministrationsThe process helps Administrationsfocus on priorities and in decisions onfocus on priorities and in decisions ondeploying limited resources to deal withdeploying limited resources to deal withthe highest risks.the highest risks.


Why you should use Risk Management:Why you should use Risk Management:

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How do you use it in Customs?How do you use it in Customs?How do you use it in Customs?How do you use it in Customs?

The first step is to look at your CustomsThe first step is to look at your Customscontext.context.

What is the role of Customs?What is the role of Customs?

What are your national priorities and theWhat are your national priorities and theexpectations of the government and theexpectations of the government and the

public?public? What is the nature of your operationalWhat is the nature of your operationalenvironment?environment?

Where do you start?Where do you start?Where do you start?Where do you start?

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How do you use it in Customs?How do you use it in Customs?How do you use it in Customs?How do you use it in Customs?

The next steps in the Risk ManagementThe next steps in the Risk Managementprocess are to:-process are to:-


Analyse the risks; andAnalyse the risks; and

Evaluate the risks,Evaluate the risks,

but, if you are just starting on Riskbut, if you are just starting on Risk

Management planning:Management planning:

Where does the information come from?Where does the information come from?Where does the information come from?Where does the information come from?

Who does this?Who does this?

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Responsibilities must be allocated:Responsibilities must be allocated:

Appoint a Risk Management champion withAppoint a Risk Management champion withappropriate qualifications, includingappropriate qualifications, including

experience and analytical skills.experience and analytical skills.Form a Risk Management Committee,Form a Risk Management Committee,

representative of operational areas.representative of operational areas.

Conduct Risk Management Workshops.Conduct Risk Management Workshops.Determine operating procedures.Determine operating procedures.

Who does the Risk Assessment?Who does the Risk Assessment?Who does the Risk Assessment?Who does the Risk Assessment?

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1.1.Identify commodity or control risks;Identify commodity or control risks;e.g., high duty rates or quantitye.g., high duty rates or quantitycontrols, the demand for prohibitedcontrols, the demand for prohibitedgoods, such as drugs, pornography,goods, such as drugs, pornography,traffic in CITES wildlife.traffic in CITES wildlife.

2.2.Research existing databases andResearch existing databases andrecords on commodity and traderrecords on commodity and trader

histories.histories.3.3. Evaluate current procedures to identifyEvaluate current procedures to identifypotential control weaknesses.potential control weaknesses.

Sources of information for Risk AssessmentsSources of information for Risk AssessmentsSources of information for Risk AssessmentsSources of information for Risk Assessments

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After identifying and analysingAfter identifying and analysingthe risks, you can evaluate.the risks, you can evaluate.

What is the likelihood of the riskWhat is the likelihood of the riskevent occurring?event occurring?

Evaluate the risksEvaluate the risksEvaluate the risksEvaluate the risks

Almost certainAlmost certainLikelyLikelyModerateModerate

UnlikelyUnlikelyRare?Rare?

Almost certainAlmost certainLikelyLikelyModerateModerate

UnlikelyUnlikelyRare?Rare?

What is theWhat is theconsequenceconsequence

if the riskif the riskeventevent

occurs?occurs?

What is theWhat is theconsequenceconsequence

if the riskif the riskeventevent

occurs?occurs?

ExtremeExtremeVery highVery highModerateModerateLowLow

Negligible?Negligible?

ExtremeExtremeVery highVery highModerateModerateLowLow

Negligible?Negligible?

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You need to describe or to quantifyYou need to describe or to quantifyexactly what the Likelihood andexactly what the Likelihood andConsequence terms means to you.Consequence terms means to you.

This helps in ensuring a consistentThis helps in ensuring a consistentapproach in future risk assessment andapproach in future risk assessment andreview and monitoring.review and monitoring.

It promotes a common understandingIt promotes a common understandingwithin the Administration.within the Administration.


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After establishing After establishing LikelihoodLikelihood and andConsequenceConsequence you can use a table like you can use a table likethis to set a level of risk.this to set a level of risk.


Extreme Very high Moderate Low Negligible

Almostcertain

Severe Severe High Major Moderate

Likely Severe High Major Significant Moderate

Moderate High Major Significant Moderate Low

Unlikely Major Significant Moderate Low Very low

Rare Significant Moderate Low Very low Very Low

You must define what these risk levels mean toYou must define what these risk levels mean toyou.you.

You must define what these risk levels mean toYou must define what these risk levels mean toyou.you.

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Low and very low level risks can normallyLow and very low level risks can normallybe accepted, subject to on-goingbe accepted, subject to on-goingmonitoring.monitoring.

All other risks are included in theAll other risks are included in themanagement plan.management plan.

The plan catalogues the risks, the level ofThe plan catalogues the risks, the level ofrisk, and describes a treatment.risk, and describes a treatment.

The treatment is the action proposed,The treatment is the action proposed,(and perhaps the resources allocated).(and perhaps the resources allocated).

Treating the risksTreating the risksTreating the risksTreating the risks

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Targetedselections

Targetedselections

Development ofDevelopment ofRisk Profiles

Development ofDevelopment ofRisk Profiles

PhysicalPhysicalexaminationexamination

PhysicalPhysicalexaminationexaminationIndustry audits

Industry audits

RandomRandomexaminationsexaminations

RandomRandomexaminationsexaminations

ComplianceimprovementComplianceimprovement

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A common method of treating risks is todevelop risk profiling and targetingsystems.

This means in the case of goods selecting transactions for specificchecks, according to trader, agent,origin of goods, commodity code, dutyrate, routing, value, etc.

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Risk Profiles are developed as a means ofputting risk management into practice atthe Operational level.

A Risk Profile is normally specific to aCustoms office. It describes:

The risk areas

Assessment of the level of risk

The countermeasures adopted

Activation date and review dates

Means of measuring effectiveness.

A Risk Profile is normally specific to aCustoms office. It describes:

The risk areas

Assessment of the level of risk

The countermeasures adopted Activation date and review dates

Means of measuring effectiveness.

E d

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Using the profile information, consignmentsof goods, means of transport and peopleare targeted.

The profile information is used as the

basis for Selection Criteria.

Documents received and processedby Customs, i.e., cargo and

passenger manifests, goodsdeclarations, are comparedagainst the Selection Criteria

Documents received and processedby Customs, i.e., cargo and

passenger manifests, goodsdeclarations, are comparedagainst the Selection Criteria

SelectionCriteria

SelectionCriteria

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Selections are made by manual checks ofdocuments, or by using automated systems.

Selected transactions or movements aresubject to the actions detailed in the profileor plan, e.g., physical examination, audit, etc.

SelectionCriteria

SelectionCriteria

Documentsand Data

Documentsand Data

Selectedmovements

Selectedmovements

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Monitor & ReviewMonitor & ReviewMonitor & ReviewMonitor & Review

The initial assessment made of theexistence and level of risks must beevaluated on a regular basis.

You need to measure the effectivenessof risk profiles and update as necessary.

Reliable reporting of examination resultsReliable reporting of examination results Reliable reporting of examination resultsReliable reporting of examination results

Compliance measurement activitiesCompliance measurement activities Compliance measurement activitiesCompliance measurement activities

Feedback from the business communityFeedback from the business community Feedback from the business communityFeedback from the business community

Results analysis and data comparisonsResults analysis and data comparisons Results analysis and data comparisonsResults analysis and data comparisons

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The starting point is theThe starting point is the Action PlanAction Plan::

1.1. Allocate responsibilities, e.g., a RiskAllocate responsibilities, e.g., a RiskManagement Champion and a working party.Management Champion and a working party.

2.2. Evaluate how Risk Management processes can beEvaluate how Risk Management processes can bebest applied inbest applied in youryour national environment.national environment.

3.3. Survey existing skills and do a training needsSurvey existing skills and do a training needsassessment.assessment.

4.4. Catalogue existing sources of data orCatalogue existing sources of data orinformation that can help in identifying risks.information that can help in identifying risks.

Using Risk ManagementUsing Risk ManagementUsing Risk ManagementUsing Risk Management

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5.5. Flow chart existing processes.Flow chart existing processes.

6.6. Communicate and consult within Customs,Communicate and consult within Customs,with other Agencies, the trading communitywith other Agencies, the trading community

and transport industry.and transport industry.7.7. Obtain IT tools or set up processes forObtain IT tools or set up processes for

effectively operating a selectivity system.effectively operating a selectivity system.

8.8. Provide training in profiling/selectivity skills.Provide training in profiling/selectivity skills.

9.9. Test and gain confidence in the RiskTest and gain confidence in the RiskManagement process.Management process.

Using Risk ManagementUsing Risk ManagementUsing Risk ManagementUsing Risk Management

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This presentation endeavors to coverThis presentation endeavors to coverbriefly the concepts and the benefitsbriefly the concepts and the benefitsof using Risk Management practices,of using Risk Management practices,particularly within Customsparticularly within CustomsAdministrations.Administrations.

The processes and the many controlThe processes and the many controloptions deserve further study, andoptions deserve further study, andmany other sources of information onmany other sources of information onthis topic are available.this topic are available.

ControlControl ANDAND FacilitationFacilitationControlControl ANDAND FacilitationFacilitation

By.. Risk ManagementBy.. Risk ManagementBy.. Risk ManagementBy.. Risk ManagementEndEndEndEnd

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