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About …

Risk Management Risk Management

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What is Risk Management? What is Risk Management? Who uses Risk Management? Who uses Risk Management? How is Risk Management used? How is Risk Management used? Risk Management in Customs Risk Management in Customs How do you use it in Customs? How do you use it in Customs?
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What is Risk Management? What is Risk Management?
• Good management practice • Process steps that enable improvement in decision making • A logical and systematic approach • Identifying opportunities • Avoiding or minimising losses
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End End What is Risk Management? What is Risk Management? Risk Management is the name given to a logical and systematic method of identifying. Mouse ‘Click’ to move on to the next slide ©UNCTAD 2000 Next Next 5 . analysing. treating and monitoring the risks involved in any activity or process.

End End What is Risk Management? What is Risk Management? Risk Management is a methodology that helps managers make best use of their available resources Mouse ‘Click’ to move on to the next slide ©UNCTAD 2000 Next Next 6 .

covering a wide range of activities or operations.End End Who uses Risk Management? Who uses Risk Management? Risk Management practices are widely used in public and the private sectors. These include: •• Finance and Finance and Investment Investment •• Insurance Insurance •• Health Care Health Care •• Public Public Institutions Institutions •• Governments Governments Next Next ©UNCTAD 2000 7 .

• The Risk Management process is well established. (International RM process standards.End End Who uses Risk Management? Who uses Risk Management? • Effective Risk Management is a recognised and valued skill. • Educational institutions have formal study courses and award degrees in Risk Management.) Next Next ©UNCTAD 2000 8 .

Next Next ©UNCTAD 2000 9 .End End Who uses Risk Management? Who uses Risk Management? Risk Management is now an integral part of business planning.

regardless of the type of business. There are in the RM process 7 steps Next Next ©UNCTAD 2000 10 .End End How is Risk Management used? How is Risk Management used? The Risk Management process steps are a generic guide for any organisation. activity or function.

End End The basic process steps are: Establish the context Establish the context Identify the risks Identify the risks Analyse the risks Analyse the risks Evaluate the risks Evaluate the risks Treat the risks Treat the risks Next Next ©UNCTAD 2000 11 .

so the process includes continuing: Monitoring and review Monitoring and review and Communication & consultation Communication & consultation Next Next ©UNCTAD 2000 12 .End End ‘Risk’ is dynamic and subject to constant change.

the nature of your business. the risks inherent in your business and your priorities. Communicate & consult Communicate & consult ©UNCTAD 2000 Next Next 13 .End End The Risk Management process: Establish the context Establish the context The strategic and organisational context in which risk management will take place. For example.

End End The Risk Management process: Identify the risks Identify the risks Defining types of risk. (i. ‘Strategic’ risks to the goals and objectives of the organisation. • Identifying the stakeholders. future developments.e. Monitor and review Monitor and review Communicate & consult Communicate & consult ©UNCTAD 2000 Next Next 14 . for instance.who is involved or affected).. • Past events.

cost or consequences of that event occurring? (Economic. political.End End The Risk Management process: Analyse the risks Analyse the risks How likely is the risk event to happen? (Probability and frequency?) What would be the impact. social?) Monitor and review Monitor and review Communicate & consult Communicate & consult ©UNCTAD 2000 Next Next 15 .

by risk category and rated by likelihood and possible cost or consequence. Monitor and review Monitor and review Communicate & consult Communicate & consult ©UNCTAD 2000 Next Next 16 . Determine inherent levels of risk.End End The Risk Management process: Evaluate the risks Evaluate the risks Rank the risks according to management priorities.

(i.e. financial and technical) • Risk acceptance.End End The Risk Management process: Treat the risks Treat the risks Develop and implement a plan with specific counter-measures to address the identified risks.. low risks) Next Next ©UNCTAD 2000 17 . Consider: • Priorities (Strategic and operational) • Resources (human.

End End The Risk Management process: Treat the risks Treat the risks Document your risk management plan and describe the reasons behind selecting the risk and for the treatment chosen. monitoring or evaluation processes. Monitor and review Monitor and review Communicate & consult Communicate & consult ©UNCTAD 2000 Next Next 18 . and assumptions on residual risk. Record allocated responsibilities.

Communicate & consult Communicate & consult ©UNCTAD 2000 Next Next 19 . prioritising and treating risks. (e. the business environment. must be regularly reviewed.End End The Risk Management process: Monitor and review Monitor and review In identifying. organisations make assumptions and decisions based on situations that are subject to change. or government policies). Risk Management policies and decisions Risk Management policies and decisions must be regularly reviewed. trading patterns..g.

End End The Risk Management process: Monitor and review Monitor and review Risk Managers must monitor activities and processes to determine the accuracy of planning assumptions and the effectiveness of the measures taken to treat the risk. audit. Communicate & consult Communicate & consult ©UNCTAD 2000 Next Next 20 . compliance measurement. Methods can include data evaluation.

End End Mon tor Moniitoring a nd re ing a d reviiew n v ew Establish the context Establish the context Identify the risks Identify the risks Analyse the risks Analyse the risks Evaluate the risks Evaluate the risks Treat the risks Treat the risks Comm Comm un uniicatio cation & n& c onsu consu lta ltatiion t on Next Next 21 The Risk Management process: ©UNCTAD 2000 .

Risk management helps in matching Customs priorities to resources. Administrations provide facilitation while maintaining control over the international movement of goods and persons. Next Next ©UNCTAD 2000 22 .End End Risk Management in Customs Risk Management in Customs Customs administrations have turned increasingly to Risk Management as an effective means of meeting national objectives.

e..End End Risk Management in Customs Risk Management in Customs International Organisations encourage and support the adoption of modern Customs control techniques. ©UNCTAD 2000 Next Next 23 . using Risk Management principles.g.. • WTO/Kyoto Convention. • APEC Sub-Committee on Customs Procedures. • Transport Industry representative bodies.

operational or tactical.u su -u Next Next ©UNCTAD 2000 24 Strategic: Risks to Strategic: Risks to . environment. l a sua l revenue. geeconomic).g.End End Risk Management in Customs Risk Management in Customs Risk management within Customs can be strategic. er t ng o y lon lly lrevenue.g. health. es iies e.s(social or restrictions. erm t erm r economic).prohibitions g rate st(social or trat restrictions. environment. Customs goals and objectives. health. . Customs goals and objectives.prohibitionseand gand e...

monitoring and review. ©UNCTAD 2000 Operational: Decisions Operational: Decisions Next Next 25 . with the m str a with the assessed risks. r m str te r assessed Deployment of resources.me d . iium te of resources.memonitoring and review.End End Risk Management in Customs Risk Management in Customs Risk management within Customs can be strategic. d um Deployment . operational or tactical. and action plans and action plans on measures taken giiedeal on measures taken to sdeal to te ge s a te risks.

to approved procedures. working within situations. officers at their workplace. Next Next ©UNCTAD 2000 26 Tactical: Used by Tactical: Used by . to deal with immediate s to deal with tegiies immediate ge stra te within situations. operational or tactical. working rm stra e t m ort setr parameters and tte . officers at their workplace.sh to approved procedures.sh or set parameters and .End End Risk Management in Customs Risk Management in Customs Risk management within Customs can be strategic.

by facilitating the movement of goods. Next Next ©UNCTAD 2000 27 . ships. • Makes more effective use of existing skills and experience – giving better results. • Improves the quality of Customs controls – information and accountability. aircraft and people – when rated low risk.End End Risk Management in Customs Risk Management in Customs Why you should use Risk Management: Why you should use Risk Management: • Economic benefits.

Next Next ©UNCTAD 2000 28 .End End Risk Management in Customs Risk Management in Customs Why you should use Risk Management: Why you should use Risk Management: The process helps Administrations focus on priorities and in decisions on deploying limited resources to deal with the highest risks.

End End How do you use it in Customs? How do you use it in Customs? Where do you start? Where do you start? The first step is to look at your Customs context. • What is the role of Customs? • What are your national priorities and the expectations of the government and the public? • What is the nature of your operational environment? Next Next ©UNCTAD 2000 29 .

End End How do you use it in Customs? How do you use it in Customs? The next steps in the Risk Management process are to:• Identify the risks • Analyse the risks. if you are just starting on Risk Management planning: Who does this? Who does this? Where does the information come from? Where does the information come from? Next Next ©UNCTAD 2000 30 . and • Evaluate the risks. … but.

•Form a Risk Management Committee. representative of operational areas. including experience and analytical skills. •Determine operating procedures.End End Who does the Risk Assessment? Who does the Risk Assessment? Responsibilities must be allocated: •Appoint a Risk Management champion with appropriate qualifications. Next Next ©UNCTAD 2000 31 . •Conduct Risk Management Workshops.

End End Sources of information for Risk Assessments Sources of information for Risk Assessments 1. e. the demand for prohibited goods. high duty rates or quantity controls. such as drugs.g.. Identify commodity or control risks. Research existing databases and records on commodity and trader histories. pornography. 3. Evaluate current procedures to identify potential control weaknesses. traffic in CITES wildlife. 2. Next Next ©UNCTAD 2000 32 .

you can evaluate.End End Evaluate the risks Evaluate the risks After identifying and analysing the risks. • What is the likelihood of the risk event occurring? Extreme ••Extreme Almost certain ••Almost certain Very high ••Very high Likely ••Likely Moderate ••Moderate What is the What is the Moderate ••Moderate consequence Low ••Low consequence Unlikely ••Unlikely if the risk Negligible? ••Negligible? if the risk event Rare? ••Rare? event occurs? occurs? Next Next ©UNCTAD 2000 33 .

This helps in ensuring a consistent approach in future risk assessment and review and monitoring. Next Next ©UNCTAD 2000 34 . It promotes a common understanding within the Administration.End End Evaluate the risks Evaluate the risks You need to describe or to quantify exactly what the ‘Likelihood’ and ‘Consequence’ terms means to you.

End End Evaluate the risks Evaluate the risks After establishing ‘Likelihood’ and ‘Consequence’ you can use a table like this to set a level of risk. ©UNCTAD 2000 Next Next 35 . you. Extreme Almost certain Likely Moderate Unlikely Rare Severe Severe High Major Significant Very high Severe High Major Significant Moderate Moderate High Major Significant Moderate Low Low Major Significant Moderate Low Very low Negligible Moderate Moderate Low Very low Very Low You must define what these risk levels mean to You must define what these risk levels mean to you.

The plan catalogues the risks. All other risks are included in the management plan. Next Next ©UNCTAD 2000 36 . and describes a treatment. subject to on-going monitoring. (and perhaps the resources allocated).End End Treating the risks Treating the risks Low and very low level risks can normally be accepted. the level of risk. The treatment is the action proposed.

End End Treating the risks Treating the risks Development of Development of Risk Profiles Risk Profiles Industry audits Industry audits Random Random examinations examinations Targeted Targeted selections selections Physical Physical examination examination Compliance Compliance improvement improvement Next Next ©UNCTAD 2000 37 .

origin of goods. value. agent. etc.End End Treating the risks Treating the risks A common method of treating risks is to develop risk profiling and targeting systems. This means – in the case of goods – selecting transactions for specific checks. commodity code. Next Next ©UNCTAD 2000 38 . according to trader. duty rate. routing.

Means of measuring effectiveness. A Risk Profile is normally specific to a A Risk Profile is normally specific to a Customs office. It describes: •• The risk areas The risk areas •• •• •• •• ©UNCTAD 2000 Assessment of the level of risk Assessment of the level of risk The countermeasures adopted The countermeasures adopted Activation date and review dates Activation date and review dates Means of measuring effectiveness. Next Next 39 . It describes: Customs office.End End Treating the risks Treating the risks Risk Profiles are developed as a means of putting risk management into practice at the Operational level.

End End Treating the risks Treating the risks Using the profile information.. i.e. The profile information is used as the basis for Selection Criteria. i. goods Criteria Criteria declarations. cargo and by Customs. means of transport and people are targeted. are compared declarations.. are compared against the Selection Criteria against the Selection Criteria Next Next ©UNCTAD 2000 40 . Documents received and processed Documents received and processed by Customs. cargo and Selection Selection passenger manifests. consignments of goods.e. goods passenger manifests.

g. e. physical examination. Selected transactions or movements are subject to the actions detailed in the profile or plan.. etc. Next Next ©UNCTAD 2000 41 .End End Treating the risks Treating the risks Selection Selection Criteria Criteria Documents Documents and Data and Data Selected Selected movements movements Selections are made by manual checks of documents. audit. or by using automated systems.

You need to measure the effectiveness of risk profiles and update as necessary. •• Reliable reporting of examination results Reliable reporting of examination results •• Compliance measurement activities Compliance measurement activities •• Feedback from the business community Feedback from the business community •• Results analysis and data comparisons Results analysis and data comparisons ©UNCTAD 2000 Next Next 42 .End End Monitor & Review Monitor & Review The initial assessment made of the existence and level of risks must be evaluated on a regular basis.

g. e. ©UNCTAD 2000 Next Next 43 .End End Using Risk Management Using Risk Management The starting point is the Action Plan: 1. a Risk Management Champion and a working party. 1. 1. Allocate responsibilities.. Catalogue existing sources of data or information that can help in identifying risks. Survey existing skills and do a training needs assessment. Evaluate how Risk Management processes can be best applied in your national environment. 1.

Provide training in profiling/selectivity skills. Communicate and consult – within Customs. 1. with other Agencies. 1. Next Next ©UNCTAD 2000 44 . 1. Flow chart existing processes. Obtain IT tools or set up processes for effectively operating a selectivity system. Test and gain confidence in the Risk Management process. 1.End End Using Risk Management Using Risk Management 5. the trading community and transport industry.

particularly within Customs Administrations. Risk Management End By. The processes and the many control options deserve further study. Risk ManagementEnd ©UNCTAD 2000 45 ... Control AND Facilitation Control AND Facilitation By.End End This presentation endeavors to cover briefly the concepts and the benefits of using Risk Management practices. and many other sources of information on this topic are available.

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