End

End

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About

Risk
Risk Management
Management

UNCTAD 2000 2
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What
What is
is Risk
Risk Management?
Management?

Who
Who uses
uses Risk
Risk Management?
Management?

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

Risk
Risk Management
Management in
in Customs
Customs

How
How do
do you
you use
use it
it in
in Customs?
Customs?
Next
Next
Mouse Click to move on to the next slide
UNCTAD 2000 3
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What
What is
is Risk
Risk Management?
Management?

Good management practice

Process steps that enable improvement
in decision making
A logical and systematic approach
Identifying opportunities
Avoiding or minimising losses

Mouse Click to move on to the next slide Next

Next

UNCTAD 2000 4
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What
What is
is Risk
Risk Management?
Management?

Risk Management is the name given

to a logical and systematic method
of identifying, analysing, treating
and monitoring the risks involved in
any activity or process.

Mouse Click to move on to the next slide Next

Next

UNCTAD 2000 5
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What
What is
is Risk
Risk Management?
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 Next

Next

UNCTAD 2000 6
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Who
Who uses
uses Risk
Risk Management?
Management?

Risk Management Finance

Finance and
and
practices are widely used Investment
Investment
in public and the private Insurance
Insurance
sectors, covering a wide
range of activities or Health
Health Care
Care
operations.
Public
Public
These include: Institutions
Institutions
Governments
Governments
Next
Next

UNCTAD 2000 7
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Who
Who uses
uses Risk
Risk Management?
Management?

Effective Risk Management

is a recognised and valued skill.

Educational institutions have formal

study courses and award degrees in Risk
Management.

The Risk Management process is well

established. (International RM process
standards.)

Next
Next

UNCTAD 2000 8
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Who
Who uses
uses Risk
Risk Management?
Management?

Risk Management is
now an integral part of business
planning.

Next
Next

UNCTAD 2000 9
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How
How is
is Risk
Risk Management
Management used?
used?

The Risk Management

process steps are a
There are
generic guide for
any organisation, 7 steps
in the RM
regardless of the
process
type of business,
activity or function.

Next
Next
UNCTAD 2000 10
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The basic process steps are:

Establish
Establish the
the context
context

Identify
Identify the
the risks
risks

Analyse
Analyse the
the risks
risks

Evaluate
Evaluate the
the risks
risks

Treat
Treat the
the risks
risks

Next
Next

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Risk is dynamic and subject to constant

change, so the process includes
continuing:

Monitoring
Monitoring and
and review
review

and

Communication
Communication && consultation
consultation

Next
Next

UNCTAD 2000 12
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The Risk Management process:

Establish
Establish the
the context
context

The strategic and organisational context

in which risk management will take
place.
For example, the nature of your
business, the risks inherent in your
business and your priorities.

Communicate
Communicate && consult
consult Next
Next

UNCTAD 2000 13
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The Risk Management process:

Identify
Identify the
the risks
risks
Defining types of risk, for instance,
Strategic risks to the goals and
objectives of the organisation.
Identifying the stakeholders, (i.e.,who
is involved or affected).
Past events, future developments.
Monitor
Monitor and
and review
review
Communicate
Communicate && consult
consult Next
Next

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The Risk Management process:

Analyse
Analyse the
the risks
risks

How likely is the risk event to happen?

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

Monitor
Monitor and
and review
review
Communicate
Communicate && consult
consult Next
Next

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The Risk Management process:

Evaluate
Evaluate the
the risks
risks

Rank the risks according to

management priorities, by risk
category and rated by likelihood and
possible cost or consequence.
Determine inherent levels of risk.

Monitor
Monitor and
and review
review
Communicate
Communicate && consult
consult Next
Next

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The Risk Management process:

Treat
Treat the
the risks
risks

Develop and implement a plan with specific

counter-measures to address the
identified risks.
Consider:
Priorities (Strategic and operational)
Resources (human, financial and technical)
Risk acceptance, (i.e., low risks)
Next
Next

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The Risk Management process:

Treat
Treat the
the risks
risks
Document your risk management plan and
describe the reasons behind selecting the
risk and for the treatment chosen.
Record allocated responsibilities, monitoring
or evaluation processes, and assumptions on
residual risk.

Monitor
Monitor and
and review
review
Communicate
Communicate && consult
consult Next
Next

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The Risk Management process:

Monitor
Monitor and
and review
review
In identifying, prioritising and treating risks,
organisations make assumptions and decisions
based on situations that are subject to
change, (e.g., the business environment,
trading patterns, or government policies).
Risk
Risk Management
Management policies
policies and
and decisions
decisions
must
must be
be regularly
regularly reviewed.
reviewed.

Communicate
Communicate && consult
consult Next
Next

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The Risk Management process:

Monitor
Monitor and
and review
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.
Methods can include data evaluation,
audit, compliance measurement.

Communicate
Communicate && consult
consult Next
Next

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The Risk Management process:

atiioonn
onssuullttat
Establish
Establish the
the context
context
ing anndd rreevviieew
w

n && ccon
Identify
Identify the
the risks
risks

Analyse
Analyse the
the risks

icaattiioon
risks
Moonniittoorring a

Evaluate
Evaluate the
the risks

muunnic
risks

mm
Treat
Treat the
the risks
risks

CCoom
M

Next
Next

UNCTAD 2000 21
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Risk
Risk Management
Management in
in Customs
Customs
Customs administrations have turned
increasingly to Risk Management as an
effective means of meeting national
objectives.
Administrations provide facilitation while
maintaining control over the international
movement of goods and persons.
Risk management helps in matching Customs
priorities to resources.

Next
Next

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Risk
Risk Management
Management in
in Customs
Customs

International Organisations encourage and

support the adoption of modern Customs
control techniques, using Risk Management
principles., e.g.,

WTO/Kyoto Convention.

APEC Sub-Committee on Customs

Procedures.

Transport Industry representative bodies.

Next
Next

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Risk
Risk Management
Management in
in Customs
Customs

Risk management within Customs can be

strategic, operational or tactical.

Strategic:
Strategic: Risks
Risks to
to
Customs
Customs goals goals andand objectives,
objectives,
e.g.,prohibitions g i
and eess
e.g.,prohibitions a teeand
g i
s rra t
t(social
t
restrictions,
restrictions, r mm s (social or
or
t
rr tee r
n g
ge
economic),
e
economic), health,
health,
y l o
lo n
u a lllly revenue,
revenue, environment.
environment.
u ssu a
-- u
Next
Next

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Risk
Risk Management
Management in
in Customs
Customs

Risk management within Customs can be

strategic, operational or tactical.

Operational:
Operational: Decisions
Decisions
and
and action
action plansplans
on
on measures
measures takentaken to
gto
ie
iesdeal
sdeal
a t e
e g
rrat risks.
with
with thethe m sst
assessed
t
assessed risks.
te r
r m
e of resources;
u m
Deployment
i
ddiu m t
Deployment
m ee of resources;
-- m monitoring and review.
monitoring and review.
Next
Next

UNCTAD 2000 25
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Risk
Risk Management
Management in
in Customs
Customs

Risk management within Customs can be

strategic, operational or tactical.

Tactical:
Tactical: Used
Used by
by
officers
officers at at their
their workplace,
workplace,
to
to deal
deal with
withaimmediate
e i e
immediate
g i ess
s trr atteg
situations,
situations,
t e r
rmm st
working
working within
within
r t t e
-- sshhoortset
set parameters
parameters and and
to
to approved
approved procedures.
procedures.
Next
Next

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Risk
Risk Management
Management in
in Customs
Customs

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

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Risk
Risk Management
Management in
in Customs
Customs

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

The process helps Administrations

focus on priorities and in decisions on
deploying limited resources to deal with
the highest risks.

Next
Next

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How
How do
do you
you use
use it
it in
in Customs?
Customs?
Where
Where do
do you
you start?
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
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How
How do
do you
you use
use it
it in
in Customs?
Customs?
The next steps in the Risk Management
process are to:-
Identify the risks
Analyse the risks; and
Evaluate the risks,
but, if you are just starting on Risk
Management planning: Who
Who does
does this?
this?
Where
Where does
does the
the information
information come
come from?
from?
Next
Next

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

Next
Next

UNCTAD 2000 31
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Sources
Sources of
of information
information for
for Risk
Risk Assessments
Assessments
1. Identify commodity or control risks;
e.g., high duty rates or quantity
controls, the demand for prohibited
goods, such as drugs, pornography,
traffic in CITES wildlife.
2. Research existing databases and
records on commodity and trader
histories.
3. Evaluate current procedures to identify
potential control weaknesses.
Next
Next

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

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Evaluate
Evaluate the
the risks
risks

You need to describe or to quantify

exactly what the Likelihood and
Consequence terms means to you.

This helps in ensuring a consistent

approach in future risk assessment and
review and monitoring.

It promotes a common understanding

within the Administration.

Next
Next

UNCTAD 2000 34
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Evaluate
Evaluate the
the risks
risks
After establishing Likelihood and
Consequence you can use a table like
this to set a level of risk.
Extreme Very high Moderate Low Negligible
Almost
Severe Severe High Major Moderate
certain
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
You must
must define
define what
what these
these risk
risk levels
levels mean
mean to
to
you.
you. Next
Next

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

Next
Next

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Treating
Treating the
the risks
risks

Development
Development ofof Targeted
Targeted
Risk
Risk Profiles
Profiles selections
selections

Physical
Physical
Industry
Industry audits
audits examination
examination

Random
Random Compliance
Compliance
examinations
examinations improvement
improvement

Next
Next

UNCTAD 2000 37
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Treating
Treating the
the risks
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, according to trader, agent,
origin of goods, commodity code, duty
rate, routing, value, etc.

Next
Next

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

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

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Treating
Treating the
the risks
risks

Selection
Selection Documents
Documents Selected
Selected
Criteria
Criteria and
and Data
Data movements
movements

Selections are made by manual checks of

documents, or by using automated systems.
Selected transactions or movements are
subject to the actions detailed in the profile
or plan, e.g., physical examination, audit, etc.
Next
Next

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

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

Next
Next

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Using
Using Risk
Risk Management
Management
5. Flow chart existing processes.
6. Communicate and consult within Customs,
with other Agencies, the trading community
and transport industry.
7. Obtain IT tools or set up processes for
effectively operating a selectivity system.
8. Provide training in profiling/selectivity skills.
9. Test and gain confidence in the Risk
Management process.

Next
Next

UNCTAD 2000 44
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This presentation endeavors to cover

briefly the concepts and the benefits
of using Risk Management practices,
particularly within Customs
Administrations.
The processes and the many control
options deserve further study, and
many other sources of information on
this topic are available.

Control
Control AND
AND Facilitation
Facilitation
By..
By.. Risk
Risk Management
Management
End
End

UNCTAD 2000 45