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About About
Risk ManagementRisk Management
Risk ManagementRisk Management
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What is Risk Management?What is Risk Management?
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
What is Risk Management?What is Risk Management?
What is Risk Management?What is Risk Management?
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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.
What is Risk Management?What is Risk Management?
What is Risk Management?What is Risk Management?
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Risk Management is a methodology
that helps managers make best use oftheir available resources
What is Risk Management?What is Risk Management?
What is Risk Management?What is Risk Management?
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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.)
Who uses Risk Management?Who uses Risk Management?Who uses Risk Management?Who uses Risk Management?
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Risk Management isnow an integral part of business
planning.
Who uses Risk Management?Who uses Risk Management?Who uses Risk Management?Who uses Risk Management?
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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
Establish the contextEstablish the context
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The Risk Management process:
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.
Identify the risksIdentify the risks
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The Risk Management process:
Communicate & consultCommunicate & consultMonitor and reviewMonitor and review
Analyse the risksAnalyse the risks
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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The Risk Management process:
Communicate & consultCommunicate & consultMonitor and reviewMonitor and review
Evaluate the risksEvaluate the risks
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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The Risk Management process:
Treat the risksTreat the risks
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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The Risk Management process:
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.
Communicate & consultCommunicate & consultMonitor and reviewMonitor and review
Treat the risksTreat the risks
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The Risk Management process:
Communicate & consultCommunicate & consult
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.
Communicate & consultCommunicate & consult
Monitor and reviewMonitor and review
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The Risk Management process:
Establish the contextEstablish the context
Identify the risksIdentify the risks
Analyse the risksAnalyse the risks
Evaluate the risksEvaluate the risks
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.
Risk Management in CustomsRisk Management in CustomsRisk Management in CustomsRisk Management in Customs
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Risk management within Customs can beRisk management within Customs can bestrategic, operational or tactical.strategic, operational or tactical.
Risk Management in CustomsRisk Management in CustomsRisk Management in CustomsRisk Management in Customs
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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Risk management within Customs can beRisk management within Customs can bestrategic, operational or tactical.strategic, operational or tactical.
Risk Management in CustomsRisk Management in CustomsRisk Management in CustomsRisk Management in Customs
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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Risk management within Customs can beRisk management within Customs can bestrategic, operational or tactical.strategic, operational or tactical.
Risk Management in CustomsRisk Management in CustomsRisk Management in CustomsRisk Management in Customs
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.
Risk Management in CustomsRisk Management in CustomsRisk Management in CustomsRisk Management in Customs
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.
Risk Management in CustomsRisk Management in CustomsRisk Management in CustomsRisk Management in Customs
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:-
Identify the risksIdentify the risks
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.
Evaluate the risksEvaluate the risksEvaluate the risksEvaluate the risks
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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.
Evaluate the risksEvaluate the risksEvaluate the risksEvaluate the risks
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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Treating the risksTreating the risksTreating the risksTreating the risks
Targetedselections
Targetedselections
Development ofDevelopment ofRisk Profiles
Development ofDevelopment ofRisk Profiles
PhysicalPhysicalexaminationexamination
PhysicalPhysicalexaminationexaminationIndustry audits
Industry audits
RandomRandomexaminationsexaminations
RandomRandomexaminationsexaminations
ComplianceimprovementComplianceimprovement
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Treating the risksTreating the risksTreating the risksTreating the risks
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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Treating the risksTreating the risksTreating the risksTreating the risks
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.
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Treating the risksTreating the risksTreating the risksTreating the risks
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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Treating the risksTreating the risksTreating the risksTreating the risks
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