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Risk Management
Risk Management
Risk Management
Risk Management
Risk Management
Risk Management
Risk Management
Risk Management
Risk Management
Risk Management
Risk Management
Risk Management
Risk Management
Risk Management
Risk Management
Risk Management
Risk Management
Risk Management
Risk Management
Risk Management
Risk Management
Risk Management
Risk Management
Risk Management
Risk Management
Risk Management
Risk Management
Risk Management
Risk Management
Risk Management
Risk Management
Risk Management
Risk Management
Risk Management
Risk Management
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Risk Management

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  • 1. ©UNCTAD 2000 1 EndEndEndEnd
  • 2. ©UNCTAD 2000 2 EndEndEndEnd About … Risk ManagementRisk ManagementRisk ManagementRisk Management
  • 3. ©UNCTAD 2000 3 EndEndEndEnd Mouse ‘Click’ to move on to the next slide NextNextNextNext 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 CustomsRisk 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?
  • 4. ©UNCTAD 2000 4 EndEndEndEnd Mouse ‘Click’ to move on to the next slide NextNextNextNext • Good management practice • Process steps that enable improvement in 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?
  • 5. ©UNCTAD 2000 5 EndEndEndEnd Mouse ‘Click’ to move on to the next slide NextNextNextNext 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. What is Risk Management?What is Risk Management?What is Risk Management?What is Risk Management?
  • 6. ©UNCTAD 2000 6 EndEndEndEnd Mouse ‘Click’ to move on to the next slide NextNextNextNext Risk Management is a methodology that helps managers make best use of their available resources What is Risk Management?What is Risk Management?What is Risk Management?What is Risk Management?
  • 7. ©UNCTAD 2000 7 EndEndEndEnd NextNextNextNext Risk Management practices are widely used in public and the private sectors, covering a wide range of activities or operations. These include: Who uses Risk Management?Who uses Risk Management?Who uses Risk Management?Who uses Risk Management? • Finance and Investment • Insurance • Health Care • Public Institutions • Governments • Finance and Investment • Insurance • Health Care • Public Institutions • Governments
  • 8. ©UNCTAD 2000 8 EndEndEndEnd NextNextNextNext • Effective Risk ManagementEffective 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.) Who uses Risk Management?Who uses Risk Management?Who uses Risk Management?Who uses Risk Management?
  • 9. ©UNCTAD 2000 9 EndEndEndEnd NextNextNextNext Risk Management is now an integral part of business planning. Who uses Risk Management?Who uses Risk Management?Who uses Risk Management?Who uses Risk Management?
  • 10. ©UNCTAD 2000 10 EndEndEndEnd The Risk Management process steps are a generic guide for any 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? NextNextNextNext There are 77 steps in the RM process
  • 11. ©UNCTAD 2000 11 EndEndEndEnd NextNextNextNext 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
  • 12. ©UNCTAD 2000 12 EndEndEndEnd NextNextNextNext ‘Risk’ is dynamic and subject to constant change, so the process includes continuing: Communication & consultationCommunication & consultation Monitoring and reviewMonitoring and review and
  • 13. ©UNCTAD 2000 13 EndEndEndEnd NextNextNextNext The Risk Management process: 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 & consultCommunicate & consult Establish the contextEstablish the context
  • 14. ©UNCTAD 2000 14 EndEndEndEnd NextNextNextNext The Risk Management process: Communicate & consultCommunicate & consult Monitor and reviewMonitor and review 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. Identify the risksIdentify the risks
  • 15. ©UNCTAD 2000 15 EndEndEndEnd NextNextNextNext The Risk Management process: Communicate & consultCommunicate & consult Monitor 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 or consequences of that event occurring? (Economic, political, social?)
  • 16. ©UNCTAD 2000 16 EndEndEndEnd NextNextNextNext The Risk Management process: Communicate & consultCommunicate & consult Monitor and reviewMonitor and review Evaluate the risksEvaluate the 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.
  • 17. ©UNCTAD 2000 17 EndEndEndEnd NextNextNextNext The Risk Management process: Treat the risksTreat the 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)
  • 18. ©UNCTAD 2000 18 EndEndEndEnd NextNextNextNext The Risk Management process: 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. Communicate & consultCommunicate & consult Monitor and reviewMonitor and review Treat the risksTreat the risks
  • 19. ©UNCTAD 2000 19 EndEndEndEnd NextNextNextNext The Risk Management process: Communicate & consultCommunicate & consult Risk Management policies and decisions must be regularly reviewed. Risk Management policies and decisions must be regularly reviewed. Monitor and reviewMonitor and 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).
  • 20. ©UNCTAD 2000 20 EndEndEndEnd NextNextNextNext The Risk Management process: 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 & consultCommunicate & consult Monitor and reviewMonitor and review
  • 21. ©UNCTAD 2000 21 EndEndEndEnd NextNextNextNext 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 risks Monitoringandreview Monitoringandreview Communication&consultation Communication&consultation
  • 22. ©UNCTAD 2000 22 EndEndEndEnd NextNextNextNext 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 CustomsRisk management helps in matching Customs priorities to resources.priorities to resources. Risk Management in CustomsRisk Management in CustomsRisk Management in CustomsRisk Management in Customs
  • 23. ©UNCTAD 2000 23 EndEndEndEnd NextNextNextNext International Organisations encourage andInternational Organisations encourage and support the adoption of modern Customssupport the adoption of modern Customs control 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
  • 24. ©UNCTAD 2000 24 EndEndEndEnd NextNextNextNext Risk management within Customs can beRisk management within Customs can be strategic, operational or tactical.strategic, operational or tactical. Risk Management in CustomsRisk Management in CustomsRisk Management in CustomsRisk Management in Customs Strategic:Strategic: Risks to Customs goals and objectives, e.g.,prohibitions and restrictions, (social or economic), health, revenue, environment. Strategic:Strategic: Risks to Customs goals and objectives, e.g.,prohibitions and restrictions, (social or economic), health, revenue, environment. - usually longer term strategies - usually longer term strategies
  • 25. ©UNCTAD 2000 25 EndEndEndEnd NextNextNextNext Risk management within Customs can beRisk management within Customs can be strategic, operational or tactical.strategic, operational or tactical. Risk Management in CustomsRisk Management in CustomsRisk Management in CustomsRisk Management in Customs Operational:Operational: Decisions and action plans on measures taken to deal with the assessed risks. Deployment of resources; monitoring and review. Operational:Operational: Decisions and action plans on measures taken to deal with the assessed risks. Deployment of resources; monitoring and review.- medium term strategies - medium term strategies
  • 26. ©UNCTAD 2000 26 EndEndEndEnd NextNextNextNext Risk management within Customs can beRisk management within Customs can be strategic, operational or tactical.strategic, operational or tactical. Risk Management in CustomsRisk Management in CustomsRisk Management in CustomsRisk Management in Customs Tactical:Tactical: Used by officers at their workplace, to deal with immediate situations, working within set parameters and to approved procedures. Tactical:Tactical: Used by officers at their workplace, to deal with immediate situations, working within set parameters and to approved procedures. - short term strategies - short term strategies
  • 27. ©UNCTAD 2000 27 EndEndEndEnd NextNextNextNext • Economic benefits, by facilitating theEconomic benefits, by facilitating the movement of goods, ships, aircraft andmovement of goods, ships, aircraft and people – 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:
  • 28. ©UNCTAD 2000 28 EndEndEndEnd NextNextNextNext The process helps AdministrationsThe process helps Administrations focus on priorities and in decisions onfocus on priorities and in decisions on deploying limited resources to deal withdeploying limited resources to deal with the 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:
  • 29. ©UNCTAD 2000 29 EndEndEndEnd NextNextNextNext 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 Customs context.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 the expectations of the government and theexpectations of the government and the public?public? • What is the nature of your operationalWhat is the nature of your operational environment?environment? Where do you start?Where do you start?Where do you start?Where do you start?
  • 30. ©UNCTAD 2000 30 EndEndEndEnd NextNextNextNext 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 Management process 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?
  • 31. ©UNCTAD 2000 31 EndEndEndEnd NextNextNextNext Responsibilities must be allocated:Responsibilities must be allocated: •Appoint a Risk Management champion withAppoint a Risk Management champion with appropriate 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?
  • 32. ©UNCTAD 2000 32 EndEndEndEnd NextNextNextNext 1.1. Identify commodity or control risks;Identify commodity or control risks; e.g., high duty rates or quantitye.g., high duty rates or quantity controls, the demand for prohibitedcontrols, the demand for prohibited goods, 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 and records on commodity and traderrecords on commodity and trader histories.histories. 3.3. Evaluate current procedures to identifyEvaluate current procedures to identify potential 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
  • 33. ©UNCTAD 2000 33 EndEndEndEnd NextNextNextNext After identifying and analysingAfter identifying and analysing the risks, you can evaluate.the risks, you can evaluate. • What is the likelihood of the riskWhat is the likelihood of the risk event occurring?event occurring? Evaluate the risksEvaluate the risksEvaluate the risksEvaluate the risks •Almost certainAlmost certain •LikelyLikely •ModerateModerate •UnlikelyUnlikely •Rare?Rare? •Almost certainAlmost certain •LikelyLikely •ModerateModerate •UnlikelyUnlikely •Rare?Rare? What is theWhat is the consequenceconsequence if the riskif the risk eventevent occurs?occurs? What is theWhat is the consequenceconsequence if the riskif the risk eventevent occurs?occurs? •ExtremeExtreme •Very highVery high •ModerateModerate •LowLow •Negligible?Negligible? •ExtremeExtreme •Very highVery high •ModerateModerate •LowLow •Negligible?Negligible?
  • 34. ©UNCTAD 2000 34 EndEndEndEnd NextNextNextNext You need to describe or to quantifyYou need to describe or to quantify exactly what the ‘Likelihood’ andexactly what the ‘Likelihood’ and ‘Consequence’ terms means to you.‘Consequence’ terms means to you. This helps in ensuring a consistentThis helps in ensuring a consistent approach in future risk assessment andapproach in future risk assessment and review and monitoring.review and monitoring. It promotes a common understandingIt promotes a common understanding within the Administration.within the Administration. Evaluate the risksEvaluate the risksEvaluate the risksEvaluate the risks
  • 35. ©UNCTAD 2000 35 EndEndEndEnd NextNextNextNext After establishing ‘After establishing ‘LikelihoodLikelihood’ and’ and ‘‘ConsequenceConsequence’ you can use a table like’ you can use a table like this 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 Almost certain 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 to you.you. You must define what these risk levels mean toYou must define what these risk levels mean to you.you.
  • 36. ©UNCTAD 2000 36 EndEndEndEnd NextNextNextNext Low and very low level risks can normallyLow and very low level risks can normally be accepted, subject to on-goingbe accepted, subject to on-going monitoring.monitoring. All other risks are included in theAll other risks are included in the management plan.management plan. The plan catalogues the risks, the level ofThe plan catalogues the risks, the level of risk, 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
  • 37. ©UNCTAD 2000 37 EndEndEndEnd NextNextNextNext Treating the risksTreating the risksTreating the risksTreating the risks Targeted selections Targeted selections Development ofDevelopment of Risk Profiles Development ofDevelopment of Risk Profiles PhysicalPhysical examinationexamination PhysicalPhysical examinationexaminationIndustry auditsIndustry audits RandomRandom examinationsexaminations RandomRandom examinationsexaminations Compliance improvement Compliance improvement
  • 38. ©UNCTAD 2000 38 EndEndEndEnd NextNextNextNext Treating the risksTreating the risksTreating the risksTreating 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, according to trader, agent, origin of goods, commodity code, duty rate, routing, value, etc.
  • 39. ©UNCTAD 2000 39 EndEndEndEnd NextNextNextNext Treating the risksTreating the risksTreating the risksTreating the risks Risk Profiles are developed as a means of putting risk management into practice at the Operational level. A Risk Profile is normally specific to a Customs 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 a Customs office. It describes: • The risk areas • Assessment of the level of risk • The countermeasures adopted • Activation date and review dates • Means of measuring effectiveness.
  • 40. ©UNCTAD 2000 40 EndEndEndEnd NextNextNextNext Treating the risksTreating the risksTreating the risksTreating the 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 received and processed by Customs, i.e., cargo and passenger manifests, goods declarations, are compared against the Selection Criteria Documents received and processed by Customs, i.e., cargo and passenger manifests, goods declarations, are compared against the Selection Criteria Selection Criteria Selection Criteria
  • 41. ©UNCTAD 2000 41 EndEndEndEnd NextNextNextNext Treating the risksTreating the risksTreating the risksTreating the risks 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. Selection Criteria Selection Criteria Documents and Data Documents and Data Selected movements Selected movements
  • 42. ©UNCTAD 2000 42 EndEndEndEnd NextNextNextNext Monitor & ReviewMonitor & ReviewMonitor & ReviewMonitor & 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 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
  • 43. ©UNCTAD 2000 43 EndEndEndEnd NextNextNextNext The starting point is theThe starting point is the Action PlanAction Plan:: 1.1. Allocate responsibilities, e.g., a RiskAllocate responsibilities, e.g., a Risk Management Champion and a working party.Management Champion and a working party. 2.2. Evaluate how Risk Management processesEvaluate how Risk Management processes can be best applied incan be best applied in youryour nationalnational environment.environment. 3.3. Survey existing skills and do a trainingSurvey existing skills and do a training needs assessment.needs assessment. 4.4. Catalogue existing sources of data orCatalogue existing sources of data or information that can help in identifyinginformation that can help in identifying risks.risks. Using Risk ManagementUsing Risk ManagementUsing Risk ManagementUsing Risk Management
  • 44. ©UNCTAD 2000 44 EndEndEndEnd NextNextNextNext 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 Risk Management process.Management process. Using Risk ManagementUsing Risk ManagementUsing Risk ManagementUsing Risk Management
  • 45. ©UNCTAD 2000 45 EndEndEndEnd This presentation endeavors to coverThis presentation endeavors to cover briefly the concepts and the benefitsbriefly the concepts and the benefits of using Risk Management practices,of using Risk Management practices, particularly within Customsparticularly within Customs Administrations.Administrations. The processes and the many controlThe processes and the many control options deserve further study, andoptions deserve further study, and many other sources of information onmany other sources of information on this 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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