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About About
Risk ManagementRisk Management
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Risk Management
³Risk Management is the Identification,
Analysis and Economic Control of those
RISKS which can Threaten the Assets
(Property, Human) or the Earning
Capacity of an Enterprise´
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Need for Risk Management
Uncertainty in Enterprise
Growing Complexity in Business Environment
Statutory/ Legal Obligations
Social Obligations
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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?
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Excellent management practice.
Process steps that enable improvementin decision making.
A logical and systematic approach.
Identifying opportunities. Avoiding or minimising losses.
What is Risk ManagementWhat 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?
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Risk Management is amethodology that helps managersmake best use of their available
resources
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?
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 skilled system.
Educational institutions have formalstudy courses and award degrees in RiskManagement.
TheRisk Management process is wellestablished. (International RM process
standards.)
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?
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The Risk Management process
steps is a guide for anyorganisation, regardless ofthe type of business, activityor function.
How is Risk Management used?How is Risk Management used?
There are
77 stepsin the RMprocess
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The basic process steps are:
Establish the context
Identify the risks
Analyse the risks
Evaluate the risks
Treat the risks
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¶Risk· is dynamic and subject to constantchange, so the process includes:
Communication & consultation
Monitoring and review
and
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The Risk Management process:
The strategic and organisational contextin which risk management will takeplace.
For example, the nature of yourbusiness, the risks inherent in yourbusiness and your priorities.
Establish the context
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The Risk Management process:
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 risks
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The Risk Management process:
Analyse 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:
Evaluate the risks
Rank the risks according tomanagement priorities, by riskcategory and rated by likelihood and
possible cost or consequence.
Determine inherent levels of risk.
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The Risk Management process:
Treat 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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TheRisk Management process:
Document your risk management plan anddescribe the reasons behind selecting therisk and for the treatment chosen.
Record allocated responsibilities, monitoringor evaluation processes, and assumptions onresidual risk.
Treat the risks
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The Risk Management process:
Risk Management policies and decisionsmust be regularly reviewed.
Monitor 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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The Risk Management process:
Risk Managers must monitor activities andprocesses to determine the accuracy ofplanning assumptions and the effectiveness
of the measures taken to treat the risk.Methods can include data evaluation,audit, compliance measurement.
Monitor and review
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The Risk Management process:
Establish the context
Identify the risks
Analyse the risks
Evaluate the risks
Treat the risks
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Responsibilities must be allocated:Responsibilities must be allocated:
Appoint a Risk Management champion withAppoint a Risk Management champion with
appropriate qualifications, includingappropriate qualifications, includingexperience 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 prohibited
goods, such as drugs, traffic in CITIES,goods, such as drugs, traffic in CITIE
S,wildlife.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 analyzing the risks,After identifying and analyzing the risks,you can evaluate.you can evaluate.
What is the likelihood of the risk eventWhat is the likelihood of the risk eventoccurring?occurring?
Evaluate the risksEvaluate the risksEvaluate the risksEvaluate the risks
Almost certainAlmost certainLikelyLikelyModerateModerate
UnlikelyUnlikelyRare?Rare?
Almost certainAlmost certainLikelyLikelyModerateModerate
UnlikelyUnlikelyRare?Rare?
What is theWhat is theconsequenceconsequenceif the riskif the risk
eventeventoccurs?occurs?
What is theWhat is theconsequenceconsequenceif the riskif the risk
eventeventoccurs?occurs?
ExtremeExtremeVery highVery highModerateModerateLowLow
Negligible?Negligible?
ExtremeExtremeVery highVery highModerateModerateLowLow
Negligible?Negligible?
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This helps in ensuring a consistent approachThis helps in ensuring a consistent approach
in future risk assessment and review andin future risk assessment and review andmonitoring.monitoring.
It promotes a common understanding withinIt promotes a common understanding withinthe Administration.the Administration.
Evaluate the risksEvaluate the risksEvaluate the risksEvaluate the risks
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After establishing ¶After establishing ¶LikelihoodLikelihood· and· and¶¶ConsequenceConsequence· you can use a table like this to· you can use a table like this toset a level of risk.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 to you. You must define what these risk levels mean to you. You must define what these risk levels mean to you. You must define what these risk levels mean to you.
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Low and very low level risks can normallyLow and very low level risks can normallybe accepted, subject to onbe accepted, subject to on--goinggoingmonitoring.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 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
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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 effectiveness ofrisk 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 processesEvaluate how Risk Management processescan be best applied incan be best applied in youryour nationalnationalenvironment.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 identifyingrisks.risks.
Using Risk ManagementUsing Risk Management
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5.5. Flow chart existing processes.Flow chart existing processes.
6.6. Communicate and consultCommunicate and consult ²² within Customs,within Customs,with other Agencies, the trading communitywith other Agencies, the trading communityand transport industry.and transport industry.
7.7. Obtain IT tools or set up processes forObtain IT tools or set up processes foreffectively 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 Management