RISK MANAGEMENT

SYSTEM
ROHIT ANAND
 WHY RISK MANAGEMENT

• Economic Reforms - Liberalization and deregulation

• Growing complexity and volumes of international trade
• Increasing workload without concurrent increases in resources
• Impact of Customs operations on the economy’s competitiveness
• Heightened expectations from stakeholders for greater efficiency and
effectiveness
• Global harmonization of Customs Procedures – Kyoto Convention,
International cooperation under the aegis of WCO
 WHY RISK MANAGEMENT CONTINUED….

• Customs have to reconcile two diametrically opposed demands

• Demand for continuous improvement in Customs facilitation
performance.
• Speedier, less intrusive, less costly and hassle free Customs
Clearance
• Demand for efficient and effective enforcement to address
• Threats to National security and public safety
• Threats to National economy – Dumping, Smuggling
• Threats to Revenue - Commercial Frauds
• In short, it is the Challenge of doing more with less
 RISK TYPES

• Contraband Risks
• Security related – arms and ammunition, explosives, WMD, drugs etc
• Other – outright smuggling of sensitive goods, concealment, pilferage etc
• Commercial Risks
• Duty related (examples)
a) Valuation related
b) Classification related
c) Notification related
d) Export Promotion Schemes related
e) Preferential tariff or FTA related
f) Anti-dumping related
 Non-duty related
 Requirement of I-E Policy and Allied Acts.
 RISK MANAGEMENT PROCESS

• Collection and Collation of Data & Information

• Analysis & Assessment of Risk
• Determination of Action to Treat Risk
• Monitor and Review Performance
This is a continuous, cyclical process
Data and information collected today become tomorrow's starting point for risk
management.
 BASIC APPROACH

• Trust the compliant clients and offer facilitation (Accredited

Clients Programme)
• Focus resources towards non-compliant clients and high risk
transactions to ensure effective enforcement directed towards
threats to
• National Security
• Economy
• Revenue
• Public safety, Environmental safety etc
 BASIC APPROACH CONTINUED….

• Trust compliant clients and offer upfront facilitation thro’ Accredited Clients Programme – Active
Facilitation
• Focus resources towards non-compliant clients and high risk transactions – Active Enforcement
• Address all known risks to national security, economy, revenue, public & environmental safety etc thro’
Targets, Interventions, Rules and CCRs
• Address unknown risk thro’ Randoms
• Facilitate those consignments where no known risk is detected, after exhaustion of randoms – Passive
facilitation
• Pre-clearance and post-clearance risk mitigation
• Constant review and monitoring of facilitation and enforcement strategies
 OBJECTIVES OF RISK MANAGEMENT

To achieve:
• Optimal balance between facilitation and enforcement.
• Effective utilization of resources – matching workload to resources.
• Standards of customs operations and processes comparable with the best international
practices
Reduce dwell time
Reduce transaction costs
Promote compliance
RISK MANAGEMENT FLOW CHART
 RISK MANAGEMENT PROCESS

• RMS will process bills of entry submitted and recommend the method of treatment to
the EDI system
• It could be
• First Check
• Both Assessment & Examination
• Only Assessment
• Only Examination
• No Assessment or Examination
 RISK MANAGEMENT TOOLS

 Accredited Clients Program (ACP)- Assured Facilitation

 Intelligence based interdiction of consignments – Targets
 Compliance measurement tool - Interventions
 Addressing known Risks through Risk Rules
 Random selection of consignments to cater to unknown risks.
 Compulsory Compliance Requirements (CCRs)
 Post Clearance Compliance Verification by Post Clearance Audit (PCA)
 SOME FREQUENTLY USED TERMS

• Facilitation – No assessment & no examination

• Risk area: A Customs process or area of operation where the risk resides. Eg.
Misdeclaration, Undervaluation,ADD, Notification etc
• Risk indicator: Any entity -individual (e.g. importer, CHA) or a country of origin,
commodity etc. which can be used as criteria to identify risk
• Risk factor: A variable, associated with a risk indicator that influences risk.
(i) Direct risk factor - data elements available in declarations (IGM
or B/E)
(ii) Derived risk factor - Statistical derivation drawn out the historical data pertaining
to Bills of Entry and IGMs
 ACCREDITED CLIENTS PROGRAM

• Part of Risk Management System

• Transparent criteria for accreditation
• Willingness to comply
• Capacity to comply
• Track record of clients very important
• Trade\excise turnovers,
• Accreditation based on application
• Assured facilitation in import\ export clearance
• Random checks to ensure unpredictability and have statistically valid compliance
measurement
• Intervention where necessary
 ACP - CONDITIONS

• Submission through ICEGATE

• Use of digital signature
• Duty payment through own account in the designated bank
• Continued maintenance of compliance levels
• Data quality of submissions
• Voluntary compliance
 RISK TREATMENT

• Pre-clearance treatment
• Document and/or goods examination
Contraband, Anti-dumping, Requirements under Allied Acts, High risk transaction above a threshold
risk level

• Post-clearance treatment
• Post clearance audit and other compliance verification
Lowest/low risk transactions, Accredited clients, transactions selected for post-clearance compliance
verification
 ORGANIZATION - NATIONAL

Headed by a National Risk Manager

Functions
 Ownership of the programme
 Research and Analysis
 Strategic Planning
 Support to Board
 Co-ordination with concerned agencies and Custom Houses
 Risk Management Cycle
 Operation and maintenance of RM databases
 Oversight of implementation
 Monitoring and Review
National Risk Management Committee comprising reps of DRI, DOV etc to guide the
management of the programme.
 ORGANIZATION - LOCAL

Commissioner, assisted by an Addl./Joint Commissioner to be designated as

the local risk manager
Functions
• Implementation
• Management of local issues in congruence with national objectives/priorities by using
tools of targeting and intervention
• Providing local inputs to Headquarters
• Reporting to Headquarters
To be assisted by a local risk management committee with reps of local units of DRI,
DOV etc.
THANK YOU