Risk Management

Risk Management or our ability to look into the future and create preparedness for a scenario we expect to meet in the future has never been more important to a modern border control agency.

Risk management could be defined as a logical, systematic method that identifies, analyzes, evaluates, treats, monitors, and communicates risks in a way that minimizes losses and maximizes opportunities.

Specifically with respect to border management agencies such as Customs, there are long-standing guidelines by established organizations like the World Customs Organization (WCO Kyoto Convention, Customs Control Guidelines 2000, Customs Risk Management Compendium) and the European Union (EU Standard Risk Management Framework 2007, that mandate the use of risk management in order to effectively set priorities and efficiently allocate resources necessary for maintaining a proper balance between controls and facilitating legitimate trade/passenger flow. Risk management can be used to determine where the greatest areas of exposure to risk exist, and can support management in deciding how to allocate limited resources effectively. In managing risk a balance must be struck between costs and benefits, as clearly it will not be cost effective to address all risks equally.

This is especially true since the last decade has been one which has been increasingly characterized by the impact of globalization:

• rapidly increasing internationalization and liberalization of trade – leading to a substantially increased volume of international trade, with the concomitant efficiencies of production and delivery (just in time delivery), sophistication and complexity of products and services and the growth of e-commerce;
• increasing avoidance, evasion and fraud - which manifests itself in a variety of different ways, some of which are tending to become increasingly organized and to take on an international dimension in concert with the internationalization of trade and the free movement of goods, people and capital;
• more security threats to society - particularly in the aftermath of the events of 9/11. Here again the threats are no longer local in nature but are tending to take on an international dimension.

This situation is not only of a different nature from anything seen previously. It is also of a considerably different dimension from anything faced previously. This poses a considerable challenge to the border management community - a challenge which is characterized by the apparently contradictory role of ensuring facilitation of trade and of maintaining the necessary controls in an increasingly 'hostile' environment. Border management work must therefore be organized in a way that takes into account the trans-national dimension of business, crime and terror.

KGH Border Services offers a Risk Management Model (RMM) which allows a structured approach towards risk management and brings in the importance of a relevant organization, training, cooperation and high-level support. The model is implemented as a process including risk management context and areas, risk identification, risk analysis, risk assessment, addressing the risks and monitoring and reviewing the process through compliance measurement.

Due to the magnitude and complexity of the information involved, support by technology is necessary throughout the entire risk analysis process – from identifying risk through to monitoring the effect of any intervention (i.e. control measure) with a view to iteratively improving the accuracy of the identification and quantification capability. Such technological support should be flexible and able to adapt to a variety of different types of risk analysis and border management tasks, such as pre-clearance, clearance, accreditation process and monitoring, post-clearance inspections, general intelligence work etc.

Finally, technology also needs to assist with the overall management and administration of the whole process, amongst other things, with a view to providing management with a complete picture of the ongoing process through the production of performance indicators.