The clearance of goods to enter a market is often considered a balance between facilitating and controlling. The latter is checking that the goods are compliant with all relevant rules and regulations, corresponding to legitimate regulatory objectives. This may include consumer health and safety, safeguarding the environment, compliance with social norms or aiming to achieve overarching objectives like the United Nation’s Sustainable Development Goals (SDGs). Risk management is the key method to achieve this balance. Unless absolutely every single shipment is to be physically verified, agencies will need to establish criteria to choose which shipments to control and which shipments to not to control. This will be through risk management.
Core concepts of risk management in regulatory systems
The first chapter is on regulation, explaining how and why Governments regulate. It recognizes the linkages of risk management with traders and how regulations impact their operations. It further provides some examples from the European Union (EU) on regulatory tools. Reforms to regulation which are now occurring widely are normally done with a view to respond to perceived risks. This is followed by a chapter on market surveillance which clearly explains that it would be impossible to control every shipment and it is necessary to target specific products, sectors and markets which would have the highest impact, using a risk-based selection method. This chapter outlines some of the criteria used in a risk-based approach and the methodologies of control and inspection.
The third chapter explains how customs agencies utilize risk profiling. Customs is often the agency at the border that performs controls for all relevant agencies. The chapter explains the different sources of data used for and the six phases required for risk profiling. It underlines that intelligence-driven risk indicators and relevant criteria is solely driven by the collection of data. Conformity assessment plays a key role in ensuring that products placed on the market are safe. This chapter establishes the importance of this role and follows with the various methods of conformity assessment, underlining that the method is based on an assessment of the risks that may arise as a result of non-compliance. It also provides the example of the EU conformity marking “CE.” There is not one sole Government agency which handles regulations linked to international trade; this is implied in the chapters above. In order to avoid over regulation or conflicting regulations, there is a need for a certain level of coordination. This could best be achieved as described in the next chapter through integrated risk management which incorporates a national strategy and a multi-layered roadmap. It also emphasized the importance of involving key stakeholders, including those from the private sector. This section closes with a detailed analysis of business risks which Government agencies would take into consideration in their risk analysis. It outlines the basis of business risks, then explains methodologies to address these (from a Government perspective). It provides detailed examples from the United Kingdom of Great Britain and Northern Ireland and Armenia.
Risk management in businesses
The next section considers risk from a private-sector perspective. It is important to underline that commercial operators have a financial interest in ensuring that their goods are compliant and that they avoid unnecessary security threats; their main interest is to trade their goods and reap the financial benefits – loss due to non-compliance or security threats would result in loss of revenue.
The first chapter in this section looks at how private sector companies integrate risk management into their internal processes. The types of risks outlined in this section may differ from the types of risks that Government would consider. However, this chapter demonstrates how technology and notably advanced compliance systems can assist in addressing these risks which could provide inspiration for Government agencies.
The following chapter turns the view of risk management to the supply chain notably international transportation. It demonstrates how electronic data exchange can contribute to data collection, increased transparency and minimizing errors, delays and disputes. It recognizes the key importance of compliance with regulations and also addresses security threats. The approach is again towards digitalization and how this can help to address potential risks. The chapter does also underline the importance of stable standards like those developed by the United Nations Centre for Trade Facilitation and Electronic Business (UN/CEFACT) to achieve the corresponding electronic solutions.
This section ends with a chapter on risk competence (for private or public sector). It explains that simply applying risk management tools is not sufficient for effective risk management; it is necessary to have a certain level of analysis and develop a strategy for the organization. The chapter develops elements of risk competence and how to acquire these skills.
Emerging issues
The next section provides a forwardlooking view of themes related to risk management. The first chapter on circular economy stresses that rational regulations are often better accepted by traders. It provides three case studies which highlight how a risk-based regulation helps to move towards a more circular economy. It concludes, remarking that some States may have capacity shortfalls, making it difficult to ensure proper monitoring and successful implementation.
The next chapter dives into regulations around artificial intelligence (AI) and the notion of residual risk. It takes the EU AI Act as a starting point. It reminds the important role of standards in demonstrating compliance and that there may not yet be stable standards on AI that can be used. Furthermore, the difficulty to analyze all of the potential functionalities and outcomes of an AI system makes testing compliance difficult. The chapter proposes how to evaluate residual risk for products with AI systems.
This section concludes with gender considerations for risk management. It underlines that hidden bias, including through scientific research and international mechanism, can perpetuate a detrimental gender bias. It explains that standards are not currently protecting women as well as they protect men. It provides a methodology used in Canada which could be used to help inform a risk management process that goes beyond gender-responsiveness.
Case study
The final section provides a case study from New Zealand which demonstrates how an electronic system has helped to assess the risk of non compliance. It outlines the types of interventions and the probability factors and technical factors built into the risk engine. It does underline the need for continuous review and update of the system.
Source: UNECE