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Technical Assistance Consultant’s Report
This consultant’s report does not necessarily reflect the views of ADB or the Government concerned, and ADB and the Government cannot be held liable for its contents. All the views expressed herein may not be incorporated into the proposed project’s design.
Project Number: 52049-002 August 2020
Islamic Republic of Pakistan: Preparing the Trade and Competitiveness Program
Prepared by
Sovereign Border Solutions
Cape Town, South Africa
For Pakistan Federal Board of Revenue
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29 Bell Crescent, Westlake Business Park, Cape Town, South Africa
Pakistan Integrated Risk Management System Deliverable: Integrated Risk Management Framework
Executive and Management Summary
August 2020 TA-9580 PAK: Preparing the Trade and Competitiveness Program - Integrated Risk Management System (52049-002)
ADB – Pakistan Integrated Risk Management System- Integrated Framework
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29 Bell Crescent, Westlake Business Park, Cape Town, South Africa
TABLE OF CONTENTS
1 GLOSSARY OF TERMS ...................................................................................................... 4
2 INTRODUCTION .................................................................................................................. 7
3 EXECUTIVE SUMMARY ...................................................................................................... 9
3.1 Overview ........................................................................................................................................ 11
3.2 Main Observations ......................................................................................................................... 15
3.3 The Framework for PSW IRMS ..................................................................................................... 16
3.4 IRMS Dependencies and Critical Success Factors (CSF) ............................................................ 22
3.5 Recommendations ......................................................................................................................... 23
3.6 Benefits of Risk Management ........................................................................................................ 25
3.7 Way Forward for an Integrated Risk Management System ........................................................... 28
4 MANAGEMENT SUMMARY............................................................................................... 30
4.1 Risk Management Overview .......................................................................................................... 30
4.2 Current Risk Management Capability Assessment ....................................................................... 40
4.3 Volumetrics .................................................................................................................................... 44
4.4 Governance Model ........................................................................................................................ 49
4.5 Technical Solution Design ............................................................................................................. 55
4.6 IRMS Roadmap ............................................................................................................................. 59
Copyright © 2020 Sovereign Border Solutions (SBS)
All rights reserved. This document is meant solely for use by SBS and its contracted clients. No part of this
document may be reproduced, distributed, or transmitted in any form or by any means, including photocopying,
recording, or other electronic or mechanical methods, without the prior written permission of SBS.
ADB – Pakistan Integrated Risk Management System- Integrated Framework
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29 Bell Crescent, Westlake Business Park, Cape Town, South Africa
1 GLOSSARY OF TERMS
Abbreviation Description
ADB Asia Development Bank
ANF Anti-Narcotics Force - Ministry of Narcotics Control
AQD Animal Quarantine Department - Ministry of National Food Security & Research
BPM Business Process Management
BPMN Business Process Modelling Notation
COE Centre of Excellence
COO Country of Origin
CRM Customer Relationship Management
CSF Critical Success Factor
DIQ DiagnostIQ: SBS bespoke tool for conducting diagnostic analysis
DPP Department of Plant Protection – Ministry of National Food Security & Research
DRAP Drug Regulatory Authority of Pakistan - Ministry of National Health Services, Regulations, & Coordination
FBR Federal Board of Revenue
FDB Fisheries Development Board - Ministry of National Food Security & Research
FSC&RD Federal Seed Certification & Registration Department - Ministry of National Food Security & Research
GA Government Agencies
GC Governing Council
GD Goods Declaration
GOP Government of Pakistan
HS Harmonised System
ICT Information and Communications Technology
IFC International Finance Corporation
IRMS Integrated Risk Management System
ISO International Organisation for Standardisation
KPIs Key Performance Indicators
ADB – Pakistan Integrated Risk Management System- Integrated Framework
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LPCO Licenses, Permits, Certificates and Others
MNC Ministry of Narcotics Control
NOC No Objection Certificate
NSW National Single Window
NTC National Targeting Centre
OGA Other Government Agency – Refers to agencies other than Customs and Revenue
PCs Phyto-sanitary Certificates
PCSIR Pakistan Council of Scientific and Industrial Research - Ministry of Science and Technology
PEC Pakistan Engineering Council - Ministry of Science and Technology
PMO Program Management Office – Customs Wing of FBR
PNAC Pakistan National Accreditation Council - Ministry of Science and Technology
PSI Pre-shipment Inspections
PSQCA Pakistan Standards & Quality Control Authority - Ministry of Science and Technology
PSW Pakistan Single Window
PSWC Pakistan Single Window Company
QA Quality Assurance
RA Risk Assessment
RACI “Responsible, Accountable, Consulted and Informed” Matrix
RM Risk Management
RMC Risk Management Committee
IRMS Integrated Risk Management System
SAFE Framework of Standards to Secure and Facilitate Trade
SBS Sovereign Border Solutions
SLA Service Level Agreement
SPS Sanitary and Phytosanitary
STA Strategic Threat Assessments
TEU Twenty-foot Equivalent Units
TFA Trade Facilitation Agreement
ADB – Pakistan Integrated Risk Management System- Integrated Framework
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TIP Trade Information Portal
UML Universal Modelling Language
UNCEFACT United Nations Centre for Trade Facilitation and Electronic Business
WCO World Custom Organisation
WTO World Trade Organisation
ADB – Pakistan Integrated Risk Management System- Integrated Framework
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2 INTRODUCTION
Pakistan ratified the WTO’s Agreement on
Trade Facilitation (2013) on 27th October 2015
and as such committed to the establishment of
Pakistan Single Window (PSW) as a ‘Category
C’ commitment with an implementation timeline
of five years with effect from 22nd February
2017. Pakistan Customs has been designated
as the ‘Lead Agency’ by the Office of the Prime
Minister’s for the development of this important
reform initiative. Accordingly, Pakistan
Customs- Federal Board of Revenue (FBR)
has established a Program Management Office
(PMO) in the Customs Wing to coordinate and
supervise this initiative.
A national single window (NSW) is a facility that
allows parties involved in trade and transport to
lodge standardised information and documents
with a single-entry point to fulfil all import,
export, transit and trade-related regulatory
requirements. The Pakistan SW (PSW) will
help reduce the time and cost of doing business
in Pakistan and make trade-related business
processes more efficient, transparent and
consistent. Pakistan Customs, with the
assistance of local and international experts,
developed the National SW (NSW) Roadmap
for implementation of this initiative. The experts
conducted a Situation Analysis, from
November 2017 to February 2018, to assess
the state of readiness of the Other Government
Agencies (OGAs) involved in regulation of
cross border trade that will be included in the
PSW in the first phase. These OGAs, to varying
degrees, apply regulations on trade which
generally are in the form of, or relate to,
issuance of licenses, permits, certificates, other
(exemptions and import / export or transit
approvals).
The situation analysis found that, while
Pakistan Customs uses an automated system
for risk management (RM) to apply risk-based
selectivity criteria for control of goods across
the international borders (in accordance with
1 World Bank Ease of Doing Business Report published in 2018 and PRAL data
WCO and WTO recommended best practices),
OGAs generally do not use any RM information
technology (IT) systems and only employ basic
techniques with regard to selectivity criteria.
Instead the OGAs generally rely on an intrusive
sampling and inspection system covering all
import/export and transit cargo, requiring multi-
layer verifications and approvals that
considerably slow down cargo clearance times.
On average, cargo clearance time and costs
per Twenty-foot Equivalent Unit (TEU) are as
follows: 216 hours and USD 417 for imports;
and, 113 hours and USD 406 for exports to
process the approximately 2.4 Million Twenty-
foot Equivalent Units (TEUs)1.
Efficacy of any developed NSW will remain a
serious concern if the OGAs and Customs
continue to function in isolation without
effective coordination in terms of risk-based
controls and inspections. In a SW environment,
all participating agencies must apply a system
of risk-based selectivity derived from a
structured Risk Management (RM) framework
to better target consignments posing a potential
risk, to ensure optimal and judicious utilisation
of resources for effective regulatory control.
Recognising this requirement, the PMO
supported by the International Finance
Corporation (IFC) engaged a consortium of
experts including Sovereign Border Solutions
(SBS) to develop the design document for
PSW. This document offered a framework to
progress the development of the PSW by
delivering the following:
1. Governance and operational business model;
2. Functional model and technical architecture;
3. Revenue model and fee structure; 4. Legal gap analysis and recommendations; 5. Change management &
communications/publicity strategy & plan; and
ADB – Pakistan Integrated Risk Management System- Integrated Framework
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6. Design of an implementation and procurement plan.
Following on the previous project and
contracted by the Asian Development Bank
(ADB), SBS was appointed as the prime
consultant to deliver the framework for the
Integrated Risk Management System (52049-
002) (“the Project”). The Project commenced
on November 2019 and was initially scheduled
to end in May 2020 but was extended (following
a delay due to the COVID -19 global
pandemic). The following Ministries and
Departments were covered under the scope of
the project:
1. Ministry of National Food Security & Research Department of Plant Protection (DPP), Federal Seed Certification &
Registration Department (FSC&RD), Animal Quarantine Department (AQD), Fisheries Development Board (FDB)
2. Ministry of National Health Services, Regulations, & Coordination Drug Regulatory Authority of Pakistan
(DRAP) 3. Ministry of Science and Technology
Pakistan Standards Quality Control Authority (PSQCA),
Pakistan Engineering Council (PEC), Pakistan Council of Scientific and
Industrial Research (PCSIR), Pakistan National Accreditation Council
(PNAC)
4. State Bank of Pakistan
5. Ministry of Narcotics Control (MNC)
Anti-Narcotics Force (ANF)
6. Federal Board of Revenue (FBR)
Pakistan Customs,
Inland Revenue
The Project commenced where the prior single
window project left off by conducting a gap
assessment of the risks faced by each
individual OGA (with particular emphasis on
those that make up 90% of the transaction
volume in terms of LPCOs and physical
inspections of cross border trade) and provide
an analysis of the capabilities each has with
regard to managing its respective risk.
The figure below presents an overview of the
nine milestones and deliverables of the project
which provide a logical progression that
includes, inter alia, the development of a
strategic risk matrix across all of the agencies,
a review of associated data to validate
conclusions and assumptions and to serve as
a basis for fact-based decision making, a
review of available solutions on the market, the
development of business requirements, high-
level solution design to support a “buy or build”
strategy, and finally, a framework, governance
model and implementation strategy and plan.
Further details on each deliverable within the
Project are depicted in Figure 1 below.
Figure 1: Summary of Deliverables
Environmental Gap Assessment1
Gap assessment report between current risk approaches (Customs and listed OGAs) and best practice capability risk management framework.
Deliverable: Gap Assessment Report
Pro
ject
Man
agem
en
t a
nd R
ep
ort
ing
10
R
ele
vant R
eport
Inputs
C
lient engagem
ent a
nd d
eliv
era
ble
ove
rsig
ht
Strategic Risk Matrix2
Strategic Risk Assessment overview and understanding across OGAs, including institutional awareness and treatment of threats and risks.
Deliverable: Strategic Risk Assessment
Data Analysis3
Data Analysis report on customs and OGA commodity, trader, volume and value data based on established methodology and references of similar exercises. This will include a stratified analysis of all goods imported, exported and transited through Pakistan in order to support enhancement of existing risk frameworks, profiles and rules. Deliverable: Data Analysis Report
High-Level Solution Design6
Technology agnostic high-level solution design and functional architecture for IRM solution.
Deliverable: Solution Design & Functional
Architecture
Implementation Roadmap9
IRMS implementation strategy and plan aligned with PSW roadmap and implementation plan incorporating case studies, analysis and assessment of various options, and recommendation on the optimal strategy.
Deliverable: Implementation Roadmap
and Plan
Business Requirements5
Business requirements specification incorporating risk related business requirements of all listed OGAs based on legislation, procedures
Deliverable: Business Requirements
Specification
Business Model7
Governance and operating model for Integrated Risk Management under the NSW including structure, reporting lines, required resources etc.
Deliverable: Business Model
Market Assessment4
Market assessment of available risk management solutions applicable to PNSW context using established methodology with references of similar assessments
Deliverable: Market Assessment Report
Integrated Risk Management Framework8
Integrated Risk Assessment/Management Framework and Policy Guidelines containing selectivity criteria for clearance of goods (import/export/transit) pre, during and post clearance that include key risk indicators etc. aligned with internationally accepted best practices and supported by an objective/verifiable analysis of the anticipated benefits in terms of time and cost savings for trade and for the relevant regulatory authorities post implementation
Deliverable: Integrated IRMS Framework
ADB – Pakistan Integrated Risk Management System- Business Requirements Document
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3 EXECUTIVE SUMMARY This document is the culmination of the project deliverables and serves to combine the assessment
results, outcomes and recommendations from the subsequent deliverables to present a structured way
forward for the IRMS project within the PSW program. It is presented in 2 separate documents in the
form of an overview and executive summary, followed by a management summary of each section.
The following table provides a navigation guide for each section of the document:
Executive Summary Highlighting the main outcomes, observations and strategic
recommendations, and benefits of Risk Management
Main Observations Presenting the main observations of the
assessment and analysis.
IRMS Framework
A summary of the framework required to
govern the IRMS as well as the business
requirements and technical solution design
Recommendations
Strategic, tactical and operational
recommendations resulting from the overall
analysis
Benefits of IRMS
The PSW will benefit all entities involved in the
cross-border trade supply chain, and similarly
the IRMS will offer specific benefits to these
entities.
Critical Success
Factors
In order for the IRMS to succeed, there are a
few critical factors that have to be fulfilled.
Management
Summary
Providing an overview of the IRMS framework and high-level details on
each deliverable.
Risk Management
Overview
An overview of RM principles and an
integrated solution within the context of the
PSW
Current RM Situation
Assessment
An assessment of the current environment to
measure the capability of the cross-border
GAs from a risk management perspective
Customs DPP PSQCA AQD DRAP FSC&RD NCD ANF
Adoption of RM Policies
RM Framework in Place
Risk Assessment Capability
Adequate RM Staff
Inspection Capacity
RM System
✓ ✕ ~ ✕ ~ ✕ ✕ ~
~ ✕ ✕ ✕ ✕ ✕ ✕ ✕
✕ ✕ ✕ ✕ ✕ ✕ ✕
~ 3 None DedicatedNone
Dedicated
None
DedicatedNone
DedicatedNone
DedicatedNone
DedicatedNone
Dedicated
Under
capacity
Under
capacity
Under
capacity
Under
capacityUnder
capacityUnder
capacityUnder
capacityUnder
capacity
✓ ✕ ✕ ✕ ✕✕ ✕ ✕
Current RM Process
CustomsElectronic
Declaration
Automated
Selectivity
R isk based port
Inspections
DPP, AQD, FSC&RD Manual application
Subjective verification
100% port Inspections
PSQCA, DRAP Manual application
Subjective
filter ing
Imp/Exp based
inspections
ANF Manual manifest review
Subjective filter ing
Selected port inspections
Uncoordinated assessment and inspection process result ing in multiple inspections for single consignment;
No RM framework or risk based inspections for OGAs;
Resulting in additional costs and time for traders;
Description Unimpeded Impeded
GD Release 4 days 11 hrs 5 days 0 hrs
Gate out 9 days 3 hrs 10 days 17 hrs
Average Clearance Times
~
Recommendations
Strategic Tactical Operational
Governance model
Legislation and rules
Benefits realisation
management
Publicity plan
Capacity building
Project management
Business process re-
engineering
Systems development
Tariff code rationalisation
and extension
Risk management training
National Targeting Centre
Data Management
Joint inspections
Change Champions
Systems Documentation
and Upgrade
Government
Government Agencies
Trading Community
Trade Information Portal
Registration
Integrated Tariff Book
Consolidated Data Set
Single-form Development
PSW Core Development
IRMS15
Project 1: Governance Model
3
Project 2: Capacity Building
5
Project 3: Risk Assessment
4
Project 4: IRMS System
11
Project 5: Joint Inspection
6
TRADE FACILITATION SAFETY AND SECURITY
Increasing legitimate
Trade
Decreasing illegitimate
TradeRISK
MNGT
138
109
23 00
50
100
150
N/C Basic Standard Advanced
Cross-Agency Capability
Totals
ADB – Pakistan Integrated Risk Management System- Integrated Framework
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Volumetrics
A data analysis of the cross-border trade
environment to provide empirical validation for
the current state assessment.
Market Assessment
Presenting the outcomes of a survey of
solution providers that could potentially
provide a RM solution that meets the PSW
functional and technical requirements
Governance and
Operating Model
The PSW risk management Governance and
Operating Model establishes a framework and
structure that integrates the process for
managing risk in the organisation’s overall
strategy, planning, management, reporting,
policies, values, and culture based on the
generally accepted best practice with respect to
risk management and those set out in ISO
31000.
Technical Solution
Design
The IRMS is fundamentally a new way of
operating driven by an automated and technical
solution. This solution, or system, can be
developed in a number of ways. In order to
guide the PMO and the PSW project, a
technical review was conducted of the current
technical systems available in Customs as well
as the OGAs in order to determine the best way
forward.
Business
Requirements
Specification
Building on the governance model and
considering the suggested technical solution
design, the business requirements
specification was prepared in order to provide
a technical starting point for the development
team to commence design and development
of the IRMS.
IRMS Roadmap
The IRMS roadmap is perhaps one of the
most critical aspects of the overall project. It
will be dependent on a number of factors,
including time, human resources, budget and
other strategic considerations. The roadmap
takes these into account and proposes
projects, tasks and deliverables.
Company/Solution Survey
Sent
Survey
Response
Demo
Workshop Comments
Industry Specific &
Generic Enterprise
Risk Solutions 20+
(See Annexure C)
N N/A N/A No solutions found fit for purpose
3CE Y Y N Provides commodity/HS solution tools only
Cotecna N N/A N/A No longer active in the domain and was never
considered a key player.
Crimson Logic Y N N
Interfront Y N N
SGS N N/A N/A SGS uses technology partners for IT and does not
develop their own solutions (e.g., Crimson Logic)
TTEK Y Y Y Demo at WCO ICT Conference
Cupia-UNIPASS Y N N/A Solution is not “modular” and requires complete
installation of entire SW system
Webb Fontaine Y Y Y Demo at WCO ICT Conference
PSW Risk Management Team
PSW Governing Council
PSW Risk Management Committee (Interagency)
Analyses & Targeting Manage PerformanceTreatment Feedback
Risk Management Solution & Tools (Process, Technology)
Center of Excellence (COE)
PSW COMPANY GOVERNMENT AGENCIES
OGA RISK Management
GA Risk Management Team
Risk Analyst Risk/Data AnalystRisk Analyst Data Analyst Compliance
Secretariat
PSW RM TeamVendorsOGA Seconded Domain Expert
Risk ManagerOGA Liaison
Risk Analyses Understand Risk Objectives Set:
1. Risk Rule ID
2. Threat Rule Set
3. Decision Table
4. Document Type
5. Weighting
Capture Risk Conditions
Condit ion 1 Condi tion 2Condi tion 3
Condition 4
Condition 5
Conditio
n 6
Generate Risk Rule Set
Risk Committee
Establish Risk
Management Strategy and
Framework
Define Risk PoliciesDefine Risk Operating
Procedures
Model and Test Risk Results
Data Inputs
Risk Management Objectives Risk Thresholds and Priorities KPI’s and SLA’s
Risk Parameters & Rule Sets
Test Results
Create/Maintain Risk
Parameters & Rules
Review & Monitor
Risk Feedback
Iterative Delivery Model
4. Implement
2. Pilot/Test
3. Amend/Align/ Integrate
1. Build/Procure
Business Process Re-engineering
Wo
rkstr
eam
s
Change Management
Draft and Publish Legislation
Project Management
PSW Development Bu ild , Test and Implement
OGA Development Build , Test and Implement
IRMS Procure /Development Build , Test and Implement
PCS Procure/Development Build , Test and Implement
S upport Systems Procure/Deve lopment Bu ild , Test and Implement
Tasks
an
d M
ilesto
nes
Phase 0: Development & Build Phase 1: SW Lite
Trade Information Portal
PSW Workflow
Phase 2: SW Core
Support Systems
PSW Core Workflow PSW Advanced Workflow
Phase 3: SW Advanced
6- 9 Months 18 -36 Months Beyond
Regulatory Info Integrated Tariff
OGA Workflow
Application/review/approve
Value added services
Ramp-up and Advanced processing
Regist ration
Some back-end processing
PSW integrated Workflow
Establish PSW Company
Solution Planning and Design
Establish Project Office
Define Program Plan (Master)
Secure Funding
Recruitment
Benefits Realisation Mngt
Solution Specification and Development Core and Support Workflow Systems:
o Business Requirements Specifications,o Functional Specifications,o Technical Specifications,
Development Plans:
o Language and coding,o Define and establish standards,o Database infrastructure and specifications,o Test strategy,o Deployment strategy.
IRMS, CRM, Financial Mngt, Performance Mngt, Reporting, BI, etc
Integrated processing across support systems
Advanced features and functionality
Statistical and performance reporting
PCS Integration
Cargo reporting and status tracking Pre-planning and automatic release
Interfaced processing
ADB – Pakistan Integrated Risk Management System- Integrated Framework
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3.1 OVERVIEW
CURRENT STATE
In the past few years, Pakistan has made progress in improving
cross-border trade processing but has also fallen short in some
areas – attested to by the global indicators in Figure 2
alongside.
One of the key determinants of these rankings is a country’s
ability to treat cross-border trade with the appropriate level of
scrutiny and intervention required to enable differentiated and
facilitated treatment for those that qualify. This principle lies
at the core of RM.
Amongst the many organisations responsible for managing cross border trade, Customs is one of the
few that operates under the principles of RM. RM is well understood in the organisation, structures do
exist, and a software system is in place that makes use of advanced risk management tools. Other
government agencies have a varied approach to managing their risks, some more formalised than
others, but none with a formulated, structured strategy, plan and policy in place for RM.
Exploring the problem statement
for the project, the analysis
indicated there are areas requiring
general as well as more specific
functional and technical
improvement, including
operational policies and practices,
automation and monitoring, and
control. Overall there is limited
capability within OGAs in terms of
RM principles, know how, human
resources and IT (e.g., most
agencies are paper-based) and
tools. Most OGA interventions are
based on science-based
interventions, regulatory guidelines, revenue-based objectives, historic practices, and rudimentary
tools (e.g., reference lists based on trader, Certificate of Origin, HS code etc.) and do not incorporate
RM principles (e.g. 100% intervention). For example, some agencies that apply science-based
interventions do so on a 100% basis under the assumption that all shipments pose a risk and must be
physically inspected.
Contrary to the Revised Kyoto Convention, and other best practice guidelines, there is too much
discretion accorded to inspectors to make subjective decisions on operational decisions and inspection
results are not audited in terms of quality assurance (QA), performance, or integrity. The concept of
“Compliance Management” is generally not practiced leading to general lack of trade facilitation.
Due to these inefficiencies, traders are able to present different ‘versions’ or data sets to different
Agencies depending on what is required. This is a problem as there is no validation that the data is
the same so it can be manipulated to suit the regulatory requirement and contribute to fraud. The
general lack of a consolidated and standardised approach to managing traders and trade processes
makes it difficult if not impossible to implement a trade facilitation approach to cross-border trade
management, requiring a complete risk management based re-engineering of how interactions and
Figure 2: Global Indicators
Figure 3: Current Environment
Regulatory EnvironmentMultiple ‘Faces’ of Traders
GA 1
GA 2
Banks
Customs
Ports
Non RM based Processing
• Unstructured & Manual
• Subjective
• Mainly transaction
based
• Independent
• Automated • Subjective rules
• Mainly transaction based
• Independent
RM based Processing
ADB – Pakistan Integrated Risk Management System- Integrated Framework
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29 Bell Crescent, Westlake Business Park, Cape Town, South Africa
interventions are conducted between traders and regulatory agencies to address the entire trade
transaction value chain.
FUTURE STATE
Customs and OGAs involved in cross border trade have been considerably impacted by globalisation
and the expansion of international trade over the last several decades. Trade volumes have increased
dramatically, and government resources have not grown in parallel, resulting in a situation whereby
regulatory authorities “must do more with less”. For agencies involved with cross border trade, it is
paramount that the balance between trade facilitation and regulatory enforcement and revenue
collection is balanced in a manner that does not harm the economy. This requires timely facilitation of
trade while at same time, maintaining more sophisticated border controls in order to deal with an
environment that provides more sophisticated levels of non-compliance and fraud, requiring a unified
approach between Customs and OGAs to conduct collective risk management activities (risk scoring,
consignment targeting, interventions and investigations). A single system that incorporates
requirements of both Customs and OGAs is thus the cornerstone of both integrated risk management
and targeting as well as the PSW.
The PSW provides a consolidated platform for single submission of information for a cross border
transaction – which means no repetition of information, no duplication of documents, no back and forth
with multiple parties, in other words a “single version of the truth” about traders and transactions. This
‘single trader view’, in which Pakistan Customs and OGAs and stakeholders will have a consolidated
view of the traders’ information and transaction data is the key to unlocking the ability to implement an
integrated risk management approach.
An Integrated Risk Management Solution (IRMS) must be configurable to support a variety of different
cross border trade procedures, both in real time (transaction-based) and batch. These include, inter
alia, trader accreditation, clearance, pre-clearance, anti-smuggling, audit case selection, passenger
screening and the generation of intelligence information.
Based on this single version of data and integrated approach, a consolidated assessment can be
conducted on the transaction, leading to risk-based direction of operational resources and processing.
This concept is depicted in Figure 4 below.
Figure 4: Future-State Risk Managed Processing
The following table provides an overview of the various aspects of IRMS showing the common practice
prior to the implementation of PSW, and the more integrated comprehensive approach to risk that is
SINGLE TRADER PLATFORM
TRADERS
GA 1
GA 1
Banks
Customs
PSW
Ø Trade Info Portal
Ø Registration
Ø Case management
Ø CRM
Ø Payments
Ø Reporting
Module
Module
Ports
Consolidated Data Set
RISK MANAGEMENT
Ø Automated
Ø Holistic approach
Ø Multi-dimensional &
simultaneous risk
analysis
Ø Consolidated and
shared view
Ø Feedback
Ø Continuous
improvement
Strategic and Tactical Risk Management
OPERATIONAL RM + TARGETING
RISK PROFILES
Trader COO
Agent Known Threat
HS Code 1s t Time
CPC Other
OTHER TOOLS
3rd Party Data
Compliance Analysis
Intelligence
AI, Other
UNIFIED RISK SCORE
Green Yellow Red Orange Blue Purple
Release Docs Inspect NII AEO/PCA Query
TREATMENT
Release Amend Detain
IRM Solution
ADB – Pakistan Integrated Risk Management System- Integrated Framework
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29 Bell Crescent, Westlake Business Park, Cape Town, South Africa
aimed at facilitating trade as well as protecting revenues normally adopted within a modern SW
environment:
Practice Type Current Practice Risk Based Practice
POLICY
Balance between facilitation and control
Optimisation of both facilitation and control
Mistrust of supply chain actors Trusted collaboration of supply and transport chain partners
Limited customer segmentation Customer treatment based on compliance history, differentiation and service culture
Limited incentives for compliance Strong incentives for compliance
Focus on physical border controls Focus on virtual border controls
Adversarial relationship with trade Constructive partnership with trade
Limited cooperation and data exchange
Extensive collaboration and information sharing
Application of controls at the time of clearance
Pre-arrival and post clearance controls
PROCESSES
Output-based functional model (e.g. # of inspections)
Outcome-based process model (e.g., # of infractions, revenue yield etc.)
Focus on documents Focus on collective information
Single treatment for all clients Flexible solutions for different clients
Agency specific risk management Cross-agency, intelligence-driven RM
High levels of silo based physical inspection
Intervention by exception (resource-based joint inspection controls)
Paper-based, subjective Automated and directed
Transaction-based procedures
Exception-based procedures and audit-based controls
PEOPLE Physical control at the border System based limited engagement at border with pre arrival and post clearance controls
Limited transparency Full transparency
Organisational performance monitoring Clear measures of individual and collective performance
Standard training, mainly administrative
Capability modelling, commercial and administrative
IT
Proprietary systems developed on an evolutionary model without adequate documentation and reliant upon development team
Extensive use of best practice – bespoke or open source software systems with full documentation and open to external auditing and review
Isolated data capture and information processing
Service-orientated architecture
ADB – Pakistan Integrated Risk Management System- Integrated Framework
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National silo-based data architecture Regionally integrated common solutions
ICT security limited to intrusion protection
Business continuity assured through security and contingency arrangements
Emphasis on back-office transaction processing
Move toward self-service, front-office solutions and direct access to trade systems
INFRASTRUCTURE & FACILITIES
Agencies operating on a standalone basis
Interagency collaboration
Individual trader integration with multiple agencies
One stop solution
Predominance of in-house build and deliver solutions
Value-added outsourcing
Output-based procurement Outcome-based procurement
The ultimate objective for the IRMS is the facilitation of legitimate trade in an environment with better
controls whilst reducing costs and creating efficiencies for all stakeholders. The desired outcomes
include:
Figure 5: IRMS Desired Outcomes
All these outcomes drive towards a more fluid and facilitated trader experience realised through the
implementation of the PSW solution driven by a risk management framework.
Consolidated whole-of-government approach
to managing cross-border trade risks
Proactive
Improved Detection
Better Analysis
Better PlanningResource Allocation
Improved Enforcement
Stakeholder Trust
Oversight
Improved Control
Better Data
Resilience
Improved Compliance
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3.2 MAIN OBSERVATIONS
3.2.1 Limited Use of Risk Management Tools
Current situation: Pakistan Customs is one of the few organisations that operates on the basis of risk
assessment. While OGAs may
employ RM principles, albeit
subconsciously, they do not have an
explicit RM framework or information
technology system in place.
Current constraints include
difficulties with targeting scarce
enforcement resources that are
located close to where biggest risks
lie; risk interventions focusing solely
on consignments and not entities;
and the inherent integrity issues that
arise when officers have discretion in
selecting targets.
Key dynamics that need to be managed from a RM perspective rest in the development of a responsive
set of risk rules; and managing officers’ outdated approach to risk and fears around losing control of
case selection.
Key messages to be incorporated across all stakeholders include how RM enables better targeting and
thus less or more directed intervention of trade. It is also important to stress that a risk system is not
meant to replace operator intuition but looks to provide the information and intelligence to the operator
to make informed decisions thus leading to higher strike rates. Risk based enforcement is aimed at
reducing interventions through targeting thereby increasing compliance.
Critical success factors in respect of risk management include linking it to an explicit compliance risk
management philosophy; incorporating officer experience in developing the risk rules; creating a
feedback loop for continuous improvement of risk rules; and showcasing improved outcomes from
using risk management.
Impact on trade environment: Most OGAs (other than Customs) are using subjective and unstructured
application of RM techniques which result in either unnecessarily high levels of intervention or not
enough targeted interventions to ensure success of identifying and mitigating risks. The introduction of
the IRMS will mean the way in which OGAs engage and interact with traders will change, not only in
terms of interventions but also in the way these are processed.
3.2.2 Focus on Revenue/Regulation, Not Trade Facilitation
Current situation: Historically, Government agencies have focused primarily on generating revenue
(Customs) or regulating trade (OGAs) to meet their respective targets or KPIs. This inadvertently meant
that Government processes rarely considered impact on traders and trade. With the advent of trade
facilitation as a key global and government objective, the focus has shifted to now consider traders
and how government processing impacts their businesses. Proper RM allows Government to facilitate
business, in a cost-effective manner, without losing focus of its revenue generation and regulation
objectives.
Customs DPP PSQCA AQD DRAP FSC&RD NCD ANF
Adoption of RM Policies
RM Framework in Place
Risk Assessment Capability
Adequate RM Staff
Inspection Capacity
RM System
✓ ✕ ~ ✕ ~ ✕ ✕ ~
~ ✕ ✕ ✕ ✕ ✕ ✕ ✕
✕ ✕ ✕ ✕ ✕ ✕ ✕
~ 3None
DedicatedNone
Dedicated
None Dedicated
None Dedicated
None Dedicated
None Dedicated
None Dedicated
Under capacity
Under capacity
Under capacity
Under capacity
Under capacity
Under capacity
Under capacity
Under capacity
✓ ✕ ✕ ✕ ✕✕ ✕ ✕
Current RM Process
Customs Electronic Declaration
Automated Selectivity
Risk based port Inspections
DPP, AQD, FSC&RD Manual application
Subjective verification
100% port Inspections
PSQCA, DRAP Manual application
Subjective filtering
Imp/Exp based inspections
ANF Manual manifest review
Subjective filtering
Selected port inspections
Uncoordinated assessment and inspection process resulting in multiple inspections for single consignment;
No RM framework or risk based inspections for OGAs; Resulting in additional costs and time for traders;
Description Unimpeded Impeded
GD Release 4 days 11 hrs 5 days 0 hrs
Gate out 9 days 3 hrs 10 days 17 hrs
Average Clearance Times
~
Figure 6: Relative Maturity of Risk Management Practices
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Current constraints: include the fact that simplicity, speed and efficiency are not key drivers of activities;
and the high compliance burdens negatively impact on exports, which in turn effectively reduce
willingness to invest in Pakistan.
Key messages: that need to be incorporated across all communications include how a move to trade
facilitation simply means helping traders who want to comply to do the right thing; how a focus on trade
facilitation does not mean taking a “soft” approach; how it virtually guarantees an increase in revenues
and compliance; and how enforcement activities will still target at-risk traders and consignments.
Critical success factors: in respect of moving towards a stronger trade facilitation process include
developing robust performance measures and indicators; linking trade facilitation to an explicit
compliance risk management philosophy; and showcasing how other countries benefited from a
stronger bias to trade facilitation.
Impact on trade environment: Traders will most likely welcome the trade facilitation approach but will
have to understand that this means displaying adequate levels of compliance to receive any related
benefits. This will need to be managed through guided forums of engagement and relationship
management to ensure the intended compliance frameworks are understood and adhered to.
3.2.3 Current Resources Not Adequate to Support a RM Solution
Current Situation: The lack of resources or dedicated resources for RM was identified early on in the
project assessment and has held true throughout. This applies not only from a development and
solution implementation perspective but also from an operational perspective in terms of the officers
on the ground intended to implement the revised automated business processes.
Current constraints: Without adequate resources applied to the development and the operationalisation
of the IRMS by all impacted stakeholders it will not achieve the desired results.
Key message: This is not a solution that can be imposed on GAs, it has to be designed, developed
and implemented by them. This message is mainly for internal consumption but can also be reflected
in external communication to display government commitment to trade facilitation.
Critical success factors: include ensuring that the required outcomes as identified in the operating
model are sources, trained and adequately supported in their designated roles.
Impact on trade environment: A commitment by GAs to the RM approach by dedicating the required
resources to the initiative will be seen and felt by the traders in their engagements and interactions and
would have a positive effect on their view of the solution having a cascading effect on their willingness
to comply.
3.3 THE FRAMEWORK FOR PSW IRMS
A framework refers to the set of structures and rules used when trying to solve a problem. The outcome
of the current state analysis and the data analysis identified challenges across the cross-border trade
environment but also high-lighted where the focus should be in order to progress the PSW towards a
risk driven and managed environment.
The development of the framework for the PSW IRMS was guided by a few resources, primarily the
ISO standard: 31 000, generally accepted as best practice upon which a number of other standards
are based. These standards provide a common set of definitions and understanding of risk
management and established the framework.
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The analysis and design work culminated in the framework for the IRMS which presents the
Governance structure, the technical solution design and the business requirements specification, all
foundational elements to the next phase of development, and building of the IRMS solution. Summaries
of which are presented here with further detail contained in the Management
Summary section below. 3.3.1 Governance and Operating Model
Figure 7: IRMS Governance and Operating Model
The governance and operational model provides the necessary structure required to ensure there is
adequate accountability and oversight of the IRMS solution. It identifies the roles and responsibilities
required to implement, manage and maintain the IRMS and defines the terms of reference for each.
The model is based upon the concept of a Centre of Excellence (COE) for RM within the structures of
the PSW Company.
The COE will be supported strategically by the Governing Council (GC) and the RM Committee (RMC)
providing direction, guidance and oversight of the RM solution. At a tactical level, the model proposes
setting up RM teams within each GA to assist the PSW COE with the creation, maintenance and review
of risk rules. Operationally, treatment of the identified risks will be handled by the current operational
teams (expanded as needed), working within the PSW system and providing feedback for monitoring
and oversight. With this structure in place, the project can move to the next phase of development and
building the overall PSW and IRMS solution.
3.3.2 Technical Solution Design and Business Requirements Specification
Based on the ISO 31000, risk is broken down into 5 fundamental steps, 1) Establishing the context,
followed by Risk Assessment made up of…? 2) Risk Identification, 3) Risk Analysis and 4) Risk
Evaluation and finally 5) Risk Treatment: These steps are supported by communication and
consultation as well as monitoring and review.
PSW Risk Management Team
PSW Governing Council
PSW Risk Management Committee (Interagency)
Analyses & Targeting Manage PerformanceTreatment Feedback
Risk Management Solution & Tools (Process, Technology)
Center of Excellence (COE)
PSW COMPANY GOVERNMENT AGENCIES
OGA RISK Management
GA Risk Management Team
Risk Analyst Risk/Data AnalystRisk Analyst Data Analyst Compliance
Secretariat
PSW RM TeamVendorsOGA Seconded Domain Expert
Risk ManagerOGA Liaison
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Figure 8: ISO 31000 Risk Management Model
Within the context of this model, not all risks are the same and GAs need to balance the consequence
of a threat against its likelihood in allocating risk mitigation resources. It is important to establish context
for the risk by initially assessing its importance. The relative importance can be understood by
observing environmental drivers and trends, legal mandate and requirements, organisational culture,
current capabilities and capacity and goals, objectives, scope and activities. Once the context for the
risk is established, it is important to understand what the sources of risk are and ask: “What can
happen?” and identify areas of impacts, events, causes and potential consequences, including knock
on effects.
Risk Assessment for cross border trade is a complex subject especially when including OGA risks,
commodity-based risks together with the standard Customs risks that mainly concern the protection of
revenue and the general security of goods. It is therefore essential that an IRMS must be both easy to
understand and use. It is also important that the system is flexible because one of the primary
requirements when creating risk rules for cross border trade is to have the ability to continually refine,
test and change them.
The following figure illustrates the risk assessment process in the IRMS. These will be based on a
collaborative process between the Risk Committee that will establish and formalise the policies and
procedures, provide guidance and oversight, the risk administrator responsible for initially setting up
and maintaining the rules and approvals and the risk analyst (team) responsible for generating the
rules, creating the conditions, testing the results and eventually creating and maintaining the rules. The
Risk Committee will also perform the RM function by defining the risk policies that are to be applied
using the maintenance function. The cycle will be completed with a feedback loop from the risk system
and analyst team back to the committee in order to review, monitor and where required adjust the risk
management strategies, policies and objectives.
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Figure 9: Risk Assessment
Risk analysis involves understanding the risks through classifying and categorising the risks (including
quantifying sources and causes) and quantifying and qualifying consequences.
The design concepts used when developing an IRMS are therefore vital to its success. If it is seen as
difficult, complicated to use, expensive or time consuming to change it will not achieve its required
objectives. Using this system, a competent risk management team will continually be developing,
refining and testing new risk rule requirements in the pre-production environment, especially during the
initial implementation of an IRMS.
Figure 10: Risk Analysis Process
The development of Risk Rules and their refinement will involve some form of a testing arrangement
to ensure that the Risk Rules being used in the ‘production’ environment will meet their required
objectives. The output results from these tests will be reviewed by the Risk Analyst who will then
possibly have to adjust or refine the rules and perform the test again until they are sure that the risk
rule is meeting its required objectives i.e. identifying the required risks and assigning the appropriate
score i.e. priority. Once a Risk Rule has been tested fully and appears to be meeting its objectives, it
can be introduced into the production environment, but even at this point it may require further
refinement.
All these requirements emphasise the need for a simple, flexible and easy to use system that can be
easily understood where Risk Rules can be maintained and tested by a Risk Analyst that is more
focused on the domain and operations than the technical system. It is therefore essential that these
requirements should avoid the need for program code or database changes to the core IRMS System
and can be enacted at a user level based on common language commands or actions.
Risk Analyses Understand Risk Objectives Set:
1. Risk Rule ID
2. Threat Rule Set
3. Decision Table
4. Document Type
5. Weighting
Capture Risk Conditions
Condition 1 Condition 2
Condition 3
Condition 4
Condition 5
Conditio
n 6
Generate Risk Rule Set
Risk Committee
Establish Risk
Management Strategy and
Framework
Define Risk PoliciesDefine Risk Operating
Procedures
Model and Test Risk Results
Data Inputs
Risk Management Objectives Risk Thresholds and Priorities KPI’s and SLA’s
Risk Parameters & Rule Sets
Test Results
Create/Maintain Risk
Parameters & Rules
Review & Monitor
Risk Feedback
Data Analytics
Hypothesis
Modeling/ Testing
Data Onboarding
Receive Data
Verify Data
Data QA
Create Rules
Create condition
Create/Maintain
Pre-ProductionDeploy
Feedback
Monitoring
Performance
Production
Desired Outcomes
Targeted Interventions
Resource Optimisation
Performance Measurement
Continuous Improvement
Voluntary Compliance
Measure
Evaluate
Scoring
Treatment
Review
Approve
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The ability to fully comprehend the scope of requirements for an IRMS at its outset would be ideal, but
a more practical approach would be to build in some form of future proofing, when designing the
system. This can take on many different forms but one way to ensure the overall stability and
sustainability of the system is to allow additional routines2 i.e. program code to be added through an
interface that can be maintained by the Risk Administrator, without the need for program code changes
to the core IRMS function. This will be provided through a configurable IRMS maintenance facility that
will allow a Risk Administrator to either add additional routines or to replace existing routines through
a standard on-line maintenance function.
Risk evaluation, or what can be done to address a risk, drives decision making. This understanding
helps to establish priorities and identify appropriate treatment measures which are developed based
on risk tolerance levels. Further analyses may be required as situations change.
Risk treatment entitles selecting an option to treat or eliminate the risk and evaluating what was done
to address the risk. Treatment can include increasing the tolerance level of the risk (e.g., more to green
channel). Treatment options are not mutually exclusive and can be layered through assessing the
effectiveness of a treatment measure and taking into consideration treatment resources.
Essentially, RM, and the functionality that supports it, – the IRMS modules, – are the core of any NSW
and cannot be assessed separately from the PSW. The risk framework is based on introducing an
automated risk system to manage 3 functional areas; 1) RM of traders, 2) LPCO applications and 3)
declaration processing.
This approach to Risk
Management,
understanding it is the
core of any transaction
processing system, was
made clear in the PSW
Design document. The
two figures below, taken
from page 118 of the
PSW final design
document, describes the
interactions referred to
above.
2 The meaning of a routine in this context refers to a completely independent piece of program code that has been written, compiled and tested separately to perform a specific function.
Figure 11: IRMS Technical Design
1. Trader Management & Registration
2. LPCO Risk Validation / NTM Monitoring
3. Declaration Risk Management
Strategic and Tactical Risk Management
OPERATIONAL RM + TARGETING
RISK PROFILES
Trader COO
Agent Known Threat
HS Code 1st Time
CPC Other
OTHER TOOLS
3rd Party Data
Compliance Analysis
Intelligence
AI, Other
UNIFIED RISK SCOREGreen Yellow Red Orange Blue Purple
Release Docs Inspect NII AEO/PCA Query
TREATMENT
Release Amend Detain
IRMS SOLUTIONPSW Solution Architecture
IRMS Risk Functions
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Figure 12: High Level Processes and Application
As per Figure 12, all risk testing functions for the PSW run through the IRMS, as does the processing
of declarations through WeBOC by Customs. The Figure above is further described on a module by
module basis in this section. As illustrated in Figure 13, the centrality of risk management is
emphasised, with a significant portion of all OGA assessment and scoring taking place inside the IRMS
‘box’, with those activities being processed by the various IRMS modules.
Figure 13: Risk Management at the Centre of Workflows
Drilling into Figure 13 even further shows that each time data is added or amended within the system,
one or more of the risk management modules would re-examine the data or changes made, making it
an iterative and progressive process, which could have a different outcome based on the information
available at a particular point in time. Simply, a transaction starting out as low risk early in its lifecycle
may then change to a high risk based on new information that is supplied to the IRMS.
Process LPCO Application
Process Customs
Declaration
Process Cargo Release
Plan Examination
Plan Examination
Conduct Examination
Process Payment
Conduct Risk Assessment
Conduct Risk Assessment
Conduct Risk Assessment
Conduct Risk Assessment
Schedule Examination
WeBOC
Terminal Operator (PCS)
Terminal Operator(PCS)
Banks
PSW Application
WeBOC
OGA Application
PCS Bank
IRMS
Submit Pre-Arrival Info
LPCO Query & Application
Goods Declaration Payment Release
Validate Information
Query Tariff Requirements
Validate Declaration
Process Release
Examination
Schedule Examination
Prepare Invoice
Registration
Process Registration
Terminal Operator (PCS)
Validate draft application and supporting docs
Query LPCO requirements
Draft LPCO Application
Attach required supporting documents /information
Review application
Receive LPCO application responseT
rad
er
NS
W O
GA
NS
W
Risk Assessment
Query tariff regulatory
requirements
Query tariff duty & taxes
Ris
k M
ng
t
Respond to Trader with
LPCO or request more info
Conduct required validations/ verifications
No Risk – automatic generation of LPCO
Some Risk
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3.4 IRMS DEPENDENCIES AND CRITICAL SUCCESS FACTORS (CSF)
Figure 14: Factors affecting IRMS
To complement the recommendations above the following dependencies and success factors inter-
alia have been identified as critical to the success of the IRMS (detailed in section 4.6):
1. Trade Information Portal (TIP): Although not a critical dependency for IRMS, establishing a
TIP for Pakistan and the PSW will be a critical step in rationalising the legislation, policies,
procedures and processes required for cross-border trade and will add significant value to the
overall PSW offering. It will provide a single reference point for traders, GAs and other
stakeholders regarding cross-border trade aiding in the transition to a RM approach.
2. Registration: A project that will focus on establishing the registration requirements of all GAs
involved in the PSW in order to consolidate it onto a single platform and process. The trader
base will be a critical input to the development of the PSW and the IRMS risk rules.
3. Customer Relationship Management (CRM): Linked to registration but not a critical
dependency for IRMS, this functionality refers to overall management of registered traders of
the PSW system, from compliance history, tracking, account management, fault logging, etc.
This service will be the primary platform for traders.
4. PSW core workflow: Refers to the critical components and infrastructure required for the first
phase of the PSW, and will include the basic application workflow (submit, review, approve),
declaration submission and tracking as well as consolidated payment processing.
5. Integrated Tariff Book: Integrating, rationalising and (where necessary) extending the tariff
book to include the requirements of all OGAs will improve the ability to identify, assess and
target risk, and will reduce unnecessary operational processing.
6. Consolidated Data Set: Creating a consolidated data set across all GAs and aligning it with
international standards (WCO data model, UNCEFACT, etc) will assist the PSW IRMS to utilise
internationally available information as risk inputs with minimal manipulation required and
enable cross-border inter-operability and information sharing.
7. Single-Form Development: Using the above mentioned data-set, a consolidated and
harmonised form should be developed for the processing of PSW applications or declarations.
This implies that there will be a master form (and data) from which selected fields will be
rendered based on the specific transaction. This will prove critical for standardisation and inter-
operability for the PSW solution and is a critical input to IRMS.
The following Critical Success Factors (CSF) have been identified:
Political Commitment and Sponsorship: The IRM solution is dependent upon a cohesive and
collaborative strategic, tactical and operational environment coming together to focus on
Trade Information Portal
Registration
Integrated Tariff Book
Consolidated Data Set
Single-form Development
PSW Core Development
IRMS15
Project 1: Governance Model
3
Project 2: Capacity Building
5
Project 3: Risk Assessment
4
Project 4: IRMS System
11
Project 5: Joint Inspection
6
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identifying, analysing and treating risks. This will require fundamental change in the
understanding of the GAs involved in this process as well as the trade environment. Without
adequate political support the program will stand a slim chance for achieving its goals.
Change Management: Organisations that have tried to achieve major business and technology
transformations have found that the process of implementing change will in most cases lead to
a temporary drop in productivity. Change Management helps to minimise the depth and length
of the disruption brought on as a result of a major change. The introduction of an integrated
RM for PSW will involve some major changes to a number of GAs actively involved in cross-
border trade requirements. It is imperative that these changes are communicated openly and
that they feel involved in the changes from the outset. Assessing risks in a more coordinated
and controlled manner will also require intensive training and on the job experience for the
people who are finally selected for the integrated RM Team. It is therefore essential that
effective change management practices are employed to help minimise the time and energy
that is required to align the people, processes and technology aspects of this change during its
transition
Business Process Re-engineering (BPR) : Any major IT system implementation requires the
re-engineering of current business processes and practices in order to obtain the maximum
benefit in terms of their performance, productivity, and quality. This is especially true when
introducing integrated RM within an NSW System.
Interoperability: Interoperability is the ability of different information technology systems and
software applications to communicate, exchange data with one another as well as use the
information that has been exchanged to meet the end goals as agreed and defined by the
parties involved. It will be critical to the success of the PSW implementation. Any electronic
exchange of data between the integrated RM System and any other government system (e.g.
WeBOC) should conform with the current interoperable framework standards that should have
been defined as part of the Pakistan Government’s e-Government or Digital Strategy.
3.5 RECOMMENDATIONS
The following recommendations are suggested to achieve the risk managed framework for the PSW.
These have been summarised below with further details elaborated upon in the
Management Summary and detailed deliverable sections. 1. Governance and operational model: as mentioned above the political commitment is a critical
success factor for the IRMS. Adopting the proposed model will provide the fundamental basis
for establishing accountability and responsibilities for the various role and functions required
across the solution. Included with this would be the definition and enforcement of performance
contracts and service level agreements (SLAs).
2. Define IRMS Rules and procedures to support PSW Law: a significant challenge for many
NSW solutions is not having the legislative backing to be able to implement, as they are
challenged at every level of operations. The PSW Act provides the legal mandate for the
proposed solution and should be promulgated to enable the derivation of subsequent rules and
procedures to enable the IRM solution.
3. Benefits realisation management: Benefits Realisation Management (BRM) is a process of
identifying, planning, managing and evaluating the intended benefits of an investment. In the
case of the PSW, it would be the intended benefits to the GOP, the GAs and other stakeholders.
This should have been covered in the early stages of the program but can still be detailed now
to ensure proper tracking of intended benefits of the PSW for all stakeholders.
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4. Publicity plan: An important step for the PSW and IRMS progression will be the Publicity
Strategy which entails the way in which users, traders and other stakeholders will be
communicated with, informed, educated and generally kept up to date with the progress of the
PSW program. Although some progress has been made in this regard, it is recommended that
this strategy is formalised and resources are dedicated to its fulfilment such that the objectives
can be realised.
5. Capacity building: As mentioned above, the IRM solution necessitates a paradigm shift in the
way GAs think and process their work. This shift will trigger a significant change management
effort requiring motivated and trained resources across all levels of the organisation. We are
cognizant of the resourcing challenges of GAs and therefore recommend adopting a dual role
approach where existing resources will be assigned risk management and operational roles in
order to build the initial momentum for the IRM solution. These roles could also be
supplemented by the PSWC until such time the GAs are able to transition the resources to their
structures.
6. Project management: The roadmap has proposed 5 key projects to be undertaken to deliver
the IRMS. It is recommended that a project manager be assigned to manage, drive and ensure
delivery of these projects aligning with the PSW master plan. This recommendation extends to
the PSW as well as originally proposed in the design document.
7. Business process re-engineering: There are a few BPR exercises currently underway. It is
critical that the outcomes of these exercises are reviewed against best practice and measured
against the design principles and requirements of the various development and build initiatives
underway.
8. IRMS systems development: The current primarily manual processing environment allows for
a robust design of the IRMS technology solution. The design of the PSW IRM solution can
explore the possibilities of introducing best practice functionality without the constraints of
having to integrate or accommodate any existing RM systems or processes. The PSW has
elected for a bespoke development of the core processing workflow and the OGA modules,
but it has become apparent that the development team would be hard-pressed to deliver on
these and the other core elements including the IRMS and the PCS solutions. To mitigate this
challenge, it is recommended the PSWC engage external assistance to augment their
development skills in order to bring in required technical skills and meet project deadlines.
9. Tariff code rationalisation and extension: Pakistan Customs is currently using an 8-digit HS
code nomenclature. 6-digits as per the prescribed and an additional 2 digits for National use.
As observed with a number of OGAs, this limits the ability to distinguish products to a
significantly detailed level to allow for proper risk analysis resulting in a number of requests for
NOC being requested. This process is unnecessary and time consuming, adding no value to
the end-to-end process, or managing the risks associated with these consignments. The
following has been recommended not only from a RM perspective but also for the general PSW
workflow perspective:
a. Recommend moving to 12 digits with a check digit (alpha or numeric)
b. Suggest making the change now by introducing 0000 at the end and making changes
to actual tariffs as required and enabled by law
c. This does not imply a complete re-definition of the tariff book, but only for HS codes
requiring change and when required.
10. Risk management training: Each OGA will require training on the RM framework and
methodology to be able to identify, score and eventually manage their own risks. This project
has already provided basic training on the principles and practices of RM but additional training
will be required. This must tie in to the larger PSW RM capability and can be achieved through
a train-the-trainer capability. 2 phases:
d. General RM methodology training to the PSW RM team and OGA representatives,
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e. Followed by more detailed training for the OGAs who are unable to/do not have
resources to do it themselves
11. National Targeting Centre (NTC): FBR Customs has introduced an NTC division. Analysis was
done on the strategy and mandate of the division and concluded that there is significant over-
lap between the NTC objectives and mode of operations and the PSW IRMS solution (detailed
in Section 4.4.3). It is recommended these units be merged, either strategically or tactically to
ensure maximisation of resources and alignment of goals.
12. Data Management: Data, its availability, accuracy and integrity are critical to the IRMS. The
environmental analysis and data analysis revealed that the data required to be able to define
risk rules for the GAs is not readily available. Even though elements of this are being addressed
through other initiatives it is recommended that focus is placed upon, and a concerted effort is
made to identify, collect and rationalise the required data.
13. Joint Inspections: A critical outcome of a Single Window solution is to facilitate and ideally
manage joint inspections. A pre-cursor to joint inspections is an integrated and coordinated
approach to identifying, assessing and directing treatment for risk across all impacted GAs.
The IRMS will provide this facility by conducting a unified assessment of all GA risk so that risk
treatment could occur with a single intervention. It is recommended that the practical
implications of this be assessed in terms of infrastructural viability and that the planning for the
eventual solution commence on a phased delivery approach.
14. Change Champions: The PSW and by default the IRMS will require motivated resources on
the ground to drive the changes required within their organisations. In addition to the RM
resources identified above, it is recommended that influential operational officers be identified
within each impacted GA who could undergo specific PSW and IRMS training so that they
could become operational champions for the solution.
15. Systems Documentation and Upgrade: The current Weboc system does not have adequate
documentation and architectural designs to enable easy integration or upgrading. It is
recommended that the development team that is recruited should perform this task as a matter
of training and familiarisation with the existing systems prior to engaging any upgrade to the
system for PSW purposes.
3.6 BENEFITS OF RISK MANAGEMENT3
Benefits of introducing an IRM Solution and conducting cross-border trade according to RM
principles are numerous and have been grouped into 3 in the section below. The benefits of RM flow
from the government to all stakeholders involved in the PSW.
Benefits to Government with the mandate to
stimulate the economy by making processing
more efficient;
Benefits to Government Agencies with the
mandate to facilitate trade whilst also ensuring
safety and security; and
Benefits to the Trading Community seeking to
conduct business with the lowest costs and
least amount of time.
3 Adapted from: Facilitating Trade: In the OIC Member States Report
Government
Government Agencies
Trading Community
Figure 15: Benefits of RM
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3.6.1 Benefits for Government
A comprehensive and integrated RM process can support many new opportunities to facilitate trade
and improve Government’s ability to improve the economy:
Benefit Details
The ability to coordinate the risks posed
for any given consignment across all the
agencies involved in cross-border trade.
Will provide a much more effective and efficient use of risk
assessment resources while also providing a more
comprehensive and complete analysis for the setting and
monitoring of risk profiles. This should both improve the hit
rate for seizures while allow low risk items to pass through
the cross-border trade process in far less intrusive manner.
The ability to perform a risk assessment
of a consignment before the goods have
arrived.
A detailed assessment of the risks posed by a given
consignment can be performed prior to the arrival of the
goods at the port or border. This gives the authorities more
time to the assess the risks and thereby allow low risk
consignment to pass through the cross-border process
immediately they arrive at the port/border.
The ability to provide a single point in
time for consignment risks to be
assessed by all required government
agencies in a coordinated and
collaborative environment.
1. Improve the use and efficiency of scarce risk assessment
resources,
2. Improve the general efficiency and effectiveness of the
risk assessment processes.
The implementation of a modern
approach to compliance management.
Moving away from the old ‘Gatekeeper’
approach to solely protect revenues to a
more modern longer-term strategy of
facilitating trade.
This will speed up the cross-border trade process and grow
cross border trade volumes in the longer term.
More use of Post Clearance Audit
procedures to investigate some risks
that maybe posed by some
consignments.
Again, this will speed up the cross-border trade process and
also improve the use and efficiency of scarce risk
assessment resources.
3.6.2 Benefits for Government Agencies (GA)
Benefit Details
Improved resource allocation
A benefit gained by implementing RM is improved allocation of
resources. Working with limited human, physical, technical and
financial resources while facing increased movements of goods and
means of transport, drives GAs into “strategic thinking” mode. Under
such circumstances, these agencies can decide the allocation of the
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limited resources to the border crossing points where the risk is
higher. Improved allocation of resources, especially human, will
ensure that the existing skills and experience in the administration is
effectively used and will yield better results in achieving the main
objectives.
Ability to better manage and
control the quality of work of
GA resources
By implementing RM, GAs prepare themselves for the future. The
quality of controls is improved by analysing and predicting risks and
focusing the most critical resources on the areas of highest risk.
Superficial control of everything and anything will be replaced with
exhaustive controls over those movements and shipments that pose
highest risks. A RM that embraces evaluation of outcomes and
control feedback will allow management to identify operational
weaknesses and improve current control procedures to increase
operational efficiency.
Increased revenue collection
and improved protection,
security and safety of society
RM that results in improved quality of control is beneficial for the
Governments as GAs involved in cross border trade are critical
authorities in revenue collection and protection of society against
prohibited or restricted goods.
Improved perception and
public credibility
Effective RM guarantees equal implementation of laws and
regulations for all domestic and international legal entities and
persons. This will boost the public’s confidence in GA activities. The
public would trust agencies more if they used clear criteria to identify
acceptable and unacceptable levels of risk.
3.6.3 Benefits for the Trading Community
Benefit Details
Lower operational costs for the
private sector
RM is a central aspect of building a trusted partnership between
traders and GAs, as it rewards compliance. Traders obtain the
benefits of lower inspection rates, lower cost and time for customs
formalities, in return for their investments into compliance. Having a
solid basis of RM and compliance management enables customs
administrations to adopt schemes such as authorised economic
operator, which provides various simplification measures for traders
meeting multiple criteria of good compliance and record management.
Improved supply chain security
The development of partnership programs with other parties to the
overall supply chain is a RM tool that helps minimise disruptions to
the supply chain. The emerging principles underlying a public-private
partnership approach to cargo security can be summarised as a
“trusted supply chain partner program.” This is similar to the C-TPAT:
Customs-Trade Partnership Against Terrorism, of the US Customs
and Border Protection program through which the administration
works with trade to strengthen international supply chains and, at the
same time, improve border security. The main actors in such a
program can be companies managing the global supply chains; port
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and border crossing authorities who have the responsibility for
clearing cargo and for its loading/unloading; and local, regional and
national agencies, including those who have the responsibility for
assuring security at various levels, including responding to threats
and abnormal conditions.
Reduced supply chain costs
and time
Time and costs remain important determinants of companies'
competitiveness and ability to integrate into regional and global value
chains. The physical infrastructures for trade, roads, and ports, have
an impact on the time and costs for traders.
Current studies on trade facilitation and trade costs do not measure
the impact of RM as a single factor. Instead, RM is considered to be
one of many possible trade facilitation reform measures that can
significantly reduce the trade costs as described in the WTO Trade
Facilitation Agreement (TFA) article 7.4. WTO economists calculated
the aggregated financial benefit of implementing the TFA including
the obligations regarding RM and concluded, "Trade costs could be
reduced by an average of 14.3% and boost global trade by up to $1
trillion per year, with the biggest gains in the poorest countries".
Trade costs are divided into two segments. The first segment is
related to the expenses that are liable for external factors rather than
policy choices such as the distance to market, (international and
national); transport and insurance costs; transit fees, charges, and
time; expenses related to the transport and the insurance; and
membership in the same economic community, international
agreements etc.).