Risk management is impossible unless goals are defined

17 march 2016

The Analytical Center has hosted the expert workshop “Sharing the Best Practices in Introducing Risk-Oriented Approach and Assessing the Effectiveness and Productivity of Supervisory Activities”. Representatives of the Ministry for Economic Development, the Federal Taxation Service, and the Federal Service for Labor and Employment, Treasury, the Federal Service for State Property Management, the Federal Antimonopoly Service, as well as a number of research and civil society organizations took part in the event.

“Today we have to figure out whether we can have universal rules for the introduction of the risk-oriented approach in various supervisory organizations, whether there is a need for universal standardized procedures and whether we need to define one group of risks for all or define them separately for each type of supervision,” opening the event, said Aleksey Khersontsev, Director of the Department for state regulation in the economy at the Ministry for Economic Development. The Ministry ran into these problems when working on amendments to Article 8.3 of Federal Law No 294 that defines risk-oriented approach. “We tend to prefer the idea that amendments should be made to each separate provision for the specific types of supervision where we want to introduce risk-oriented approaches,” Mr. Khersontsev explained.

“The basic postulates of the risk-oriented approach must apply to all supervisory activities. We need this in order to make sure that the representative being supervised understands why he/she is being supervised,” believes Valentin Letunovsky, Deputy Head of the Presidential Control Directorate of the Russian Federation. The specialist then talked about how the risk-oriented approach is used in the Russian Federal Taxation Service, where a powerful IT solution has been deployed to perform taxation functions, enabling the service to implement the approach not just formally on paper but in real day-to-day activities. 

Deputy Head of the Federal Taxation Service of Russia Daniil Egorov talked in detail about the key results which his organization achieved after introducing the risk-oriented approach, as well as about key lessons that were learned. The expert is sure that risk management is a continuous process as risks have a tendency to keep changing. “We are talking about a tool here that we need to achieve specific goals. You cannot manage risks unless you understand what goals you are trying to achieve,” Mr. Egorov said. - “You first need to build a strategic management system and a well-balanced system of performance indicators.” Risks tend to have some global features: for example, threat and uncertainty, so the expert believes that the main function of risk management is to identify and manage them.

Today, we have already reduced the amount of on-site audits from 100,000 to 30,000 a year. This means 4 audits per thousand companies.

Daniil Egorov, Deputy Head of the Federal Taxation Service of Russia

“Our risk management system was built on top of the system of audits. At some point it dawned on us that we cannot possibly cover all risks with on-site audits so we identified key priorities, which prompted us to build a new revised risk management model in 2007,” Mr. Egorov explained. “We did 2 things at the same time: we identified risks and made information about them public.” An important element in the new system is giving taxpayers access to information: the more open data there is the more risks will just go away on their own, the expert believes. “Today, we have already reduced the amount of on-site audits from 100,000 to 30,000 a year. This means 4 audits per thousand companies,” Mr. Egorov summed up.

Representatives of the Federal Service for Consumer Rights Supervision, the Federal Service for Labor and Employment, EMERCOM, the Federal Medical and Biological Agency and the Federal Transport Supervision Service shared their experience of implementing risk-oriented approaches. Every type of supervision has its own classification of risk levels, its own criteria and methodologies. Risk management practices employed in the private sector were also presented at the event. Experts talked about the evolution in corporate risk management in Russia. 

The expert also talked about the effectiveness and productivity of supervisory activities and discussed ways to organize a system of motivation for managers and inspectors as well as ways to use the performance assessment system to manage and finance the activities of regional supervisory organizations.

The seminar was held in accordance with resolutions of the Subcommittee on improvement of supervisory and permit issuing functions of federal executive authorities of the Governmental Commission on the implementation of the administrative reform.