Risk-based approach to control and supervision activities

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Risk is an integral part of any enterprise and event. No matter what you do, there is always the possibility that something will go wrong. This is especially true for business, since in this area risks exist in a variety of forms and can manifest themselves in the most unexpected places and moments. That is why there is a risk-based approach that allows you to operate as efficiently as possible in conditions of increased risk. What is the essence of this process? What are his factors? Is it used in the Russian Federation, and if so, at what level? This article will be fully devoted to what a risk-based approach is and all the details that relate to it.

The essence of the approach

So, first of all, you need to understand what a risk-based approach is. Imagine an enterprise that operates in any market. There are a huge number of risks that concern it, depending on what kind of activity it carries out. Carrying out control and supervisory activities at this enterprise can be carried outin a variety of ways, but it is the risk-based approach that has gained the most popularity recently. The specialist analyzes all the possible risks that relate to this enterprise, identifies the largest among them, filters out those that do not greatly affect the activities of the enterprise, and then creates a full-fledged strategy to combat them so that the enterprise can function as efficiently as possible, reducing their likelihood. So the essence of this method, in other words, is to find those factors that prevent the enterprise from functioning one hundred percent, and their further leveling.

Relationship between risk and business

Many entrepreneurs may wonder: why do they need a risk-based approach to control and supervision? After all, their enterprise is small, therefore, the risks are all on the surface, and they do not pose a real danger. However, this is a big misconception. Even the smallest enterprise can have dozens of different risk factors, many of which are hidden from the layman's eyes. As a result, they go unnoticed, are realized and do not allow the enterprise to achieve the desired goal. Accordingly, a risk-based approach in control and supervision is very important, as it allows you to identify all risk factors even before they could be realized, and then turn this information into a full-fledged business plan that allows the company to operate, avoidingimplementation of a particular risk factor, thereby increasing their productivity. The entrepreneur will be able to visually see which processes are most at risk - and not run them, in order to significantly increase their chance of success. Well, now you understand in general terms what this method is. It's time to take it apart and take a closer look.

Risk

Before embarking on a risk-based approach, you need to be clear about the basic concepts involved in this process. And the first, of course, is the risk. What it is? A risk is a certain event that has not yet happened and is not happening, but may happen in the future - and at the same time it has a certain percentage of the probability of causing damage to your enterprise. The difficulty here lies in the fact that the risk can be both directly the event itself, and a factor influencing others. At the same time, one should not forget that it may or may not happen, its effect can be both serious and weak. That is why it is recommended to invite a specialist in this approach to use it, since here a lot depends on the experience of a professional. A person who has been working with a risk-based approach for more than a year will be able to more clearly and quickly determine the severity of certain risks, to distinguish between their factors.

Initial and residual risks

What elseneed to know about the risk-based approach? Organizations are using it more and more. However, it is recommended that you use the services of specialists, as they will be able to help you most effectively draw up a risk plan for your enterprise. For example, you are unlikely to know what initial and residual risks are, and also what is the difference between them. Naturally, you should know about this even if you do not plan to use this approach, as this is very important information. The fact is that sometimes even the most serious measures do not give you a 100% guarantee that the risk will not be activated. That is why this distinction exists. The initial risk is the one that exists initially without any third-party intervention on your part, while the residual risk is the one that remains after all possible measures have been taken to eliminate it. Naturally, more often than not, residual risk has a much lower chance of activation and much less potential damage. And this already makes it clear that a risk-based approach to control is very effective and incredibly useful for any type of business.

Risk factor

The term “risk factor” has already been mentioned more than once - but what does it mean? It is the result of some action, inaction, or condition that increases the likelihood of a particular risk occurring, and also increases the likely damage that will be caused when it is activated. That factorrisk, which triggers the process of risk realization, is the cause, and this causes a lot of confusion for many people. The fact is that some factor will be the cause, but not all factors are the cause. It can be easily remembered that there will be one reason for risk activation, and there can be many side factors that will increase the probability of activation and increase damage. It is not difficult to imagine that both risk factors and the risk-based approach itself will differ in different industries. In labor protection, for example, risk factors are unlikely to coincide with those that exist in the field of small business. So now you have a general idea of how this works. It's time to look at a good example. And what would be better than the recently launched process of introducing a risk-based approach into the system of organizing state control and supervision in the Russian Federation?

Issue of a ruling

On April 1, 2016, the Russian Federation issued a government decree on a risk-based approach to organizing and conducting control and supervision activities. In accordance with it, it was decided to introduce this approach at the state level in order to increase the functionality and efficiency of government bodies. In principle, the same thing happens in the field of business - an entrepreneur must decide on the implementation of a risk-based approach, and already it, documented, launches the entirethe process that will be discussed now.

Definition of types of control

So, how did the risk-based approach to the organization of state control in the government of the Russian Federation begin? First of all, the government decree outlined the types of control that will be subject to change after the introduction of this approach. In other words, the risk-based approach, when fully implemented, will not affect all areas, but only those that were identified in the resolution. What are these spheres? In accordance with the resolution, the following types of state control and supervision will be carried out using a risk-based approach: federal state fire supervision, federal state sanitary and epidemic supervision, federal state supervision in the field of communications and federal state supervision over compliance with labor laws. However, this is not the only information contained in the decision.

Introduction of rules

What else was contained in the decree, according to which the risk-based approach was launched for the above areas of activity? State supervision in these areas will be carried out in accordance with the rules, which were also indicated in the text of the resolution. A total of 21 rules were identified. They will have to be followed by state bodies when conducting supervision and control in the relevant areas of activity.

Risk Categories and Attribution Criteria

But the information provided by the decree does not end there either - it also defines specific risk categories, hazard classes, as well as features of measures when a particular category of risk and danger is detected. Moreover, the text of the resolution also created criteria for classifying a particular individual or legal entity as a certain category of risk and danger. As a matter of fact, this is where the theoretical part ended - and from April 2016, the decree began to come into force in stages. By the way, the process is still not finished, so it will be interesting to look at which steps have already been successfully completed, which are underway, and which have not even started yet and are only scheduled for a certain date in the future.

Calculation methods

The first practical task, which began in May 2016, was the development of methods for calculating the values of indicators, which will later be used to determine the degree of danger of a particular factor and the risk itself. Please note that this process is very important and time-consuming, since, in fact, it is its results that will be the foundation for the further activities of the program. Therefore, work on this step is still ongoing, although it was started many months ago.

Unscheduled inspections

As for this step, it was very short and fast - during it it was necessary to legislate the possibility of using this approach when conducting unscheduled inspections. This was already done in the second quarter2016.

Preparation of recommendations

The next step was the preparation of detailed methodological recommendations that could be used by the relevant state government bodies to implement a risk-based approach in their activities. This step will require a lot of effort, as it implies the existence of a ready-made draft, in accordance with which recommendations will be created. That is why the deadline for the implementation of this item is set for February 2017 - and the responsible authorities are still working on its completion.

Summing up preliminary results

By March 2017, the preliminary results of the introduction of a risk-based approach to the above state supervision bodies should be summed up. The fact is that this approach is planned to be used much more widely in the future, so now it is being implemented only in a limited number of areas, and now the assessment of how effective this project is is underway. In March 2017, the results will be summed up and, based on the results, a decision will be made on how much the list of types of supervision will be expanded in the near future, and what it will be like by 2018, that is, by the time this approach is fully implemented in state supervisory authorities.

Workshops

In June 2016, the first seminar on the exchange of successful practices in the functioning of the risk-based approach in state control and supervision bodies was held. This step has no statute of limitations, as it must be done every six months. It is likely thatafter the full implementation of the system, this item will be adjusted, but until 2018, these seminars will be held every six months, which will significantly improve the functionality of this project.