Locking down contracts and auditing are absolutely key, say security experts Over the years, organisations have outsourced a wide range of services, generally because third parties can manage them more efficiently and cost-effectively than they can themselves. As a result, security and regulatory requirements have increased substantially. For IT departments, securing information in the supply [...]
Locking down contracts and auditing are absolutely key, say security experts
Over the years, organisations have outsourced a wide range of services, generally because third parties can manage them more efficiently and cost-effectively than they can themselves. As a result, security and regulatory requirements have increased substantially.
For IT departments, securing information in the supply chain is one of the biggest challenges they face today. This is because supply chains are composed of various companies, all of which have their own set of security standards, and organisations struggle to communicate their requirements to all of these different parties.
One way to approach the problem is to assess the “risk appetite” of your organisation, according to Mark Pearce, Head of Information Security at the Post Office. In other words, the IT department needs to work out what the board is prepared to accept in terms of risk, and balance that with with the amount of innovation the business requires.
Click here to read the complete article.
Source: Sophie Curtis | Techworld
Almost two-thirds (63%) of respondents to a new survey from Deloitte identified risk in the extended value chain – comprising vendors and customers and where they have less control – as their greatest concern with regards to supply chain risk. The survey of 600 global executives from manufacturing and retail companies, also found that over [...]
Almost two-thirds (63%) of respondents to a new survey from Deloitte identified risk in the extended value chain – comprising vendors and customers and where they have less control – as their greatest concern with regards to supply chain risk.
The survey of 600 global executives from manufacturing and retail companies, also found that over half (53%) said that supply chain disruptions have become more costly over the last three years.
As they operate in an environment of escalating risk, 45% of surveyed executives say their supply chain risk management programmes are only somewhat effective or not effective at all.
“Supply chains are increasingly complex and their interlinked, global nature makes them vulnerable to a range of risks,” said Colm McDonnell, partner at Deloitte Ireland.
“A recent good example of the threat of risk from the extended chain has been those businesses which have been impacted by the identification of equine DNA in food products. It is the increased complexity in addition to the growing number of potential risks which present a precarious situation for companies without solid risk management programmes in place. Quite simply, the importance of adequate risk management programmes has never been greater.”
Executives surveyed recognise the strategic importance of supply chain risk, with 71% responding that supply chain risk is an important factor in their strategic decision-making.
Nearly two-thirds (64%) claim to have in place a risk management programme specific to the supply chain. However, only 55% of surveyed executives think their risk management programmes are extremely or very effective.
According to Deloitte the four important attributes that are critical to supply chain resilience are visibility, flexibility, collaboration and control.
Click here to download a copy of the 2013 Global Supply Chain Risk survey report.
Source: Deloitte Global Services Limited
On a smarter planet, leading companies know the true costs of global business. Global sourcing can lower costs and boost profits. But procuring goods and services from around the world comes with its own set of risks. How do smarter organizations find success in a recovering global economy? By being flexible and adaptable with the [...]
On a smarter planet, leading companies know the true costs of global business.
Global sourcing can lower costs and boost profits. But procuring goods and services from around the world comes with its own set of risks. How do smarter organizations find success in a recovering global economy? By being flexible and adaptable with the right technologies, wherever they do business.
Discover the tactics used by business leaders to drive profits in our white paper, Learning from Leaders: An executive guide for managing risk in global sourcing.
Find out how they:
• Identify and mitigate vendor and procurement risks
• Find opportunities amid global uncertainty
• Apply sustainable strategies and practices
Are you ready for smarter global commerce?
Click here to download the white paper.
Business as usual is no longer good enough to stay competitive. Today’s procurement organizations must deliver value immediately, offset risk and develop game changing strategies on their journey to procurement excellence. By buying smarter, today’s leading CPOs are delivering sustainable savings of up to 8% of revenue. Download the white paper Journey to Procurement Excellence [...]
Business as usual is no longer good enough to stay competitive. Today’s procurement organizations must deliver value immediately, offset risk and develop game changing strategies on their journey to procurement excellence.
By buying smarter, today’s leading CPOs are delivering sustainable savings of up to 8% of revenue. Download the white paper Journey to Procurement Excellence and learn how best in class procurement organizations:
• Reduce costs
• Maximize Working Capital
• Manage Market Volatility
• Mitigate Risk
Are you ready to buy smarter?
Click here to download the IBM white paper.
In the risk assessment process, visualization of risks using a heat map presents a big picture, holistic view to share while making decisions on the likelihood and impact of entity-wide risks within an organization. A heat map is a two-dimensional representation of data in which values are represented by colors and can be designed from [...]
In the risk assessment process, visualization of risks using a heat map presents a big picture, holistic view to share while making decisions on the likelihood and impact of entity-wide risks within an organization. A heat map is a two-dimensional representation of data in which values are represented by colors and can be designed from being simple to 
very complex. It is important to carefully design the heat map so that the terms used to describe “potential impact” and “likelihood” are what is used in your organization.
When a heat map is used in workshops to assess the risks by individual managers, the discussions can be enhanced for they can see how risks in one part of the organization impacts another part of the organization. The resulting heat map can also be used to communicate the risk assessment to senior management, audit committees and boards of directors. The heat map also enables a business conversation on mitigation alternatives.
The information in this CGMA tool was adapted from Risk Assessment For Mid-sized Companies: Tools for Developing a Tailored Approach to Risk Management by the American Institute of Certified Public Accountants, Inc.
Click here to download the report.
Source: CGMA (Chartered Global Management Accountant)
What it Means to the Average Importer United States Customs has enormous challenges in processing and overseeing the millions of entries of merchandise that are imported into the U.S. on a yearly basis. There are 326 ports of entries and the demand on Customs to assure compliance with the trade laws is a staggering endeavor. [...]
What it Means to the Average Importer
United States Customs has enormous challenges in processing and overseeing the millions of entries of merchandise that are imported into the U.S. on a yearly basis. There are 326 ports of entries and the demand on Customs to assure compliance with the trade laws is a staggering endeavor. Customs focuses resources on designated Priority Trade Issues – high-risk areas that can cause significant revenue loss, hurt the U.S. economy, or threaten the health and safety of individuals. One of those Priority Trade issues is Penalties.
Penalties are used by Customs to promote the facilitation of proper importations, and improve the effectiveness of trade fraud remedies through strict swift punitive actions. Penalties are used in virtually all cases of violations, but in particular Customs focuses their use in conjunction with its other identified Priority Trade issues – antidumping and countervailing duties, import safety, intellectual property rights, revenues, textiles and trade agreements.
In each of these areas Customs is vigilant in searching and looking for things such as fraudulent goods; illegal transshipments; counterfeiting and falsification of documents; evasion of dumping or countervailing duties; attempts to enter previously denied goods through different ports; importers changing names, locations, and identifying information; and numerous other tactics that are used to circumvent the trade laws, fraudulently import goods and deny the government duties to which it is entitled. Customs will often find evidence of violations or potential violations through focused assessment audits, a risk-based approach to assess import compliance with trade laws and regulations. This audit approach includes assessing risks by reviewing corporate controls over trade compliance.
Webinar on Understanding US Product Safety Apparel Requirements and Risk-Based Targeting at the Border is going to take place on October 17. The webinar will be hosted by the Canadian Apparel Federation and sponsored by Export Development Canada. It will be presented by Crowell & Moring LLP. This webinar will provide practical guidance on the [...]
Webinar on Understanding US Product Safety Apparel Requirements and Risk-Based Targeting at the Border is going to take place on October 17.
The webinar will be hosted by the Canadian Apparel Federation and sponsored by Export Development Canada. It will be presented by Crowell & Moring LLP.
This webinar will provide practical guidance on the U.S. product safety requirements for apparel makers and how to effectively address risk-based targeting by U.S. Customs.
Importers of apparel face tough product safety regulation and enforcement in the U.S. The U.S. Consumer Product Safety Commission is increasingly focusing its enforcement efforts at the customs entry process using a risk-based approach to targeting shipments for auditing. Companies are challenged to keep up and comply with the full range of product safety regulatory obligations that apply to their products and rapidly respond to issues with U.S. regulatory agencies when they arise.
Webinar will cover:
• Product safety regulatory and certification requirements for adult and children’s apparel
• Interplay between federal and individual state requirements
• Elements of a reasonable testing & certification program
• Recent CPSC apparel enforcement actions and risk trends
• Risk-based targeting by U.S. Customs & Border Patrol and the Consumer Product Safety Commission
• How to handle border stoppages & what rights do you have with which agency
Speakers are Bridget Calhoun, co-chair of the Product Risk Management practice and specializes in “bet-the-company” government investigations and regulatory enforcement matters; Cheryl Falvey, Torts and Product Risk Management partner and formerly the general counsel of the U.S. Consumer Product Safety Commission; & Jini Koh, International Trade associate specializing in import and market access matters.
Click here for registration information.
When Ball Corporation, a US industrial conglomerate, was looking to diversify internationally during the mid-2000s, its attention fell on Formametal SA, an Argentine maker of metal cans. The target looked like a good fit, adding a reliably in-demand product to Ball’s broad portfolio, and in 2006 the deal was done. But soon after the deal [...]
When Ball Corporation, a US industrial conglomerate, was looking to diversify internationally during the mid-2000s, its attention fell on Formametal SA, an Argentine maker of metal cans. The target looked like a good fit, adding a reliably in-demand product to Ball’s broad portfolio, and in 2006 the deal was done.
But soon after the deal closed, Ball found that Formametal employees had been paying Argentine government officials to secure the import of used machinery, and the export of raw materials with reduced tariffs, according to findings by the Securities and Exchange Commission, the US regulator.
Payments of at least $106,749 were logged in Formametal’s books as “customs advisory services” and “verification charges”, but were allegedly bribes organised by two senior executives at the company.
According to the SEC, Ball did not do enough to stop graft, and bribes continued even after Formametal was under its control. The SEC launched an investigation into whether Ball had violated the Foreign Corrupt Practices Act (FCPA), and only last year did Ball settle for $300,000, without admitting any liability.
Ball’s story highlights the risks of M&A in emerging markets. Buying into developing economies can offer a fast path to growth, but it can also introduce corruption, fraud, the need for risk management and other issues to the organisation.
Click here to read the complete article.
Source: David Gelles | Financial Times
Survey finds companies are increasingly at risk for violating U.S. export regulations. The Obama administration is pushing export growth as a way to rev up the economy and boost job creation. But if the results of a recent survey are any indication, the small and mid-sized U.S. companies that stand to benefit most from export [...]
Survey finds companies are increasingly at risk for violating U.S. export regulations.
The Obama administration is pushing export growth as a way to rev up the economy and boost job creation. But if the results of a recent survey are any indication, the small and mid-sized U.S. companies that stand to benefit most from export growth need to educate themselves about the applicable regulations before they crank up their export engines.
The survey, conducted among mid-market companies by global trade management software provider Amber Road, found that these companies are increasingly at risk for violating U.S. export regulations. Of the 150 companies surveyed, 23 percent do not screen for restricted parties prior to engaging with trading partners and customers.
Of those survey respondents who do perform restricted-party screening, 30 percent do so manually using spreadsheets or websites. Two-thirds (66 percent) use manual processes to classify their products, opening the door to errors and inconsistencies. Of equal concern is that only 41 percent have a comprehensive export compliance program, and 20 percent have no formal compliance program in place.
Just over one-third (35 percent) of respondents have a management team that is somewhat aware of the regulations but has no involvement in the compliance process. In fact, survey respondents say a lack of executive sponsorship is largely to blame for their companies’ trade compliance deficiencies.
According to a March 2012 U.S. Bureau of Economic Analysis report, U.S. exports grew 7.7 percent from January 2011 to January 2012. That’s good news, yet it also raises concerns. “Mid-market companies in particular are increasing revenues by accessing foreign markets,” said Scott Byrnes, Amber Road’s vice president of marketing, in a statement. “Unfortunately, it appears that many mid-market companies aren’t fully aware of the regulatory requirements governing global trade.”
Click here to download the full results of the survey.
Source: DC Velocity
The United States has Free Trade Agreements (FTAs) with many countries – Australia, Singapore, Israel, Morrocco, to nave a few. Soon there will be an FTA with Korea. FTAs with each beneficiary country are identical in some ways and significantly different in others. One commonality among the FTAs is that the imported product must be [...]
The United States has Free Trade Agreements (FTAs) with many countries – Australia, Singapore, Israel, Morrocco, to nave a few. Soon there will be an FTA with Korea.
FTAs with each beneficiary country are identical in some ways and significantly different in others.
One commonality among the FTAs is that the imported product must be fully produced in the FTA country or, if made in whole or substantial part from foreign materials, that the foreign materials had been “substantially transformed” there. Documenting this can be difficult.
A recent Customs survey found that 28% of the claims for free entry under the FTAs were not properly documented. This resulted in the retroactive loss of the duty exemption and in some cases penalties as well as the curtailment of an otherwise highly successful import program.
Often, the importer is not sensitive to its exposure. It may have been importing goods duty-free under an FTA for years without any objection or question from Customs. Then a request for production documentation for a specific (usually recent) shipment is made and it is found that the factories did not maintain sufficient records.
Production documentation is often extensive – for some products, running to more than one hundred pages. Few importers find it practical to require them for each shipment, even though it is the importer’s obligation to maintain records justifying the claim for free entry. Rather, the importers request it of the manufacturers when the request comes from US Customs. Only then is it learned that the factories’ documentation is insufficient.
For starters – and this is far from the only measure you should take to minimize exposure to an unexpected duty assessment or more–we suggest that if you import under an FTA , you request production documentation from each factory you use for a recent shipment from it– and require as a contractual matter that such documentation – if your review satisfies you that it is sufficient – be provided for any other shipment within 30 days of request.
Please regard this as a general informational message. It is not advice that will insure that you qualify under an FTA or anything near an exhausive listing of measures you should take to protect your company.
Source: Stephen M. Zelman | Zelman & Associates
Note: The foregoing article pertains to U.S. Customs, but the principles involved are equally relevant to Canadian importers utilizing benefits of FTAs Canada maintains with various countries around the world.
There is no doubt that developing markets present enormous growth potential. But with these opportunities comes challenges of operating in emerging markets where corruption, illicit trade and organized crime are commonplace. How does an established, legitimate business stay competitive and compliant when operating in such locations? This is of increasing concern to corporate leaders, according [...]
There is no doubt that developing markets present enormous growth potential. But with these opportunities comes challenges of operating in emerging markets where corruption, illicit trade and organized crime are commonplace. How does an established, legitimate business stay competitive and compliant when operating in such locations?
This is of increasing concern to corporate leaders, according to Ernst & Young’s European Fraud Survey 2011 which found that two-thirds of employees said bribes were widespread in their countries, and one in five felt it acceptable to pay bribes to win business. In the firm’s most recent global fraud survey of corporate leaders found that while more than half of respondents plan to grow within the next year – especially to Latin America and the Far East where corruption is perceived as commonplace – two in five rarely perform fraud or corruption due diligence.
After all, compliance, audits and legal can be extremely expensive functions – costs that sometimes feel hard to justify, especially when competitors are trying to gain a competitive edge in overseas markets by simply following – sometimes loosely – local business practices. But staying on the up-and-up in every location where you do business ultimately makes sense in the long-run, says Andrew MacKinnon, Head of International Casualty, Zurich Global Corporate in North America.
“That compliance and competition intersect one another is the gist of the challenges that each of our customers is dealing with,” MacKinnon says. “It may be a bit more expensive on the front-end to ensure your company is compliant, but if you’re not adhering to local or international regulation, it’s not a matter of if you’ll be caught, but a matter of when.”
MacKinnon says that Zurich, a global insurer with many multinational customers, has seen clients’ questions and concerns shift from a perspective focusing primarily on price to one that now incorporates a higher level of interest in compliance, especially from a corporation’s brand perspective. “Being found for non-compliance in a country where you’re doing business is not the type of headline you want to have,” he says.
To wit, National Western Life, headquartered in Austin, Texas, in November was fined by Brazilian regulators a record $6.2 billion for violating local laws about selling life insurance – news which made local and international headlines. And while some nations are more highly regulated than others, in the long-term there is no location that will be immune from ethical business practices.
“Some emerging markets in Africa, Southeast Asia and Latin America still have a freewheeling, lax mentality regarding compliance,” MacKinnon says. “However, as time goes by, these areas are becoming more affluent and more conscious of issues associated with regulation and tax income. Hence, companies coming into any marketplace, whether in mature, developed markets or emerging ones, need to make sure they are adhering to all local law and business requirements.”
Key compliance points when operating globally:
- Choose partners in-country as well as your home nation that are dedicated to compliance.
- Station employees in key regulation and legal functions on the ground to ensure your organization has “eyes and ears” in-country.
- Identify critical local stakeholders (for example, a chief environment minister), and assign an employee to engage them and understand their agenda.
- When choosing an insurance product, consider one global insurer with the capacity to address each nation’s compliance requirements.
Source: Zurich Insurance via The Atlantic Magazine
Richard (Rick) Riess, President of GHY International shares his insight on the Macro perspective on the Economy and its relation to International Trade. For more videos subscribe to our Vimeo or YouTube channels.
In the United States, a ruling may be requested under Part 177 of the CBP Regulations (19 C.F.R. Part 177) and in Canada, advance rulings concerning the tariff classification of goods may be obtained from the CBSA under paragraph 43.1(1)(c) of the Customs Act. The key advantage of obtaining an advance ruling from Customs is [...]
In the United States, a ruling may be requested under Part 177 of the CBP Regulations (19 C.F.R. Part 177) and in Canada, advance rulings concerning the tariff classification of goods may be obtained from the CBSA under paragraph 43.1(1)(c) of the Customs Act.
The key advantage of obtaining an advance ruling from Customs is that it provides certainty to the importer as to how the specific goods in question are to be classified. This not only firmly establishes the applicable duty rate for purposes of determining landed cost, but also facilitates the various documentation requirements for clearing goods at the border.
So why might you NOT want to get a binding ruling? Seattle-based compliance expert Jim Dickeson addressed this seemingly counterintuitive question in a recent article entitled The Ruling that Binds.
The foremost reason Dickeson offers is the possibility that the classification ruling you perhaps hoped to obtain may not wind up being that which Customs arrives at. After assessing your ruling request if, for whatever reason, Customs mistakenly determines that your merchandise should be classified under another tariff item that happens to attract a higher rate of duty than was initially anticipated, you will now be legally obligated to pay the higher rate of duty whenever the goods are imported until such time as the dispute is eventually resolved (presumably in your favour) through a lengthy and potentially expensive re-determination and refund claims process.
As an alternative approach to the conventional gambit, Dickeson recommends that importers undertake everything needed to properly make a ruling request with the intent of being absolutely sure that Customs fully understands the product in question and gives you the correct classification; e.g., providing product literature, detailed technical information, references to other rulings to support your position, and even samples if necessary. However, at the point you get all of that information together, Dickeson suggests you STOP right there and not submit the request… but instead, just file the information away in a safe place.
Dickeson’s reasoning is that in compiling all the information needed to make a ruling request you have already more than adequately fulfilled your precautionary “reasonable care” standard and, in the event Customs ever challenges the tariff classification of your product at some later point in time, it should be sufficient to prove your case.
Of course, there is an element of risk involved in either approach and we are not necessarily in complete agreement with Dickeson’s opinion on the matter. It is though perhaps something that may be worth bearing in mind when considering whether or not to obtain a binding ruling from Customs in future.
A recent article on cfo.com highlights the top risk concerns for companies in 2012 as reported by advisory group Corporate Executive Board (CEB). One of the CEB survey’s top 3 concerns is “Global expansion” and the potential impact that its associated risks may have on an organization. Also of note in the CEB survey’s list [...]
A recent article on cfo.com highlights the top risk concerns for companies in 2012 as reported by advisory group Corporate Executive Board (CEB). One of the CEB survey’s top 3 concerns is “Global expansion” and the potential impact that its associated risks may have on an organization.
Also of note in the CEB survey’s list of top concerns is that of compliance specifically related to international dealings with the regulatory regimes of foreign governments and managing the risks attached to 3rd-party relationships in the financial sector and global logistical supply chain.
If these aspects of risk management sound familiar, you may recall we have discussed these issues in our original white paper released in 2010 titled A Case for an Integrated Trade Compliance Strategy and the subsequent white paper report released in 2011, The 7 Best Practises of Leading Traders, more specifically the finding that best-in-practice globally-active companies naturally integrate foreign regulatory and trade compliance risks into their overseas planning models.
To read more of the original story click here.
Senators Sheldon Whitehouse (D-RI) and Jeff Sessions (R-AL) have reintroduced the Foreign Manufacturers Legal Accountability Act of 2011 (S.1946), requiring foreign manufacturers to have a registered U.S. agent that would accept service of process for civil and regulatory claims. Currently, foreign manufacturers are able to evade U.S. laws and safety standards because of the difficulty [...]
Senators Sheldon Whitehouse (D-RI) and Jeff Sessions (R-AL) have reintroduced the Foreign Manufacturers Legal Accountability Act of 2011 (S.1946), requiring foreign manufacturers to have a registered U.S. agent that would accept service of process for civil and regulatory claims.
Currently, foreign manufacturers are able to evade U.S. laws and safety standards because of the difficulty of holding them responsible in the U.S. court system. This creates an unfair market advantage for foreign corporations, who have little fear of being held liable when their products injure or even kill U.S. consumers.
“Foreign corporations should not be able to profit from selling their products in our country without being held to the same laws and safety standards as U.S. manufacturers,” said American Association for Justice President Gary M. Paul. “American businesses and consumers all suffer when a foreign producer cannot be held accountable for a hazardous product through our legal system.”
According to an analysis by American Association for Justice, 83% (312) of the 377 recalls announced by the Consumer Product Safety Commission (CPSC) in 2009 were from foreign manufacturers. The 2008 CPSC data is similar, when 84% (329) of recalls were from foreign manufacturers. The legislation will address foreign products overseen by the CPSC, National Highway Traffic Safety Administration (NHTSA), Environmental Protection Agency (EPA) and the Food and Drug Administration (FDA).
The bill would apply to drugs, medical devices, and cosmetics, biological products, “consumer products” as defined in the Consumer Product Safety Act, chemicals under the Toxic Substances Control Act, and pesticides.
The bill specifically addresses the issues of service of process and jurisdiction. Service abroad involves the Hague Convention on the Service Abroad of Judicial and Extra Judicial Documents in Civil and Commercial Matters, to which the U.S. is a signatory. Under the terms of this agreement, a complaint must be translated into the foreign language, transmitted to the central authority in the foreign country, and then delivered according to the rules of service in the home country of the defendant. This can be a lengthy and expensive process.
The proposed legislation would require foreign manufacturers and producers of covered products distributed in commerce (or component parts that will be used in America to manufacture such products) to establish a registered agent in the United States who is authorized to accept service of process. It similarly states that a person may not import into the U.S. a covered product (or component part that will be used in America to manufacture a covered product) if such product (or component part) or any part of such product (or component part) was manufactured or produced outside the United States by a manufacturer or producer who does not have a registered agent.
The ancient curse of “…may you live in interesting times…” could well have been uttered about international trade after the 2008 Credit Crunch (a.k.a. The Great Recession). Companies trading goods and services across borders have had to establish strategies for volatile currencies, degraded credit ratings, squeezed margins and financial crime. The subject of financial crime [...]
The ancient curse of “…may you live in interesting times…” could well have been uttered about international trade after the 2008 Credit Crunch (a.k.a. The Great Recession). Companies trading goods and services across borders have had to establish strategies for volatile currencies, degraded credit ratings, squeezed margins and financial crime.
The subject of financial crime is not limited to those who have achieved global notoriety. For every Bernard L. Madoff, there are thousands of fraudsters who operate on a smaller scale. Many international trading firms and banks would rather write off the cost of financial crime, rather than pursue the perpetrators in the damaging glare of negative publicity.
Reputational risk is, after all, the most pressing concern for senior management. As a result, reported incidents of financial crime are undoubtedly less than published statistics.
There are a bewildering number of fraud variants possible within international trade. Exporters, importers, middlemen, logistics companies and their respective banks can all be defrauded of some or all of the underlying goods or purchasing funds / proceeds from the sale. Exporters can ship fraudulent goods or arrange for payment of goods that never existed. At the other end, importers can claim goods in exchange for fraudulent documents or fake payments to exporters. Issuing, negotiating, confirming and reimbursement banks all contend with fraud as a reality of their traditional trade finance businesses. Fraudulent documentation, ghost companies, doctored bills of lading, counterfeit bills of exchange and stolen or fabricated identities can all lend legitimacy to the claim that the transaction is genuine.
As supply chain finance dominates trading relationships between large vendors and buyers, certain prudent elements of risk management are exchanged for straight-through-processing and shorter cash flow cycles, scenarios ripe for exploitation by criminal elements if left unguarded.
The financial costs of fraud are painfully real to firms who incurred such losses. When coupled with foreign jurisdictions or opaque offshore financial centres, such cases can become irretrievable and simply show up in company accounts as write-offs.
Source: Manchester CF
Customs enforcement has developed drastically over the last decades to keep pace with the tremendous increase in international trade and transport, the growing awareness of trans-national organized crime and, more recently, the threat of terrorism. This has led to an increased awareness in Customs administrations that national and international co-operation is essential. This co-operation is [...]
Customs enforcement has developed drastically over the last decades to keep pace with the tremendous increase in international trade and transport, the growing awareness of trans-national organized crime and, more recently, the threat of terrorism. This has led to an increased awareness in Customs administrations that national and international co-operation is essential. This co-operation is based to a large degree on the sharing of information between Customs Services. More recently, the value of sharing information with the business sector and other law enforcement agencies has also been recognized as being of prime importance. All of this information is the basis for risk management, now generally regarded as the best approach to Customs controls in the current international trading environment.
Enhanced screening of pre-arrival information is the most effective means of promoting the flow of legitimate trade while identifying high-risk containers, cargo and passengers for examination. While 100% examination is impossible with present resources, it is feasible for Customs services to guarantee that virtually all data will be adequately screened for indications of risk. This allows the appropriate application of resources to focus on high-risk shipments for examination prior to goods arriving at a port of entry.
It is always important to remember that although it is possible to define common risk indicators and profiles; it is not possible to specify universal coefficients for the risk indicators because risks and threats change depending on several variables, just as laws, criminal organizations, importers and industries do. Furthermore, it is important to emphasize that the presence of one risk indicator does not necessarily indicate a high risk shipment or person rather; a combination of several indicators increases the probability of the presence of risk.
The WCO Framework of Standards to Secure and Facilitate Global Trade also has, as one of its core elements, a requirement that all Members implementing the initiative employ a consistent risk management approach to address threats to the trade supply chain.
Standardized Risk Assessments (SRAs) are an important part of the Customs intelligence function and contribute to the efficient and effective functioning of Customs services which in turn benefits international trade facilitation efforts.
Definition: The area of Risk within the Customs environment contains many specific definitions of equal importance which are listed below:
Risk: The potential for non-compliance with Customs laws.
Risk analysis: Systematic use of available information to determine how often defined risks may occur and the magnitude of their likely consequences.
Risk areas: Those Customs procedures and categories of international traffic which present a risk.
Risk assessment: The systematic determination of risk management priorities by evaluating and comparing the level of risk against predetermined standards, target risk levels or other criteria.
Risk indicators: Specific criteria which, when taken together, serve as a practical tool to select and target movements for their potential for non-compliance with Customs law.
Risk management: Logical and systematic method of identifying, analyzing and managing risks. Risk management can be associated with any activity, function or process within the organization and will enable the organization to take advantage of opportunities and minimize potential losses.
Risk profile: A predetermined, comprehensive and relevant combination of characteristics or risk indicators, based on information which has been gathered, analyzed and categorized.
Risk profiling: The means by which Customs put risk management into practice. It replaces random examination of documents and goods with planned and targeted working methods that use profiles as a basis.
Standardized Risk Assessments (SRAs): These Assessments produce risk indicator products for use by Customs officials for the purpose of targeting goods and conveyances in their daily work.
Source: Global Facilitation Partnership for Transportation and Trade – The United Nations Trade Facilitation Network
Recent events in the Ivory Coast, Egypt and Libya have highlighted the growing risk issues around cross border trading. Many businesses are more than aware of the physical and more obvious risks in this area, but are less familiar with the potential for interruption caused by politically driven regulation including sanctions, arising from multiple multilateral, [...]
Recent events in the Ivory Coast, Egypt and Libya have highlighted the growing risk issues around cross border trading. Many businesses are more than aware of the physical and more obvious risks in this area, but are less familiar with the potential for interruption caused by politically driven regulation including sanctions, arising from multiple multilateral, national, regional and domestic sources.
It is this increasing propensity to see politically driven regulation that may directly or indirectly impact upon trading partners and the advisers to such partners, which can create a real headache for business. Of course it can also create real opportunity for those businesses that understand the regulation and can work effectively with it.
There may be a misconception that this is a short-term problem, or something that only politically sensitive industries, such as defence, need to be concerned about. However, these issues are if anything accelerating and the concept of ‘political sensitivity’ may be applied widely to many industries today.
Whilst understanding the component parts of these cross border risks is challenging, it is possible and this understanding will be key to successful trade in the current and future international business environment. There is also a well established insurance market that can underwrite risk associated with international trade, which together with appropriate risk analysis provides many businesses with the security and confidence to realize trading opportunities in the challenging environment we operate in today.
Source: Jardine Lloyd Thompson Group plc
(Paul Teague — Procurement Leaders) Procurement executives and other business leaders should be monitoring infrastructure improvements as a matter of business due diligence. But, procurement’s role in logistics extends to more than just the condition of ports. It also touches on the important-if-unglamorous issue of trade compliance. Essentially, the term trade compliance relates to activities [...]
(Paul Teague — Procurement Leaders)
Procurement executives and other business leaders should be monitoring infrastructure improvements as a matter of business due diligence.
But, procurement’s role in logistics extends to more than just the condition of ports. It also touches on the important-if-unglamorous issue of trade compliance. Essentially, the term trade compliance relates to activities that ensure companies have all the proper trade licenses in place for global trade. Knowing you have the licenses and understanding the subtleties of free-trade zones and the myriad regulations affecting global shipments is critical. That knowledge is essential for risk management.
A lot of companies struggle with trade compliance. Not so Tyco International. It used to, but Vice President of Global Supply Chain and Operational Excellence Jaime Bohnke and her team reorganized the system for overseeing trade compliance and in the process took the risk out of it. “We didn’t have a one-company approach,” she says. Now they do.
Bohnke and other leading procurement executives take logistics and the related issues around global shipments seriously. In that sense, as in other areas, they are role models for the rest of the profession. Read the complete article here.
A survey conducted by a large North American foreign exchange provider found that 80% of the corporations surveyed acknowledged that their businesses were exposed to significant foreign exchange risk. However, only 42% of these corporations indicated that they currently employ currency hedging techniques to manage their risk.
Managing Risk Should be Strategic
Our friends at Western Union Business Services have published a paper titled, Foreign Exchange Risk Management: Protect Your Profits and Prosper in an Uncertain Economy. While this is an area that I have no direct experience handling, I found it interesting and relevant for this site because it address’ how the act of managing foreign exchange risk can be strategic for an organization.
It is worthy to note that according to their paper:
A 2006 survey conducted by a large North American foreign exchange provider found that 80% of the corporations surveyed acknowledged that their businesses were exposed to significant foreign exchange risk. However, only 42% of these corporations indicated that they currently employ currency hedging techniques to manage their risk.
Financial Risk Management is part of the ‘F’ in FACTS based approach
This suggests that there is a lot of risk left on the table with regards to Foreign Exchange, that would be one of the areas of focus under a FACTS based approach of an Integrated Trade Compliance Strategy. The FACTS based approach is a way to view the tactical detail of reviewing aspects that relate to your trade compliance program. The letters represent that broad categories that we have found you should consider in your review Financial, Advisory, Compliance, Technology, Service. Rick Riess, President of GHY International shares his vision of this “unpacking the facts” approach in the following excerpt from the GHY International website:
Key to our approach is a comprehensive “360 degrees” trade assessment that examines your entire supply chain as an integral cycle encompassing various Financial, Advisory, Compliance, Technology and Service aspects of your business (that we collectively refer to by the acronym “FACTS”).
After having explored the FACTS to discover potential opportunities to increase your cash flow, compliance, supply chain visibility, etc., and/or decrease your exposure to the risk of non-compliance, the cost of excessive duty payouts, etc., we then develop a heuristic plan customized to your specific situation that allows you to “test drive” proposed solutions and evaluate them before proceeding further.
This road map is more clearly articulated on the GHY International web site where we share this vision as part of our approach with importers and exporters in order to define a GAP. You can read more about this offering here.
Foreign Exchange Management Expertise
In the white paper from Western Union Business Services they address the top 3 myths about currency hedging, which includes;
- Currency hedging is speculative and risky.
- Currency hedging is only for the short-term; in the long run exchange rates always average out.
- I don’t need to hedge currency risk if I operate in US dollars and conduct foreign business in US dollars—I’m not exposed to other currencies.
They also cover the 3 key components of managing risk with a hedging program. This and other great tips can be found in the white paper, you can check it out here.
