As part of this assignment, it is required to demonstrate the ability to apply risk assessment to compliance management to evaluate the effectiveness of a state custom control organization. Risk management is especially valuable in emergency situations that require the prediction of external and internal threats to a particular organization. In this case, it is required to take the Catdom Customs Department as an organization for assessing the risk of interdisciplinary maneuvers. In order to create a more accurate picture of the work of this administrative organization subordinated to the Minister of Trade, it makes sense to attract additional sources. They could explain the statistical picture of what is happening on the island more precisely, thus implying possible strategies and recommendations for the management of the island.
The fundamental problem that needs to be solved affecting the entire trading community of the island is the unbalanced pace of deliveries and constant delays in cargo. The verification time spanning the period between the filing of a declaration and the completion of the evaluation has increased significantly compared to the previously given period. Importers of goods are forced to stand in queues for days to receive goods as each of the cars is carefully checked by the customs inspection for the presence of a dangerous worm. This parasite threatens the island’s citrus industry, which is reason enough for the trade department to impose such a strict screening policy. The islanders rely on a regular harvest of citrus fruits as they are a marketable export commodity that generates economic profit. However, if we use a risk assessment strategy, then it makes sense to assume that these strict measures can cause no less damage to the economy in the long run. Despite the fact that over the past year, the economy of Catdom has experienced a noticeable recovery, it can be assumed that within a few years, it risks not being so confidently strengthened. Indeed, the number of transactions increased by 5,000, and the total value of transactions and the amount of profit itself increased to an even greater extent. However, despite this rise in overall economic convertibility, it can be assumed that much more transactions could be made if the supply chain were somehow simplified.
Time Release Research works on breaking down the process of delivering goods into significant stages to understand which part of the process is the most time-consuming compared to the previous period. Based on the Time Release Study conducted to identify the main problematic aspects of the import-export mechanism, another reason for delays becomes noticeable. Customs The Department of Catdom Island has in the past been scammed by a bankrupt firm that paid remotely with checks. Now each importer is obliged to personally appear at the Department and sign the documents necessary for the sale of goods. Obviously, this scheme is extremely time-consuming, which slows down the dynamics of the trading process. Moreover, this procedure is technically outdated and unattractive in such a way that it not only takes time but also, in the future, may scare away potential importers due to a banal inconvenience.
Risk Management and Solutions
Compliance management as a practical principle in an organization’s operation implies that employees’ actions must be consistent with relevant laws and regulations. Requirements and recommendations are usually put forward to the organization by relevant international alliances, government regulatory mechanisms, as well as industrial legal entities (Shome, 2021). It is interesting to note the paradox observed in the logic of applying risk management to this type of management. Compliance management is designed to reduce the risk level by adhering to certain proven standards (Blokdyk, 2021). Risk management calls not only to evaluate risks but also has the concept of positive risk, which is justified and can serve as the key to a winning strategy (Blokdyk, 2021). In this context of Catdom Island, it must be said that the Department of Customs is forced to take certain risks to accelerate the delivery pace.
At the same time, these risks should not be blind and simplifying the level of verification to a minimum without any additional regulations seems thoughtless. It is necessary to develop new principles for evaluating goods based on statistical data and the discovered international standards of trade organizations. Considering that the worm that threatens the island’s entire citrus industry is found only in relevant commodities, it is likely that the inspection mechanism should be left so complicated only for imported citrus fruits.
It should be added that this will be a justified risk, especially considering that citrus fruits are far from the only product that provides the country’s economy. In general, it should be noted that the export market on the island is only in a developing stage, so one can understand the administration’s worries and enhanced verification measures, however only slowing down the economy. The second option to facilitate checks would be to reduce the details of the assessment based on the principle of importing goods from those countries where a case of this worm has not yet been registered. Such a measure is also somewhat risky but still significantly reduces the pressure on importers and island dealers. It is important that by accelerating the process of evaluating the goods, the waiting period and the process of selling the goods are also accelerated. It can be assumed that if importers wait for trucks with loads for several days, this may have a negative impact on the freshness and quality of some goods and thus inevitably hit the economy. Thus, it is clear that the strict policy of assessing goods by the inspectorate should be reduced in some way and that this significantly dynamizes economic processes, money circulation and financial profit.
Compliance management itself covers quite an impressive number of areas necessary for a well-functioning import-export process. Trade surveillance and conflicts of interest are areas of compliance management, and these areas are problematic for the custom policy chosen by the island (Shome, 2021). It was the over-focus on security that was the problem for the island’s economy. Moreover, this applies both to the principle of the slowing down process chosen by the customs officers and to business aspects related to the signing of papers. The desire to never again be deceived leads the island’s administration to radical solutions that do not correspond to the value of the tasks set.
The fact that each importer to the state must personally sign papers in the Department of Customs is also very time-consuming and hinders a more active development of the economy. Probably debugging computerized digital signature mechanics and a personal dialogue with the administration via the Internet conference room could solve this problem. Digitalization, especially after the pandemic lockdown, has become a key way to stay agile in business and trade (World Customs Organization, 2021). Finding more flexible solutions that do not require movement from a trading partner could also increase the attractiveness of this island for trade due to the convenience and, moreover, the progressiveness of digital business. The importer’s face-to-face procedure is old-fashioned and there are no guaranteed ways to digitalize the process without risking or questioning the authenticity of the importer’s identity.
Compliance with Global Standards
A realistic risk assessment within the framework of compliance management requires a reconciliation of the practices applied by the island with real standards and recommendations that are globally accepted. The World Customs Organization regularly updates the document, which contains the tactics of the so-called holistic approach to the assessment of imported goods. It is argued that it is absolutely unnecessary to check each ship in detail, and moreover, it is harmful because it will slow down the economic movement. There are several statuses by which the level of compliance can be determined, and Catdom Island turns out to be voluntarily non-compliant, as it regularly consciously ignores the recommendations proposed by the global community (Blokdyk, 2021). At the same time, the WCO standard strives for sufficient flexibility so as not to contradict the policies of any state (World Customs Organization, 2021). Based on this, it can be argued that Catdom Island is not a special case of the impossibility of meeting the global standard; it is simply that their practices are too old-fashioned and strict.
The customs officers’ techniques also seem outdated, as they do not use smart security technologies that would produce a faster assessment of the goods. In this way, the immutability of the goods would be guaranteed throughout its entire transportation along the supply chain. It is also clear that additional automation and digitalization is required to maintain adequate and continuous communication with merchants who receive imported goods. It is obvious that the level of WCO does not correspond to the technical level of service of the supply chain as a whole. Holistic perception implies the integrity and balance of the entire economic mechanism. Automation in the economy’s modern ultra-dynamic realities is required to not slow down or thicken the flow in any part of the supply chain. Therefore, in the context of Catdom Island, a permanent recording of the status of any product is required, with notifications of waiting and delivery times sent directly to the recipient of the import. In this way, one could get rid of days-long queues waiting for goods and alleviate the inefficient extra burden on the state’s trade forces.
Therefore, from the position of risk management, it turns out that the Customs Department needs to computerize the methods for assessing and registering goods. Only a centralized system for sending data and automated checks will be able to unload the queues that slow down the economy of the island. The same need for digitalization applies to the signature of importers in Catdom. It is noticeable that deliveries are slowing down due to the fact that the importer himself has to perform a number of unreasonable actions in terms of productivity that could be performed online and have the same legal weight. Thus, both exporters and importers, who make up the opposite ends of the supply chain, experience enormous temporary and financial inconvenience. The key risk of continuing such strategies in the long term is the further stagnation of the trading mechanism, the deadening of economic processes and the loss of interest from increasingly progressive foreign importers.
The Gatekeeper Role
Proceeding from the described principles of conducting trade on the island, it makes sense to propose the term gatekeeper for the most accurate description of the formed trading regime. No state can be a full 100% gatekeeper because it is forced to interact with other states (Cooper, 2019). However, in this case, the signs of such an economy are extremely noticeable in this state. Gatekeeping is not described as a specific status but rather as a set of traits, including special control over imports and exports (Cooper, 2019). The regulations offered by the Customs Department of the island are so strict that they slow down trade, which is a fact of gatekeeping. Lack of technical support may itself be a feature of an overly incompetent economy that has difficulty interacting with the outside world. The term gatekeeper in the aspect of the state is used most often in relation to decolonized African states with unstable economies seeking to maintain neutrality (Cooper, 2019). The clientelism inherent in such countries should also be noted: given that two percent of importers are responsible for 20% of the market, there is an unequal distribution of income and privileges.
Thus Catdom is indeed a gatekeeper state maintaining asymmetric trade relations with the world. This is also emphasized due to the fact that the economy of the island is not primarily needed in any of the export industries. Such tactics are clearly contrary to the basic standards proposed by the WCO and can be smoothed out by redistributing control mechanisms. Digitalization of processes at each stage, simplification of the legal framework for importers, and reduction of part of the verification mechanisms are necessary for more efficient operation of import-export relations on the island. The introduction of these practices reduces the risk of further stagnation and makes the state more attractive for trade due to compliance with the SAFE safety standards proposed by the WCO.
Blokdyk, G. (2021). Risk management and compliance: A complete edition. 5StarCooks.
Cooper, F. (2019) Gatekeeping practices, gatekeeper states and beyond. Third World Thematics: A TWQ Journal, 3(3), 455-468.
Shome, P. (2021). Customs administration. In: Taxation History, Theory, Law and Administration. Springer Texts in Business and Economics. Springer, Cham.
World Customs Organization. (2021). WCO SAFE Framework of Standards.