Risk Management in Regulatory Frameworks

Risk Management in Regulatory Frameworks

Towards a Better Management of Risks You do not have access to this content

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Author(s):
UN
03 May 2013
Pages:
119
ISBN:
9789210561020 (PDF)
http://dx.doi.org/10.18356/41223185-en

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Recent years have been marked by many catastrophic events both natural and man-made. Close interconnections mean that the impact of these crises has been felt throughout the world. Although many tools have been developed to manage risks successfully, there can be no doubt that many of the losses we have recently witnessed could have been prevented or minimized, in the context of an effective and well-balanced regulatory system. The goal of this publication is to provide insights and recommendations for policymakers on designing regulatory systems that result in an efficient, effective and transparent management of risks. It introduces a holistic model of a regulatory system, function by function and with real-life examples, which is based on the objective of managing risks effectively.
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  • Acknowledgements
    This publication was authored by Lorenza Jachia and Valentin Nikonov. It is based on the work carried out under the auspices of the UNECE Working Party on Regulatory Cooperation and Standardization Policies. The authors would like to thank the members of the Group of Experts on Risk Management in Regulatory Systems as well as other experts who have participated in the Working Party’s discussions on risk management since 2009. They also acknowledge with thanks the comments received from Virginia Cram-Martos, Director, Division on Trade and Sustainable Land Management at the UNECE. The publication was edited by Erica Meltzer.
  • Preface
    Among the most unsettling, and paradoxical, consequences of globalization has been its effect on risks: while it has great potential to reduce the impact and likelihood of a number of risks – local and global, natural and manmade – it has also helped magnify and spread others. The increasingly complex and intertwined nature of global supply chains spanning continents and oceans has brought many benefits but also directly or indirectly contributed to a wide range of events resulting in loss of life, environmental degradation and economic hardship.
  • Abbreviations
  • Executive summary
    The UNECE Working Party on Regulatory Cooperation and Standardization Policies started its work in 1970 as a forum for dialogue among regulators and policymakers. Since then, it has been working on a number of topics, including technical regulations, standardization, conformity assessment, accreditation, metrology, market surveillance and risk management. It makes recommendations that promote regulatory policies to protect the health and safety of consumers and workers and preserve our natural environment, but without creating unnecessary barriers to trade and investment.
  • Introduction: Risk management and regulatory systems
    A devastating earthquake hit an already fragile Port-au-Prince in January 2010. It was the deadliest tremor in recorded history, leaving enormous losses in its wake. Yet by seismic standards it was a major, but not cataclysmic, event. The consequences were compounded by Haiti’s chaotic construction, its lack of a comprehensive national building law and seismic design code, and more generally its poor planning capacity for catastrophes. In Chile, by contrast, building codes and risk-based building rules have been regularly updated and enforced since their adoption in 1931. Innovative technologies were introduced and applied to disaster risk management and regular training sessions held in educational institutions. Better preparedness was undoubtedly among the factors that helped reduce the consequences of the earthquake that struck there in February 2010, which was 500 times more powerful than the one in Port-au-Prince (World Bank, 2011; Kaufmann and Tessada, 2010).
  • Managing risks
    Risk management is a discipline firmly rooted in organizational management, and particularly in business management. Regulations are often addressed to business operators, which need to implement them through their managerial structures. This chapter describes the various types of risk that are typically faced by business and the main tools that are used to manage them. It thus provides useful background information for the remainder of this publication, which looks at how these concepts can be applied to regulatory systems.
  • Risk management in regulatory systems: A reference model
    In the previous chapter we described various types of risks that typically confront businesses and some of the main tools for managing them. In this chapter, we show how these concepts can be applied to a regulatory system.
  • Regulation as a risk mitigation tool
    In the previous chapter we described a methodology for the application of risk management tools to the needs and goals of a regulatory system. The model presents laws, administrative measures and technical regulations, complemented by voluntary standards and norms, as key tools for managing risks in the regulatory system as a whole.
  • How does regulation work in practice? An example
    Following on our discussion of the structure of a regulatory system (figure 4.4), we will now focus on the roles of various stakeholders in regulation and show “who does what” when the development and implementation of a regulation is chosen as a risk mitigation tool. Rather than providing an exhaustive description of all functions, which would not be possible even in a series of publications, we will use an example – an imaginary case study – to present the most interesting aspects of each of them.
  • Risk management at UNECE WP.6
    This publication has presented the main results of the risk management work under way in the UNECE Working Party on Regulatory Cooperation and Standardization Policies (UNECE WP.6) since 2009. This work has been entrusted since 2010 to the Working Party’s Group of Experts on Risk Management in Regulatory Systems (UNECE GRM).
  • Evaluating risk management in regulatory systems
    This publication has attempted to promote and support change in the structure of regulatory systems – change that can be realized only through a well-managed portfolio of projects. In this chapter we will present a methodology for such a reform. The intention is to obtain an objective evaluation of the existing risk management practices of a regulatory system. Such an evaluation is a prerequisite to developing an action plan for implementing risk management in a regulatory system.
  • Conclusions
    Managing risks through regulations is not a new concept. The Code of Hammurabi – perhaps the oldest existing set of laws – provided that if a builder does not construct a house properly and the homeowner dies as a result, the builder should be put to death.
  • List of members of the UNECE GRM, at the time of publication
    The Group is chaired by Mr. Kevin Knight and coordinated by Mr. Donald Macrae and Mr. Valentin Nikonov.
  • References
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