Businesses will be motivated to improve their legal compliance capacity through risk management. Photo: H.Deu

Motivation for businesses to improve compliance

The 2022 Business Law Flow Report of the Vietnam Confederation of Commerce and Industry (VCCI) analyzed and managed risks expressed in the classification of management objects based on the level of compliance with the law evaluated according to the criteria, graded on the scale.

Accordingly, the lower level of compliance is, the more violations, and the more strict and frequent management is required. High level of compliance, no or small violations, violations that have occurred for a long time without recidivism, then fully implement remedial measures for violations.

According to VCCI, state management agencies will allocate management resources more effectively when focusing their forces on potential violators in the context of limit ed state resources.

This also helps deter those with low compliance levels by knowing that they will be subject to increased management; businesses are said to be incentivized to improve their legal compliance capacity to avoid risks.

Risk management facilitates and encourages businesses with a high degree of compliance to save resources to fulfil inspection requirements and thus more resources for the organization of production and favourable business activities, develop scale and fully fulfil tax obligations to the state.

Therefore, in our country, the customs sector is applying this approach in the classification of customs clearance applied to enterprises importing and exporting goods based on the level of compliance with applicable customs laws, which is exempted from detailed inspection of records and goods (Green stream), only detailed inspection of records is not required to inspect goods (Yellow stream) or must check both documents and goods (Red stream). Furthermore, in the Red Channel, the level of detailed inspection is also divided into levels depending on the degree of violation of the owner of the goods. Furthermore, a post-clearance inspection of goods is also applied to risk management, according to the provisions of Clause 2, Article 78 of the Law on Customs 2014.

According to the report of VCCI, the risk assessment and classification of inspection decisions are being applied according to the regulations issued by the Government and the Ministry of Finance based on applying the classification of criteria groups.

Expressly, the provisions of specialized management laws; the provisions of customs and tax laws; the results of the enterprise's compliance risk assessment; Customs professional information and results of analysis and risk assessment are provided and updated by professional units at Customs at all levels.

The above criteria group classifications are established and applied to the customs professional information system; When the enterprise registers the declaration, the system will automatically compare the information on the customs declaration with the criteria mentioned above groupings, combined with the use of algorithms to stream inspection decisions.

It should be widely applied to bring many benefits

According to the recommendations of the Organization for Economic Co-operation and Development (OECD), regulations and processes that are science-based, centralized and well-proportioned are effective and less expensive. Regulations that do not consider the real risks tend to be burdensome, costly and inefficient.

Overall assessment of risk management in ministries and sectors, VCCI assessed that, in some other areas that have not yet been managed based on the level of risk, the inspection of goods quality is still spread evenly while it is entirely possible to apply a risk-based approach to management.

The report of VCCI gives an example of a general basis for state inspection of goods quality, which can create a risk of abuse to conduct an inspection and significantly affect the operation of enterprises.

Some places may have applied risk-based management according to the level of legal compliance of enterprises, but the legal document does not stipulate the principle of risk-based inspection. Therefore, VCCI believes it may lead to each locality applying a style.

Therefore, the report of VCCI said that risk-based management could also be studied and applied in many sectors and fields in state management in Vietnam, bringing many benefits to both State management agencies and individuals and business organizations to enhance the effectiveness and efficiency of policies.

Accordingly, regarding the requirements for risk-based management, VCCI believes that it is necessary to develop a set of evaluation criteria based on the analysis of possible risk factors in each management area, collect opinions from affected subjects on this set of criteria, and ensure feasibility and suitability.

This also needs to balance management needs (including management capacity: time, personnel, costs), ensuring the operational stability of the subjects under management and other factors. To do this, it is necessary to build data at agencies related to the field of management and connection to form a common database used to analyze possible risk factors.