SCM RISK MANAGEMENT FRAMEWORK by 504KNTQ

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									                                                     PO Box 204,
                                                      Rooigrond, 2743
                                                     Tel: +27 (18) 388 2462
                                                     Cell: 078 800 4521
                                                     Enquiries: Mr. Sipho Maduma Director: SCM
                                                     Email: smaduma@nwpg.gov.za
___________________________________________________________________




                DEPARTMENT OF PUBLIC SAFETY


                  SUPPLY CHAIN MANAGEMENT


               RISK MANAGEMENT FRAMEWORK




                     “Working together we can do more”


INDEX                                                                           PAGE


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  INDEX                                                    PAGE

1. DEFINITION: RISK MANAGEMENT…………………………………………………. 3
2. TYPES OF RISK IN THE DEPARTMENT OF PUBLIC SAFETY………………….. 3
3. Financial Risk…………………………………………………………………………….              3
4. RISK MANAGEMENT PLAN……………………………………………………………               4
5. RISK TRANSFER…………………………………………………………………………                 5
6. MITIGATE THE RISK……………………………………………………………………               5
7. ACCEPT THE RISK………………………………………………………………………                5
8. CONFLICT OF INTEREST………………………………………………………………               5
9. CONFIDENTIALITY………………………………………………………………………                 5
10. FIVE BENEFITS OF INTERNAL CONTROLS……………………………………….        6
11. REPORTING, REVIEWING AND APPROVING RECONCILIATION’S…………   6
12. CONTROLLING APPLICATIONS AND ENVIRONMENT OF
    COMPUTER INFORMATION SYSTEMS……………………………………………..           6
13. APPROVING AND CONTROLLING DOCUMENTS…………………………………          6
14. COMPARING INTERNAL DATA WITH EXTERNAL SOURCES
    OF INFORMATION……………………………………………………………………… 7
15. LIMITING DIRECT PHYSICAL ACCESS TO RECORDS…………………………... 7




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1. DEFINITION: RISK MANAGEMENT

Risk Management is the management of risk which may affect the day to day operations and a
continuous, proactive and systematic process affect the achievement of department objectives.
The executive authority, accounting officer, management and other personnel must apply strategic
planning that may be to identify potential events that may affect the department and provide
reasonable assurance regarding the achievement of department objectives. Development and
implementation of fraud prevention plan may be one of tools that may eliminate waste and
corruption in the use of Public assets.

2. TYPES OF RISK IN THE DEPARTMENT OF PUBLIC SAFETY

   2.1 Corruption and fraudulent practice

       Is a high risk that occurs in the awarding of contracts. Any bidders found to be engaged in
       corrupt or fraudulent activities in competing for the contract in question must be rejected.

   2.2 Business courtesy and bribery.

       These are slightly to occur from Bidders. That may be avoided by allowing a provision to be
       included in the contract agreement with the contractor, requiring contractors to permit the
       Accounting Officer to inspect their accounts and records relating to the performance of the
       contracts and to have them audited by auditors appointed by the accounting officer

   2.3 Form of Interest from Bid Committee members.

       That could be avoided by allowing Bid Committee members to sign declaration of interest
       and rescues themselves from decision making process, should it appear that they have any
       involvement could result in an accusation of undue influence.

   2.4 Theft and abuse of Government assets / property.

        Effective control measures must be in place. An accounting officer may appoint audit
       committee members shared by a non political officer bearer.

   2.5 The committee must report or comment on:-

       2.5.1 The effectiveness of internal control
       2.5.2 The quality of in year management and monthly reports submitted in terms
             of the Act and the Division of Revenue Act
       2.5.3 Its evaluation of the annual financial statements.
   3 Financial Risk

       Unauthorized expenditure:- expenditure that was not made in accordance with the
       purpose of a vote. Procurement plan must be developed to avoid this occurrence.

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    3.1 Irregular expenditure

       An expenditure that incurred in contravention of or not in accordance with a requirement of
       any applicable legislation. That may be avoided in delegating officials in writing in
       accordance to financial delegation.

    3.2 Fruitless and wasteful expenditure

       An expenditure which was made in vain and would have been avoided had reasonable care
       been exercised. That could be avoided if government officials sensitize and become vigilant
       in procurement of goods and services.

4 RISK MANAGEMENT PLAN

RISK    DESCRIPTION                          ACTION
1       Unavailability of Supply Chain       Draft Policy Communicating with National /
        Management Policy                    Provincial Treasury
2       Unavailability of Procurement        Development       and      establishment     of
        Plan                                 Procurement Plan Communicate with heads
                                             of Directorates to identify their requirements



3       Unavailability of formal Supplier    Implementation of formal Supplier statistics
        statistics
4       Failure to adequately manage         Implementation of Suppliers forum.
        Supplier      relationships    to    Inviting Suppliers to discuss about
        maximize purchasing leverage         how service delivery may be
                                             improved and identifications of
                                             problems areas.
5       Lack     of    co-ordination for     Implementation of Procurement Plan.
        procurement between different        Requesting plan of actions from respective
        programs and projects                projects management
6       Insufficient security                Ensure valuable assets such as Computers
                                             and Laptops.
                                             Installation of surveillance cameras
7       Inefficient of Bid Committee         Appointment of proper Bid
                                             Committee Members.
                                             Training of Bid Committee
                                             Members with regard to Bid
                                             processes.
8       Non     adherence     to       SCM   Appointment of Procurement officials in
        Delegation                           accordance to Financial delegation for
                                             approval of orders
9       Unavailability of formal Supplier    Implementation of formal Supplier statistics
        statistics



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10        Lack     of    co-ordination for     Implementation of Procurement Plan.
          procurement between different        Requesting plan of actions from respective
          programs and projects                projects management
11        Insufficient security                Ensure valuable assets such as Computers
                                               and Laptops.
                                               Installation of surveillance cameras



5. RISK TRANSFER

     Transfer of risk to the Supplier. Example, the Supplier shall permit the department to inspect
     the supplier’s records relating to the performance of the supplier and to have them audited by
     Auditors appointed by the Accounting Officer, if so required by the purchaser.

     Secondly in case a contractor renders services inside the building, it must be indicated from the
     contract that, they would take any responsibility of damage to the building caused by
     construction

6. MITIGATE THE RISK

     By passing risk to the Supplier. Example Insurances of goods. The goods supplied under the
     contract shall be fully insured in a freely convertible currency against loss or damage incidental
     to manufacture or acquisition, transportation, storage and delivery in the manner specified in
     the contract agreement.

7. ACCEPT THE RISK

     Self insure. Payments of goods and services shall be paid within 30 days after the receipts of
     proper invoice.

8. CONFLICT OF INTEREST

     Supply Chain Management Practitioners should declare any business, Commercial and Financial.
     They should not place themselves under any financial or other obligation to outside
     organizations or individuals. They should not take improper advantage of their previous office
     after leaving their official position.

9. CONFIDENTIALITY

 9.1 Supply Chain Management should protect information that is the property of government at
     all times.

 9.2     They   should not disclose any information regarding:
        9.2.1    Bids
        9.2.3    Bidders
        9.2.4    Contracts
        9.2.5    Supplier
        9.2.6    Service Provider


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   9.2.7 If such an action will infringe on their personal rights.
   9.2.8 Supply Chain Management Practitioners should keep confidential information confidential
         unless legislation, the performance of duty or the provisions of law require otherwise.

10. FIVE BENEFITS OF INTERNAL CONTROLS

  10.1 Identify key objectives and those risks that may impact their delivery. The organisation
       will be able to meet their mandate as required by the State.

  10.2 Measure the performance of staff. The organization will be able to identify shortfalls
       within their staff members and motivate staff to perform effective and efficient.

  10.3 Ensure that the Audit Committee is a powerful and proactive agent for corporate self-
       regulation. The department will have effective internal control.

  10.4 Monitor the effectiveness with which risk is identified, measured and managed.

  10.5 The department will be able to facilitate a risk assessment to determine the material risks
       to which the department may be exposed and to evaluate the strategy for managing
       these risks.

  10.6 Ensure that actions and decisions of the organization are in compliance with the
       applicable laws, regulations and contracts that will enable the department to
       eliminate fraud and corruption. Risk may also be limited.

  11. REPORTING, REVIEWING AND APPROVING RECONCILIATION’S

  11.1 Once three are applicable then the department will be able to prevent and detect
       errors in the financial and operational information.

  11.2 Employees should be provided with guidance and training to ensure that errors
       wasteful and wrongful acts are minimized.

  12. CONTROLLING APPLICATIONS AND ENVIRONMENT OF
      COMPUTER INFORMATION SYSTEMS

  12.1 Unauthorized changes to programmes which process data must be prevented.

  12.2 Installations of firewalls will prevent data corruption from unauthorized external
        access.

  13. APPROVING AND CONTROLLING DOCUMENTS

       Internal control structures and all transactions and significant events
       are to be clearly documented.




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   14. COMPARING INTERNAL DATA WITH EXTERNAL SOURCES
       OF INFORMATION.

         Controls should be designed for programmes, which do not process data to ensure that
         they are installed or developed and maintained in an authorized and effective manner and
         that access to system software is limited.
         Firewalls should be installed to prevent data corruption from unauthorized external access

   15.   LIMITING DIRECT PHYSICAL ACCESS TO RECORDS

   15.1 Access to sensitive and confidential files or records should limited.

   15.2 Officials should have use –id’s and password to access programmes, data files and
        software applications.




DEPARTMENTAL
SCM RISK
MANAGEMENT
FRAMEWORK
APPROVED BY

                       MR I MOTALA
                       HEAD OF DEPARTMENT
                       NW: DEPARTMENT OF PUBLIC SAFETY
APPROVAL DATE




                             “Working together we can do more”




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