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State agencies not ready, says consultant

Published: 
Thursday, May 31, 2018
Risks and procurement management
Ken Hackshaw, risk management consultant PICTURE ROBERTO CODALLO

Business and political leaders need risk management training to deal with T&T’s challenges, says Ken Hackshaw, risk management consultant and a lecturer in risk management at the Arthur Lok Jack Global School of Business.

“Look at what is going on now economically. It is a great time to put risk management concepts to work and be more risk intelligent. It speaks about the country’s work ethic, about the country’s complacency.

Risk management is the new normal internationally.”

Hackshaw, founder and executive director of the T&T Risk Management Institute, said with the Public Procurement and Disposal of Public Property Act yet to be fully proclaimed, many of the country’s state entities are not yet equipped to operationalise the legislation.

Key appointments have been made, he said.

In January, Moonilal Lalchan, a former president of the T&T Chamber of Industry and Commerce, was appointed procurement regulator and chairman of the Procurement Board and the ten members of the board have received their instruments of appointments.

However, according to Hackshaw, systems for full implementation of the new act are not in place across the public sector.

“The Risk Management Institute had direct involvement in development of the policy handbook that operationalises the act and we know what is required of state entities. It is my respectful view that most of the state entities are not equipped as yet to actually comply and/or effect the legislation,” he said.

He blamed this on a lack of strong internal controls and effective risk management.

Procurement legislation is not just about compliance, he pointed out: “It is about identifying, managing and reporting on the risks associated with the procurement and disposal of goods. In that regard I have some concerns.”

Hackshaw said a professional certificate enterprise risk management course developed by the Risk Management Institute about a year ago, includes a module on procurement risk management.

“We are the only folks that are knowledgeable of and trained in assisting state entities. There is the compliance aspect which is the legal and regulatory aspect of it but it is the internal controls that are mandated that I have a concern with.”

Hackshaw also has questions about the procedures that should be followed:

“What about supply chain risk management?

“What about identifying the risk associated with who you identify?

“Did the person do due diligence on the vendor that they are engaging to provide that service?

“What about third party risks in verifying how good the person is, or if something bad were to happen to the vendor, would they able to complete the service that you hired them for? There should be continuity plans.”

He proposes training and education to get state entities to the place they ought to be.

“The institute can do that. Many state organisations have procurement departments. Some of them are trained in what procurement is analogous to supply in change management.

“What they do not have is the risk management component. Best practice and international standards now dictate that one needs to marry the procurement and legislation,” he said

Hackshaw said state-run organisations must have procurement departments that are agile to deal with the dynamism of the modern world.

“This is to keep abreast of all the massive changes in the world. I have done procurement risk management training for a major state entity in the energy sector. Kudos to them for having the awareness to say that they need to have help.”

Corruption risk

There is a function in procurement risk management training that deals with corruption risk assessment, said Hackshaw.

“What this implies is not to identify individuals who are corrupt, it is meant to identify procedures, policies, processes that can be used to commit fraud or corruption.

“Basically, the rules and regulations are not stringent enough that they could be easily used to commit a corrupt practice.

“An example is where you read that in the banks fraud is being committed. It is because the process or the procedure is outdated and there are not enough controls than can be taken advantage of.”

None of this currently exists in any state organisation in T&T, he said.

“I will challenge anyone to ask most board members or leaders in state organisations if they have any idea what is their corruption risk assessment.”

A “normalisation of deviance” concept was developed by American sociologist Diane Vaughan to describe weaknesses in the United States’ Space Agency (NASA’s) organisational behaviour, Hackshaw said.

“This basically says the bad things have been continuing so long that it becomes the accepted norm. That is what is going now in many state entities and across society. The processes, as bad as they are now, are an accepted norm. Training is the solution for all of this.”

Organisational challenge

In September, Hackshaw will be releasing a book, How Success Can Lead to Failure—Tales of Trinbagonians’ Risk Management Culture and Leadership, a compendium of articles and newsletters he has written over the last five years.

“I have added what an entity or person can do to prevent these things from happening. This is to help business leaders make better decisions.”

He also covers personal risks, organisational risks and risks at the country level in the book.

“When there is an effective risk management programme, there is the possibility of the country increasing its credit rating based on that. One of the pillars the international credit agencies look at is if a country has a risk management programme.”

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