Right principles for a risk-based approach


State control of business should be based on a risk-based approach. There have been the relevant legal provisions at the level of slogans for more than ten years. However, to what extent is the actual state control mechanism really based on risks?

The answer to this question can be found in paragraph 11 of the CMU Resolution No.752, which stipulates that up to 10% of business entities can be classified as high-risk ones and up to 30% – as medium-risk businesses in relevant state control areas.

What does it practically mean? For example, there are 1,000 business entities working in a certain area of state control. If it happens that 300 business entities are classified as high-risk ones based on statutory risk assessment criteria, then still only 100 of them will be legally classified as high-risk businesses and inspected at appropriate intervals (no more than once every two years). Another business entities will be classified as medium-risk ones, which implies carrying out planned state control measures no more than once every 3 years.

The case stated above clearly demonstrates the “split mind” of domestic law makers, who, on the one hand, declare the state’s responsibility to focus on the risk associated with activities of a particular business entity, and, on the other hand, force state control bodies to ignore this risk and pretend that, in fact, it is lower.

It is easy to see that in the example mentioned above, classifying an entrepreneur as a high-risk or medium-risk business will depend only on the judgement of a particular state official. Does this case create corruption opportunities? Certainly, it does. Should we change this situation? The answer is definitely “Yes”. How can we solve the problem described? This will be discussed in our next articles. Stay in touch!