§ Mrs. McKenna
To ask the Secretary of State for Trade and Industry if he will make a statement about the outcome of the review of the ECGD's risk management systems, the Terms of Reference for which he announced on 26 May. 
§ Mr. Byers
Following a competitive tendering process, KPMG Management Consultants were appointed to carry out the review.
KPMG's main findings were as follows:
- "For risk management to be effective there are four primary and critical requirements
- Risk identification
- Risk measurement
- Risk reporting, and
- Pro-active risk management.ECGD generally achieves good results in identifying and measuring risks accurately. Reporting of risks has been flagged as an area which needs attention.520WKPMG's report presents recommendations which will enhance the identification, measurement and reporting of risk.If the recommendations are successfully implemented, HM Treasury will be able to return to a more strategic role and provide added value oversight of ECGD.At present ECGD is constrained from truly managing risk by its competitive position and operating framework. In particular it is set up to price long-term transactions upfront in highly volatile markets with very limited opportunities to influence their risk/return balance once risk positions are accepted. Making the step forward necessary to accommodate the final element of pro-active risk management requires fundamental change to the business strategy and operating framework. ECGD and HM Treasury have been jointly considering a capital based approach through the development of PMS III; continuation of this initiative should be a priority.
My hon. Friend the Financial Secretary to the Treasury and I welcome the conclusions made by KPMG. We have drawn up an Action Plan to address all the recommendations made in their report. A copy of KPMG's report and the Action Plan Summary (Cm 4792) have today been placed in the Libraries of both Houses.
§ Mr. Ian Stewart
To ask the Secretary of State for Trade and Industry what progress has been made on various reviews of the ECGD; and if he will make a statement. 
§ Mr. Byers
I am pleased to announce the Review of ECGD's Mission and Status, which I announced to the House on 27 July 1999,Official Report, columns 305–06, is now complete and the Government have accepted its conclusions.
When I announced this Review, I referred to a number of other concurrent reviews of ECGD's activities. These are also complete and I refer my hon. Friend in particular to a separate announcement on the outcome of the Risk Management Review, in answer to a question from my hon. Friend the Member for Cumbernauld and Kilsyth (Mrs. McKenna) today, Official Report, columns 519–20W. The Report of ECGD's Mission and Status (Cm 4790), and all other Reports connected with this fundamental scrutiny of ECGD's role, have today been placed in the Library of the House, including the Report of a study by National Economic Research Associates (NERA) on the Economic Rationale for the Public Provision of Export Credit Insurance by ECGD (Cm 4791) and a Report on the provision of ECGD's Reinsurance for Exports Sold on Short Terms of payment (Cm 4793). This now means that all the Government's current reviews of ECGD's activities are at an end.
The Mission and Status Review was informed by a wide-ranging public consultation exercise and Reports by the Trade and Industry Committee, in its Third Report on ECGD: "The Future of the Export Credits Guarantee Department" published by the Committee on 20 January this year (Third Report, HC 52) and the International Development Committee's Report: "ECGD—Development Issues" published 20 December 1999 (First Report, HC73).
While strongly reaffirming ECGD's role in bringing economic benefit to the UK, and maintaining jobs, by supporting UK exporters and investors in overseas markets—and proposing greater freedom to provide this 521W support in the future—the conclusions of the Review published this afternoon set out a new direction for ECGD. It says ECGD should:Introduce greater openness and transparency to its operations. This includes greater consultation with customers and interested parties together with the appointment of outside Directors to ECGD's Management Board. The Export Guarantees Advisory Council's remit and membership should also be changed to advise on policy and principles, not individual risk decisions.Seek to attract more medium-sized exporters and investors as direct customers; offering a package of products geared to light capital goods and services and smaller projects. ECGD should work with the Small Business Service, Regional Development Agencies and British Trade International to increase understanding of ECGD services amongst smaller exporters.Support the Government's objectives of promoting sustainable development, human rights, good governance and trade throughout the world, by ensuring its activities are consistent with these wider international policies. ECGD will publish further details of how it plans to assess project impacts by the end of 2000.
We need to ensure that UK firms remain able to compete effectively against exporters and investors supported by Government-backed Export Credit Agencies in other countries. The changes will ensure speedier decision making, giving greater certainty to firms and new efforts to attract smaller exporters who may be looking to export to unfamiliar areas of the world.
The Report recommends that ECGD should be reformed and strengthened to ensure it is able to meet the challenges of the years ahead. From today ECGD will be working to a new Mission Statement.
ECGD's financial targets will be maintained, as will its overall risk appetite. It will be strengthening its risk management systems and establishing a capitalised framework and a Trading Fund, this should lead to ECGD having complete operational autonomy.
Further development of its systems for assessing sensitive projects and publication of more information on these, together with a statement of Business Principles to guide and inform its business policies and practice will help increase transparency and understanding.
The Reinsurance Review, which is also published today, concludes that, without withdrawing its present reinsurance arrangements, ECGD should work to transfer 100 per cent. of its short-term credit insurance risk to the private sector.
The Report sets out an ambitious reform agenda for ECGD which it needs to take forward in consultation with its customers and other interested parties. I am confident that ECGD will be able to continue to give first-class support to UK firms to compete for business opportunities abroad—thereby bringing economic benefit to the UK and countries in which it is supporting projects.