HC Deb 30 November 2000 vol 357 cc953-5W
Mr. Ian Stewart

To ask the Chancellor of the Exchequer if he plans to review the implementation of the recommendations made by KPMG in December 1999 on the adequacy of the risk management systems and processes of the Export Credits Guarantee Department. [141296]

Mr. Timms

On 25 July this year my right hon. friend the Secretary of State for Trade and Industry published the ECGD Risk Management Review [Cm 4792], which was jointly commissioned from KPMG by HM Treasury and ECGD. Alongside the Review HM Treasury and ECGD Ministers also published an Action Plan to address all the recommendations made in KPMG's report.

The Government, in their response to the Trade and Industry Committee's report on the future of ECGD, noted that they intended to commission a follow-up, independent report to assess progress in addressing the recommendations made by KPMG.

KPMG have been re-engaged to undertake this follow-up review. It is to be undertaken in two stages with the following Terms of Reference:

Stage I

The consultants are required to examine progress in addressing the recommendations set out in sections 1, 2, 3 and 5 of the KPMG report. In particular the consultants should: comment on the adequacy and effectiveness of the actions taken in remedying the shortcomings identified in the KPMG report; examine and report whether each KPMG recommendation has been sufficiently addressed; and where further progress is deemed necessary, recommend what action should be taken, its priority and the timescale within which it should be addressed.

The consultants should also examine ECGD's proposals to develop a capital-based portfolio management system (PMS 3) at whatever stage its development has reached by Stage I of this follow-up study. The consultants are required to comment on whether the proposals are likely to address the recommendations made in section 4 of the KPMG report and, where they might not, recommend changes to the framework under development accordingly.

The consultants will be required to begin the assessment of Stage I by end-October 2000. This stage should be completed within a four-week timescale.

Stage II

The consultants will be required to: assess whether ECGD's systems and procedures, following measures taken, constitute an effective pro-active risk management system envisaged in sections 3 and 4 of KPMG's report which delivers real control over risk. This should not conflict or duplicate with ECGD's current invitation to tender for consultancy on portfolio management; examine any area(s) where further progress was deemed necessary during Stage I of the study, and report whether the relevant KPMG recommendation(s) have been subsequently addressed; discuss and recommend (on the basis of the above analysis) whether the operating environment is now such that restoration of high level delegated authorities from HM Treasury to ECGD would be appropriate and whether ECGD should have full operational autonomy.

It is envisaged that the consultants will begin the Stage II assessment in spring 2001, to be completed within a two-week timescale.

The consultants will need to verify that agreed changes to operations and procedures are implemented in practice throughout the risk management process. They can expect to have unrestricted access to Government papers relevant to the study and to be able to question such employees of ECGD or other Government Departments as they judge necessary.

The output from this project will be a report at the end of Stage I and a second one at the end of Stage II, addressing the relevant issues set out in these Terms of Reference.