One of the most important factors in the administration of governance and development in the regions is an efficient and effective regional financial management system. However, in some cases there is still financial management that is not in accordance with regulations and can result in state losses, community losses, and hampering government activities. These problems cover various aspects, including aspects of policies, programs and activities caused by the ineffective implementation of risk management. Although the rules for implementing risk management in several local governments already exist, in the implementation of these regulatory policies, local governments often do not apply risk management [1].

Risk Management in financial management is very necessary for local governments to identify, measure, monitor, and control problems that arise from financial management. Risk management is a theory of management science that is expected to be used as a guide in identifying all risks that are expected to occur in the future, measuring the likelihood of these risks appearing and the impact if these risks actually occur and are believed to be possible. interfere with the continuity of organizational goals [2,4].

Based PP No 60 Tahun 2008, risk is an event that may occur and if it occurs will have a negative impact on the achievement of government agency goals. Risk is also explained in PMK No 12/PMK.09/2016 concerning the Implementation of Risk Management in the Ministry of Finance that risk is the possibility of an event having a negative impact on the achievement of objectives. Meanwhile, the Committee of Spronsoring of The Treadway Commissio (COSSO) defines risk as the possibility of an event occurring that can affect the achievement of the entity's goals. When viewed from the understanding, risk is always related to the possibility of something that can be detrimental or an unexpected or desired event. Based on the previous understanding, as the public sector, government agencies are required to improve performance and transparency in managing finances, so that understanding of risks must also be improved, such as determining strategic priorities and programs in  achieving  organizational  goals.  In  the  local government system, the objectives of local governments are clearly stated, among others, in regional planning documents, such as the RPJMD, Renstra and Renja/RKPD. The strategic objectives of the regional government are stated in /operational level are contained in the OPD Renja document the RPJMD document, the strategic objectives of the OPD are contained in the OPD Renstra document, and the objectives at the activity/operational level are contained in the OPD Renja document [5-9].

Several standards have been approved as a reference in implementing risk management management, one of which is regional regulations related to risk management. The Risk Management process is the systematic application of policies, procedures and management practices for communication and consultation activities, context setting, risk identification, risk analysis, risk evaluation, risk mitigation, as well as monitoring and review. Banyuwangi District uses Perbup Banyuwangi No 12 Tahun 2020 concerning the Implementation of Risk Management in the Banyuwangi District as a guide for assessing the maturity level of risk management implementation. The maturity of risk management implementation is assessed by evaluating four components, including: leadership, risk management processes, risk mitigation activities, and the results of risk management implementation. The assessment process is carried out by evaluating documentation as well as conducting interviews and written tests related to the implementation of Regional Apparatus risk management using the four components described previously. The results of the assessment will show the level of organizational maturity which is divided into five levels, namely Risk Naive, Risk Aware, Risk Defined, Risk Managed and Risk Enabled [10-14].

As stated in the Perbup Banyuwangi No 12 Tahun 2020 concerning the Implementation of Risk Management in the Banyuwangi District, Inspektorat Banyuwangi District is a Compliance Office for Risk Management, which supervises the control of the implementation of Risk Management, and carries out a consulting role. and Risk Management assistance. As the Compliance Office for Risk Management, the Inspektorat carries out the implementation of a Compliance Office for Risk Management within the Banyuwangi District; and play a role in the implementation of Risk Management consultation and assistance within the Banyuwangi District. However, as one of the OPD within the Banyuwangi District, the Inspektorat is also required to implement risk management in the internal control system in order to achieve organizational goals in accordance with the reference to PP No 60 Tahun 2008 concerning Government   Internal  Control System (SPIP).

The implementation of risk management in every OPD in Banyuwangi District is considered a new science in line with the ratification of the Perbup Banyuwangi No 12 of 2020. It is also supported by the supervisory policy within the Banyuwangi District which is contained in the Perbup Banyuwangi No 1 Tahun 2021. In the regulation there are 20 main activities supervision, one of which is the Preparation of the Risk-Based Annual Monitoring Work Program. Based on these references, Inspektorat Banyuwangi District should implement risk management to reduce the negative impacts that may hinder the objectives. In the application of risk management at Inspektorat Banyuwangi District, risks are divided into strategic or policy risks and risks that lead to technical and operational activities. The strategic directions, general policies and work programs Inspektorat Banyuwangi District are contained in the Strategic Plan (2016-2021) document as a tactical and strategic guide in the implementation of internal supervision and control within the Banyuwangi District. Through this document, researchers will analyze the application of risk management at Inspektorat Banyuwangi District with reference to Perbup Banyuwangi No 12 Tahun 2020 concerning the Implementation of Risk Management in the Banyuwangi District [15-17]. 

Risk management has become a new challenge in the government environment, especially local government. Several previous studies have tried to review how the risk management process at the government level is to determine the extent to which risks can be identified. Hadi [14] identified eight potential very high risks, seven potential high risks, five potential risks moderate and three potential risks low in the Procurement Service Unit (ULO) of Bontang City. Risk management research was also conducted in West Bandung City [3], stating that the application of risk management in West Bandung City has not been effective and only uses risk-based audits which are not yet effective. Meanwhile, research at the Regional Office of the Directorate General of Treasury of East Nusa Tenggara (NTT) came to how the risk mitigation was carried out, namely reducing the possibility of risk and lowering the level of risk [1]. The existence of a management process that has not been implemented in previous studies provides an opportunity to examine the risk management process at In spektorat Banyuwangi District to the level of risk maturity. So that this research will not only identify the risks that will occur, but also assess the level of maturity of the risks.

Research on the application of risk management has been widely carried out in the public sector. However, little has been done for the government sector, especially local government within the scope of OPD. In 2017, Hadi examined the implementation of risk management in Bontang City with six risk management processes, namely: Communication, Context Determination, Risk Assessment, Risk Evaluation, Risk Mitigation, and Monitoring and Assessment. The results of the research conducted were to identify eight potential very high risks, seven potential high risks, five moderate risks, and three potential low risks.

In contrast to Hadi [17], Ahmad [3] examines risk management to the evaluation stage of risk management by recording the risk management process in West Bandung City. Ahmad [3] explained that West Bandung City is still not effective in implementing risk management and only uses risk management-based audits which are also not effective.

Then Abdurrahman [1] also examined the application of risk management in the government environment, namely the Regional Office of the Directorate General of Treasury of NTT Province. The research was conducted by examining six risk management processes ranging from Communication and Consultation, Context Determination, Risk Assessment, Risk Analysis, Risk Mitigation to Monitoring and Review. Based on the six risk management processes, there are two mitigations that can be done, namely reducing the possibility of risk and lowering the level of risk

The research design can be used as a limitation in analyzing research problems and conditions. The limitation in this study is to assess the application of risk management in Inspektorat Banyuwangi District with several stages. The risk assessment stages consist of Risk Identification, Risk Analysis, Risk Evaluation and Risk Mitigation. The results of these stages will show the level of risk maturity in Inspektorat Banyuwangi District. The data analysis that will be carried out is based on Perbup Banyuwangi No 12 Tahun 2020 concerning the Implementation of Risk Management in Banyuwangi District. The data in this study uses the Strategic Plan, Perkin and Renja Inspektorat Banyuwangi Districy in identifying risks. Meanwhile, the research method used is quantitative research methods that are measurable and descriptive, comparative, and associative.

Identify Potential Risks

Identification of potential risks at Inspektorat Banyuwangi District was carried out using a step by step questionnaire method to see respondents opinion on a problem until it became a consensus. Questionnaire for risk identification is an early stage. Respondents were given a questionnaire in the form of risk identification which would become a risk register at Inspektorat Banyuwangi District. In the first phase of the questionnaire, there were thirty six potential risks that occurred in Inspektorat Banyuwangi District. The thirty eight potential risks of the list of potential risks were then used as material for a phase II questionnaire and an assessment of whether or not they agreed with the risk questions displayed. Phase II questionnaires were conducted with the aim of providing a summary of phase I questionnaires to respondents and an assessment of whether or not they agree or disagree with the list of potential risks that have been identified.

The assessment is carried out by calculating a scale where if you strongly agree with the potential risk then a score of 5 is given, if you agree, a value of 4 is given, neutral with the potential risk that exists then is given a value of 3, if do not agree, it is given a value of 2 and if strongly disagree, it is given a value of 1. Based on the recapitulation of the Phase II Questionnaire Results, risks with an average value above three indicate that these potential risks are priority risks that will be included in the risk register. There are 27 potential risks that are worth above three, namely:

• Monitoring object has not been recorded and mapped.

• Possibility of OPD changes.

• It is possible that the audited map is not up to date.

• There are follow-up activities (outside the annual PKPT).

• Program of annual supervision activities that are not on schedule or not on time.

• The possibility of the budget not being realized on schedule.

• RKA does not show a comprehensive activity plan and does not match the needs that should be needed.

• There are supervision guidelines that are not in accordance with audit standards.

• Regulations for supervision guidelines are not yet available.

• There is a PKS schedule that coincides with other activities.

• Lack of resource persons both from the office itself and from outside the office.

• Participants do not understand the substance of the PKS material.

• It is possible that the PKS theme is not in accordance with the supervision activities.

• Planned assignment schedule clashes with other activities.

• There is an uneven assignment.

• Difficulty in obtaining data and facts from auditees.

• There is a conflict of interest between the auditor and the audited auditee.

• The implementation of the assignment is not in accordance with the planned schedule.

• Auditors accept bribes or gratuities.

• Preparation of LHP is not timely.

• LHP is not communicative and does not comply with audit standards.

• There is an administration of missing or leaking findings

• Delivery of LHP is not on time.

• LHP is used by other parties/irresponsible persons.

• LHP recipients are not on target.

• Follow-up results of supervision are not well documented.

• There are recommendations that are not followed up.

Creating Severity and Probability Tables

Severity is a rating that indicates the seriousness of the effects of a failure mode. Severity is in the form of numbers 1 to 5, where 1 indicates the very small risk impact and 5 indicates the highest level of risk impact. The modification of the severity table is adjusted to the conditions of the Inspektorat and is based on the impact of risk on four aspects that support the supervisory activities by Inspektorat Banyuwangi District. The determination of the four criteria that become the assessment in the severity level table was obtained through interviews with six main respondents which was held on May 10, 2021.

Determination of the value of the severity level is obtained from the results of questionnaires to the six main respondents, namely Inspektur, Secretary, Irban Region I, Irban Region II, Irban Region III and Irban Region IV. The implementation of the severity level questionnaire coincided with the implementation of an interview to determine the severity level criteria, namely on May 10, 2021. The severity level value considers four criteria, including financial, reputation, time, and performance.

Probability is a measure of how often a potential risk occurs. The probability value is in the form of numbers 1 to 5, where 1 indicates a low chance of occurrence or almost never occurs and 5 indicates an almost frequent occurrence. The criteria in the probability table are an estimate of the cumulative number of failures that arise due to a certain cause in one supervisory activity with the number of supervisory activities in one fiscal year. In this study, modifications were made to the probability table because the number of PKPT varies between regions, so a table is needed that can be applied to Inspektorat Banyuwangi District. The criteria for the probability level were obtained from the results of interviews with the six main respondents which were held on May 10, 2021 along with interviews about the criteria for severity level. The following are the results of the modified probability level for Inspektorat Banyuwangi District.

The assessment is done by giving a questionnaire to 41 respondents to determine the probability value. Implementation of a probability level questionnaire on 17-18 May 2021. The assessment uses a scale of 5 where if the possibility of a risk occurring is very frequent (more than 70% or more than 7 times in 5 years), a score of 5 is given, if the possibility of a risk occurring is frequent (51 -70% or 15 to 7 times in 5 years) then a score of 4 is given, if the probability of occurrence of risk is occasional (31-50% or 5 times in 5 years) then given a value of 3, if the probability of occurrence of risk is low/small (by 11-30% or 1 to 3 times in 5 years) is given a value of 2 and if the possibility of a risk is very small (by 0-10% or 1 time in 5 years) it will be given a value of 1.

Penilaian Risiko

Risk assessment is the result of multiplying the severity value with the probability value of a risk in the risk matrix. The risk matrix is used to determine the category of a risk whether it is low, medium, high or extreme. The determination of the risk level value is obtained from the multiplication between the severity and probability values as follows: Risk = Severity x Probability. Table 1 shows the results of the modified severity level for Inspektorat Banyuwangi District.

Table 3 shows the result of multiplying the severity value and probability value of each risk at Inspektorat Banyuwangi District.

Based on the assessment of the results of the calculation of the risk value for each risk, these risks are described in the Risk Analysis Matrix to view the risk map. A risk map can be said as a description of the distribution of risk that shows the position of risk in an organization. Table 4 shows the Risk Analysis Matrix based on the calculation of the risk value above.

Based on the results of the risk analysis matrix of the 27 potential risks, it can be concluded that there is 1 very high potential, 9 high potential, 10 medium potential, 4 low potential and 3 very low potential.

Risk Mitigation Plan

After knowing each value of the magnitude of each risk and the priority of the risk level, then to determine the mitigation to be carried out, you can see from the table 5 the amount of risk that must be mitigated as follows.

Based on the results of risk data collection in the field of supervision from the previous risk identification stage, there were 27 risks that were included in the operational risk  category.  The  twenty-seven   risks   are   included  in the operational risk category due to inadequate and/or malfunctioning internal processes, human errors and system failures. Table 5 Amount of Risk that Must be Mitigated Based on Risk Category at Inspektorat Banyuwangi District, shows for the operational risk category the amount of risk that must be mitigated is 15. Following are the risk areas that must be mitigated.

Table 1: Severity Level Modification Results

Source: Data processed

Table 2: Probability Level Modification Results

Source: Data processed

Based on the analysis matrix above, there are two areas that must be mitigated with five risks in it, namely the risk that there is a PKS schedule that coincides with other activities, difficulties in obtaining data and facts from the audited, the implementation of the assignment is not in accordance with the planned schedule, the preparation of LHP is not on time and recommendations that are not followed up. The five risks must be taken to manage the risk so that the risk level can be decreased or resolved.

Tingkat Kematangan Risiko

The risk maturity level assessment is based on four components, including leadership, risk management processes, risk mitigation activities and the results of risk management implementation.  The risk maturity level assessment was obtained from the results of interviews with six main respondents (Inspektur, Secretary, Irban Region I, Irban Region II, Irban Region III, and Irban Region IV) along with a risk management understanding test on 17 May 2021 with the following assessment of each component in risk maturity level at Inspektorat Banyuwangi District.   Based on the assessment criteria above, interviews were conducted with the main respondents (Inspektur, Secretary, Irban Region I, Irban Region II, Irban Region III, and Irban Region IV) in one forum to assess each component. The interview was held on May 28, 2021. Table 7 shows a recapitulation of the assessment of the level of risk maturity at the Banyuwangi Regency Inspektorat obtained from the interviews.

Risk Level Analysis and Application of Risk Management at Inspektorat Banyuwangi District

Table 3 Calculation of Risk Value

Source: Data processed

Table 4 Risk Analysis Matrix at Inspektorat Banyuwangi District

Source: Data processed, : Very high, : High, : Medium, : Low, : Very Low

Table 5: Amount of Risk That Must Be Mitigated by Risk Category

Source: Perbup Banyuwangi No 12 Tahun 2020

Table 6: Risk Analysis Matrix that Must be Mitigated

Source: Data processed, : risks that must be mitigated   

Table 7: Recapitulation of Risk Maturity Level Value at Inspektorat Banyuwangi District

Source: Data processed

The     Banyuwangi     District     has     pioneered        the implementation of a risk management  implementation system starting in 2020, since the ratification of Perbup Banyuwangi No 12 Tahun 2020 concerning the Implementation of Risk Management in Banyuwangi District. However, until now there is still no application of risk management at the OPD level, as well as Inspektorat Banyuwangi District. To be clear, Inspektorat Banyuwangi District had not previously implemented systematic risk management. This is because Inspektorat Banyuwangi District is under the auspices of the regional government which is guided by regional regulations. Regional regulations for the application of risk management in Banyuwangi District can be said to be still in the early stages because the Perbup Banyuwangi No 12 Tahun 2020 concerning the Implementation of Risk Management in Banyuwangi District was only enacted in early 2020. So for the work system in the application of risk management at the OPD level too still in the experimental stage. Similar to other OPD, Inspektorat Banyuwangi District is still trying to create a framework for implementing risk management in the work environment, especially in the field of supervision.

In the implementation at the OPD level, Inspektorat as the compliance office for risk management divides the work program on the implementation of risk management in four quarters as the initial stage for OPD other than Inspektorat. Inspektorat as a compliance office for risk management has the task of consulting and assisting other OPDs under the auspices of the local government. Therefore, the Inspektorat should be used as an example in implementing risk management at the local government level.

When viewed from the results of the risk maturity level, the Banyuwangi Regency Inspektorat is at the risk defined level (Risk Maturity Level Score = 51,927) or in other words Inspektorat Banyuwangi District has demonstrated organizational conditions that are able to identify and determine key risks, conduct periodic reviews, and put in place mitigation measures for key risks within the organization. However, the monitoring efforts of the risk mitigation measures carried out are only carried out by certain parties within the organization and are not documented. There needs to be consistency from risk management implementers at Inspektorat Banyuwangi District to continue to evaluate and mitigate risks that fall into high and very high-risk levels. It is also possible that further treatment is needed for risks that are at very low, low and moderate risk levels as initial controls so that they do not become sustainable risks.

The risk management process only reaches the stage of determining the context which can be proven by the existence of a Risk Charter as the output of setting the context. While other risk management processes, researchers assist in identifying risks, analyzing risks and measuring the level of risk maturity so as to get a risk level value at Inspektorat Banyuwangi District. As for the risk mitigation stage, researchers can only provide suggestions for risk mitigation with high potential.

In accordance with the 2020 target of Banyuwangi District in Perbup Banyuwangi No 12 Tahun 2020 concerning the Implementation of Risk Management in Banyuwangi District, the risk level is at a value of 3 on a scale of 5 (risk defined), so it can be said that Inspektorat has achieved the target. However, if it is not implemented consistently and with high commitment from the implementers, then the value of the risk level can also change and even new risks may emerge.

Based on the discussion in chapter IV, the following conclusions can be drawn:

• The results of the risk identification stage at Inspektorat Banyuwangi District produced 38 risk proposals from ten stages of supervision activities based on the Phase I Risk Identification questionnaire. The risk proposal was retested by submitting a Phase II Risk Identification questionnaire with 27 risks with a weight above 3 (agree and strongly agree). These risks have been identified as risks that can hinder the organization's objectives.

• Based on the assessment of the results of the calculation of the risk value for each risk, these risks can be described in the Risk Analysis Matrix to view the risk map. A risk map can be said as a description of the distribution of risk that shows the position of risk in an organization. The results of the risk analysis matrix of 27 potential risks, it can be concluded that there is 1 very high potential, 9 high potential, 10 medium potential, 4 low potential and 3 very low potential.

• Based on the analysis matrix that has been carried out, there are two areas that must be mitigated with five risks in it, namely the risk that there is a PKS schedule that coincides with other activities, difficulties in obtaining data and facts from the audited, the implementation of the assignment is not in accordance with the planned schedule, the preparation of the LHP is not on time and there are recommendations that are not followed up. The five risks must be taken to manage the risk so that the risk level can be decreased or resolved.

• If viewed from the results of the risk maturity level, Inspektorat Banyuwangi District is at the risk defined level (Risk Maturity Level Score = 51,927) or in other words Inspektorat Banyuwangi District has shown an organizational condition that is able to identify and determine key risks, conduct a thorough review periodically, and put in place mitigation measures for key risks within the organization. However, the monitoring efforts of the risk mitigation measures carried out are only carried out by certain parties within the organization and are not documented. There needs to be consistency from risk management implementers at Inspektorat Banyuwangi District to continue to evaluate and mitigate risks that fall into high and very high risk levels.

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