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The Importance of Risk-Based Business Licensing for Your Business!

A. Definition of Risk-Based Business Licensing

Risk-Based Business Licensing (Risk Based Approach) is a new licensing system in Online Single Submission (OSS) which will be implemented in early 2021. This system aims to provide ease of business licensing with the ex-post concept which allows business licenses to be issued first while business actors complete commitments permit requirements or documents according to the type of permit registered within a certain period of time.

B. Legal Basis

Risk-Based Licensing was inaugurated since the enactment of Government Regulation No. 5 of 2021 (GR 5/2021) which is a derivative of the Job Creation Law. This licensing system changes the concept of licensing that is ex-ante (requirements are met first) with the concept of ex-post licensing (verification is carried out afterward). With this mechanism, it is hoped that the process of obtaining business licenses will be simpler and easier.

According to Appendix III GR 5/2021, risk is the possibility of damage or loss from a hazard. Risk assessment is carried out by considering the initial risk of a business activity including: aspects of safety, health, environment, utilization and management of resources, as well as other aspects. The risk identification process in the Risk-Based Business Licensing is based on the identification of business activities. Business activities refer to the description of business fields based on the Indonesian Business Field Standard Classification Code (KBLI) from the Central Bureau of Statistics for 2020.

Business Licensing

Read More: Ease of Doing Business in Indonesia

C. Business Licensing Function

Business License is important for every company in Indonesia, these are the functions of business licensing, despite its obligations to require it, among them are:

  1. Business actors can carry out business operations safely and comfortably so they don’t have to worry about other threats that often befall businesses that don’t have permits, such as controlling or demolition.
  2. Having a business license will make it easier to develop a business. For example, when a business actor wants to cooperate with other entrepreneurs and make it easier to export and import products.
  3. Business actors will find it easy to borrow funds from the bank

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ET Consultant is a Business Consultant and Legal Consultant Expert that provides support for local and multinational clients to start and manage their business operations in Indonesia. ET Consultant specializes in Business Incorporation, Licensing & Legal, Accounting & Taxes, Immigration, and Advisory Services.

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