Risk-Based Classification Approach for Business Licenses – an Introduction

What is the Risk-Based Classification Approach? 

The Law of the Republic of Indonesia Number 11 of 2020, well-known as the Omnibus Law on Job Creation, changed a lot of subjects in Indonesia’s regulations, including the procedure for business licensing; however, the bigger picture regarding the implementation of this regulation is to attract more investment for the nation’s economy. In the case of business licensing, the government aims to simplify the license procedure through risk classification. 

The main point of this classification is that the lower-risk business should have less and simpler legal requirements and make the business operate more swiftly. To determine the risks classification, the government will take a few procedures, which is:

  1. Identifying the relevant business activity;
  2. Evaluate the hazard level;
  3. Evaluate the potential occurrence of hazards;
  4. Determine the business risk level;
  5. Decide the type of business licence.
  • What Are the Classifications?

From the previously-mentioned topic, you may wonder what these classifications are anyway? So, here it is; the business activities after being checked-up by the government may be classified into one of the following risk-levels;

  1. Low-Risk Business Activities

Low-Risk business activities is the simplest classification since it only requires an NIB (Nomor Induk Berusaha/Obtain Business Identification Number) for start to operate. 

  1. Medium-Low Risk Business Activities

Medium-Low Risk Business Activities require a NIB and self-declared Standard Certificate for them to operate. Some of the type of business in this classification may requires the applicants to complete some of the environmental regulations like UKL-UPL (Upaya Pengelolaan Lingkungan – Upaya Pemantauan Lingkungan) and SPPL (Surat Pernyataan Kesanggupan Pengelolaan dan Pemantauan) forms. 

  1. Medium-High Risk Business Activities

As the classification gets higher, the requirements also get more complicated. Basically, a medium-high risk business classification will need to obtain a NIB and Certificate of Standards which needs to be verified by the central government, meanwhile for some particular industries, there may be other requirements too. The main differences between this and the previous class (Medium-Low Risk) is the verification for the Standard Certificate.

  1. High-Risk Business Activities

The highest classification there is, high-risk business activities may need an NIB and particular licences based on the business type to operate. 

  • The Business Licensing Process Through OSS-RBA

Here is the process regarding Business licensing by OSS-RBA (Online Single Submission Risk-Based Approach). First, the businesses apply through the OSS-RBA website to gain access by creating a username and password. Indonesian citizens’ businesses only need a Single Identity Number (NIK), while foreigners need a passport number; both need an active email to make a new account on OSS-RBA. The next step is to input the business field and investment value. Once all the data is complete, the system will issue the NIB. The notification will go to each official office as the issuer of business licensing. Should there be any verification required, the relevant authorised institution will verify the compliance.

The OSS-RBA system then will verify whether the applications are approved, incomplete, or rejected. The system also will submit a request to complete the deficiency if the results are preliminary. Low-risk and medium-low-risk businesses can complete their business license in OSS RBA. The law regulates that businesses that do not significantly affect the environment, natural resources, or are practically easy to perform, can begin their operations immediately after getting a NIB. Meanwhile, medium-high risk and high-risk businesses must have a NIB, and the ministry/institution/region will verify the requirements/standards and carry out supervision of the company.

OSS-RBA came as a one-stop system, which businesses don’t need to take a lot of progress to finish licensing. The system’s coordinated with Disdukcapil, Ministry of Finance, Ministry of Law and Human Rights, and Ministry of Agrarian and Spatial Planning for company establishment.

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