Regulatory Laggards – has COVID-19 led to a rise in burden shirking? An ANZSOG/NRCoP facilitated conversation

COVID-19 has transformed many of the operational settings for regulators as well as the context and market environment for our duty holders. This shift has raised questions regarding the way regulators approach their compliance tasks and whether regulatory burden shirking has occurred.

An ANZSOG/NRCoP (National Regulators Community of Practice) facilitated conversation on 20 October 2020 brought a group of senior regulators from a range of jurisdictions and sectors together to discuss Regulatory Laggards in the third and final of the NRCoP’s series of facilitated conversations.

Their surprising conclusion? Duty holder behaviour has not noticeably shifted in a negative direction.

Bad actors have stayed true to form, or worsened, but in most cases, both regulators and duty holders have legitimately been adapting and recalibrating their behaviours in response to COVID-driven circumstances.

COVID-19 has brought the benefits of regulators learning from each other into sharp focus and, as facilitator Adam Beaumont explained to the group, the initiative responds to long-standing requests by NRCoP participants for the opportunity for deeper engagement with their regulatory peers on common challenges and innovations.

The first two facilitated conversations focused on Windows of opportunity in a crisis and Compliance in a crisis. Regulatory laggards canvassed three key questions in small groups:

• Behaviour – have duty holder behaviour and harms changed during this period?
• Risk-based targeting – how have you adjusted your compliance monitoring to target known, or identify new, poor performers?
• Preventing non-compliance – how has your approach changed to encourage voluntary compliance or increase deterrence?

Several broader issues emerged over the course of discussion, which are outlined below. In many cases these reflected common themes in the earlier conversations, particularly in relation to the challenges of managing dispersed regulatory workforces, the enforced shift to a more digital and dispersed operating model and expanded collaboration and information-sharing with regulatory peers, partners and duty holders.

Regulators are thinking differently about preventing non-compliance, promoting compliance and engaging with duty holders and their representative bodies. Findings included:

• There was a general appreciation that for many duty holders, their models of working and what constitutes their ‘workplace’ has changed dramatically, just as it has for regulators.
• New compliance issues are emerging as workplaces and the nature of work itself continues to restructure and reform.
• There has been a noticeable shift for some regulators to the ‘support to comply’ end of the regulatory continuum, including one-on-one customised explanations of the new rules. This recognises that in a world of unknowns, preventing non-compliance through straightforward and appropriate information is a major priority.
• Transparency about regulatory posture, targeting and compliance approach has become more critical than ever before. Regulators have needed to communicate with a wide audience of stakeholders about the rationale, focus and priorities of their compliance activities.
• For those regulators whose role is to ‘regulate workplaces’, there has been a significant pivot from a compliance-based focus where the rules are known and clear, to an iterative process of engaging with duty holders on what ‘COVID-safe’ actually means.
• Message-sending, both inside regulators and outward-facing, has taken on new importance as normal compliance requirements and processes need to be adjusted to new realities.
• The pandemic has seen the emergence of new duty holders as parts of the regulated community expand or shift their operations; this has required regulators to clarify both their own and duty holders’ understanding what ‘good’ looks like and how this can be achieved.
• Peak bodies and professional associations have come into sharper focus. On the positive side they have been able to serve as an invaluable conduit between regulatory requirements and ‘real world’ issues for duty holders. On the negative side, some have been exposed as lobby groups masquerading as self-regulators, disinclined to take on complaints and discipline unethical or non-compliant members. In these circumstances direct intel from the community has been invaluable in regulators’ capacity to detect non-compliance.
• The fragmentation of rules and requirements across the states and territories has complicated the capacity of peak bodies and professional associations to disseminate clear and helpful messages to their members about their compliance obligations.

Regulators are improving their capacity to detect opportunistic non-compliers through a variety of means

• The volume of proactive field inspections and assessments and assessments has necessarily reduced dramatically, due to changing market conditions (business closure) and regulators’ imperative to keep their inspectorial workforce safe.
• In response, several innovations have emerged, ranging from virtual inspections, use of drones and much more deliberate and systematic use of intelligence from consumers, civil society organisations and industry groups anxious to protect their collective reputation and social licence.
• While reportable conduct or incident notifications, complaints and general calls to reporting lines have stayed the same or reduced during the pandemic, the level of ‘noise’ and ‘chatter’ regarding alleged breaches or issues has increased.
• Those regulators with a known and stable cohort of duty holders have been able to make well-informed judgements on propensity for opportunistic non-compliance and act accordingly.

The risk profile of duty holders needs to be under constant review and re-alignment

• Large multi-national corporations, particularly those with operations in parts of the world previously affected by pandemics, have well considered and well-rehearsed plans and do not appear to represent increased risk. The same can be observed for local duty holders with well-established and effective practices and systems for compliance.
• But in general, regulators have needed to pay close and constant attention to the risk profile and resilience of their cohort of regulated entities and consider and prepare for changes in market conditions likely to lead to harmful behaviours.
• One source of risk is reduced business activity during the pandemic; the other is the renewed focus on economic rebuilding, stimulus and de-regulation as governments promote recovery.
• Regulators are employers and therefore are duty holders themselves; working from home carries its own risk of physical and psycho-social injuries.

Regulators have been adapting their risk-based targeting models to identify new or known regulatory laggards

• Many regulators already had processes in place to continuously recalibrate and refine their compliance planning and risk targeting systems. These have been utilised during this period to enhance agility in the allocation of compliance monitoring efforts.
• COVID has brought into sharp focus regulators’ imperative to maintain and update deep understanding of their regulatory base and how their circumstances are changing. Several regulators have improved their targeting by seeking additional data, intelligence and insights during this period from regulatory peers, co-regulators and partners. This will stand them in good stead during the recovery period and beyond.

Participants’ responses 

Participants rated the workshop and this report at an excellent 4.7 out of a possible 5.0 on the question of its value in exploring the topic and capturing key insights for the broader NRCoP. Qualitative comments included:

Great workshop and useful to get the diverse and current perspectives on the state of play – well done!

Very well run and facilitated and a lot of value hearing from others’ experiences. Very keen to be involved again if the opportunity arises.