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Encouraging organisations to do more than just comply with regulations [Compliance & Regulatory Journal]

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While the law can be interpreted as saying that to ‘just comply’ with regulations is all that is required the reality is much more complex. Following the rules or doing the minimum has been found insufficient to achieve the intent of regulation and the expected benefits for the community, a situation highlighted by the recent global financial crisis. Principles-based regulation, often using risk based assessments, has focused actions onto achieving the intent without an option to just follow a set of rules. There is also a growing expectation from regulators of ‘genuine compliance’ — meaning doing more that the strict minimum required by the law. Yet despite these growing imperatives to do more than ‘just comply’ many organisations cite issues such as cost and time as limiting their capacity to act. There has however not been a systematic study of these issues to identify what actually influences organisations to ‘just comply’ or do more. Compliance professionals and regulators alike often struggle with achieving compliance outcomes within organisations, getting ‘buy-in’, and especially, being resourced and supported to have an organisation doing more than the ‘minimum’ to comply. Understanding what might be the influences that will have an organisation be proactive and do more than the minimum to comply with regulations is of vital interest, not only because it assists in implementing a compliance program, getting the resources necessary to do so, and getting the organisation engaged with the program, but because doing more is becoming increasingly important when rules may not be sufficient or regulations are principles-based, in order to achieve the regulatory outcomes desired and the social and economic benefits possible through organisations ‘doing the right thing’. This article explores the results of a survey undertaken in early mid 2009, the first of its type in Australia, of regulators and professionals responsible for compliance in organisations that examines how organisations implement new or amended regulations and what influences their approach, particularly to do more than the minimum. Using an online survey, two types of regulations in Australia were investigated: financial services sector and occupational health and safety regulations. For both types of regulation, higher levels of success with implementation of current regulations was found to be the most important factor in encouraging organisations to be proactive and do more next time. Interestingly, factors such as cost, enforcement and organisation size were not found to directly influence how organisations responded. The study also identified regulation specific dynamics at play, indicating a need for flexibility when introducing regulations rather than a ‘one size fits all’ approach. These findings raise a number of practical implications for compliance professionals, policy designers and regulators that provide both an opportunity and a challenge. These include the need for actions to support organisations to be more successful when introducing regulations, to develop business relevant benefits to gain support for implementation of regulations and to pace the introduction of regulations, to ensure they are implemented effectively.
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28 Compliance & Regulatory Journal 2009 Issue 7
While the law can be interpreted as saying that to ‘just comply’ with regulations is all that is
required the reality is much more complex. Following the rules or doing the minimum has been
found insufficient to achieve the intent of regulation and the expected benefits for the community,
a situation highlighted by the recent global financial crisis. Principles-based regulation, often using
risk based assessments, has focused actions onto achieving the intent without an option to just
follow a set of rules. There is also a growing expectation from regulators of ‘genuine compliance’ —
meaning doing more that the strict minimum required by the law. Yet despite these growing
imperatives to do more than ‘just comply’ many organisations cite issues such as cost and time as
limiting their capacity to act. There has however not been a systematic study of these issues to
identify what actually influences organisations to ‘just comply’ or do more. Compliance professionals
and regulators alike often struggle with achieving compliance outcomes within organisations,
getting ‘buy-in’, and especially, being resourced and supported to have an organisation doing more
than the ‘minimum’ to comply. Understanding what might be the influences that will have an
organisation be proactive and do more than the minimum to comply with regulations is of vital
interest, not only because it assists in implementing a compliance program, getting the resources
necessary to do so, and getting the organisation engaged with the program, but because doing
more is becoming increasingly important when rules may not be sufficient or regulations are
principles-based, in order to achieve the regulatory outcomes desired and the social and economic
benefits possible through organisations ‘doing the right thing’.
This article explores the results of a survey undertaken in early mid 2009, the first of its type in
Australia, of regulators and professionals responsible for compliance in organisations that examines
how organisations implement new or amended regulations and what influences their approach,
particularly to do more than the minimum. Using an online survey, two types of regulations in
Australia were investigated: financial services sector and occupational health and safety regulations.
For both types of regulation, higher levels of success with implementation of current regulations
was found to be the most important factor in encouraging organisations to be proactive and do
more next time. Interestingly, factors such as cost, enforcement and organisation size were not
found to directly influence how organisations responded. The study also identified regulation-
specific dynamics at play, indicating a need for flexibility when introducing regulations rather than a
‘one size fits all’ approach. These findings raise a number of practical implications for compliance
abstract
Encouraging
organisations to do more
than just comply with
regulations
Dr Katarina Hackman
Thought Leadership Article 29
Doing more than the minimum to comply is increasingly
necessary to achieve the intention of regulations, an
issue highlighted by the Global Financial Crisis of 2008
where following the rules was found to be ‘‘not
enough’’ (Downer, 2008). It is also increasingly
important with the trend to more principles-based
regulation, which in practice, may be implemented by
organisations using risk assessment approaches,
(Mullins, 2008; Rothstein, Irving, Walden and Yearsley,
2006) and which leaves much of the judgement of
degree of application of regulation and assessment of
the ‘appropriateness’ of systems for compliance with
the organisation rather than the regulator (Mullins,
2008; Rothstein, Irving, Walden and Yearsley, 2006).
This imperative to do more than the minimum was
reinforced at the Australasian Compliance Institute’s
2009 annual conference. Representatives from several
Australian Financial Services Regulators indicated that
they looked for ‘genuine compliance’. They described
this as not only doing more than the minimum required
by law but also showing, by the organisation’s actions
and senior management attitudes, that compliance with
regulation was taken seriously and was not just an
administrative tick-the-box exercise.
This was the question this research program set out to
answer. Using an online survey, two types of
regulations in Australia were investigated: financial
services sector regulations (FS) and occupational health
and safety regulations (OHS). The ‘internal view’ of
people involved in implementing regulations, or with
compliance responsibilities in organisations, was
contrasted with the ‘external view’ from people
designing, researching or assessing the implementation
of regulations.
While there are insights about what influences
organisations to comply (Doneslaar, 2007; Parker and
Nielson, 2006), and clearly doing at least the minimum
is appropriate, the question this article seeks to
address is what influences organisations to be proactive
and do
more
. This article reports on the 2009 results of
this research program and expandings on the initial
benchmark report ‘Regulation View’ (Hackman, 2009)
focusing on the ‘internal view’. First to set the context
though, this article starts with a brief review of the
regulatory, change and decision making literatures used
to develop, the conceptual model for this research.
Then an overview of the survey design and data
collection processes are described. Finally, based on
these findings, the practical implications for compliance
professionals, policy designers and regulators are
discussed.
How organisations can respond
The focus of the research is on the organisation’s
typical or usual response when implementing new or
amended regulations and what causes this to change.
Prior to launching the survey, a series of discussions
with people in organisations and with regulators was
undertaken and this dialogue indicated that this was a
realistic approach. Consistent with the regulatory
literature (Dalton, 2007; Haines, 2003; Sampson and
Bloor, 2007) this input confirmed that while
organisations varied in how they implemented specific
aspects of regulations they typically approached the
implementation of regulations in broadly the same way.
A useful way to describe how these typical responses
can vary is to use a continuum that ranges from
reactive to proactive responses. This continuum is used
to describe variations in behaviours of individuals and
organisations in a wide range of literature including
strategy, decision making and change management
(Aragon-Correa and Sharma, 2003; Mintzberg, 1978;
Palmer, Dunford and Akin, 2006). Reactive responses
are defined as actions after an event has occurred and
include actions to solve the immediate situations.
Proactive responses in contrast are defined as actions
taken before an event has occurred and include doing
actions that are new or novel to alter how events will
play out in the future.
From a compliance perspective, a response at the
reactive end of the continuum can be operationalised
to mean acting in response to regulations and doing
the minimum to implement the rules (Doneslaar, 2007;
Hackman, 2008). The nature of regulatory rules means
that managers may implement rules differently not to
circumvent regulations but to make them work
(Hofmann, 2008) and facilitate internal fit with their
organisation (Peterof and Read, 2007). However
nothing extra is undertaken in order to ‘comply’.
In contrast, being proactive revolves around the
concepts of discretionary behaviour and choice in
actions. From a compliance perspective, a response at
the proactive end of the continuum can be
operationalised to mean acting before regulations are
in place and anticipating the requirements (Parker,
professionals, policy designers and regulators that provide both an opportunity and a challenge.
These include the need for actions to support organisations to be more successful when introducing
regulations, to develop business relevant benefits to gain support for implementation of regulations
and to pace the introduction of regulations, to ensure they are implemented effectively.
abstract
30 Compliance & Regulatory Journal 2009 Issue 7
2007). Such a response could also include seeking to
influence what regulations are implemented and could
therefore be described as ‘doing extra’.
There are also gradations of proactivity between these
two responses (Larson, Busson, Vicars and Jauch, 1986).
From a compliance perspective, responses that
combine elements of reactive and proactive actions
include actions to meet the current regulatory
requirements, sustain these actions in the longer term
and potentially start to prepare the organisation for the
next regulations that must be implemented. For
instance, this would include
actions to embed the changes
more fully by incorporating or
embedding the new rules and
requirements into the culture
and process of the
organisation (Dalton, 2007;
Doneslaar, 2007; Hackman,
2005; Parker, 2007). From this
perspective such a response
could be described as ‘doing
more’ than the minimum.
Figure 1 shows the
reactive–proactive continuum
with three anchors used for
this research. Definitions
relevant to compliance
activities are provided based
on the review of the
literature and discussions
with compliance
professionals. The behaviours are cumulative because
doing the minimum to comply is appropriate at all
stages of proactivity and ‘doing more’ provides the
basis for moving to the most proactive stance of
‘doing extra’.
Figure 1 shows the
reactive–proactive continuum with
three anchors used for this
research. Definitions relevant to
compliance activities are provided
based on the review of the
literature and discussions with
compliance professionals. On this
continuum the behaviours are
cumulative because doing the
minimum to ‘comply’ is appropriate
at all stages of proactivity and to
‘do more’ provides the basis for
moving to the most proactive
stance to ‘do extra’.
What influences organisation response
A number of recent reports and case studies
identified a large number of factors at different levels
of analysis that can impact on how organisations
implement regulations (Business Council, 2005;
Hackman, 2006; Haines, 2003; Institute of Financial
Services, 2004; Institute of International Finance,
2006; National Audit Office UK, 2007; Regulation
Taskforce, 2006). From these a relatively consistent list
of factors can be identified. The most direct impacts
on organisation response could be expected from
specific aspects of the regulations being
implemented. This would include cost of
implementation, administration and reporting, clarity
of the design and benefits of regulations, the amount
and type of consultation and the time allowed for
implementation of regulations. However these factors
In contrast, being proactive
revolves around the concepts of
discretionary behaviour and choice
in actions. From a compliance
perspective, a response at the
proactive end of the continuum
can be operationalised to mean
acting before regulations are in
place and anticipating the
requirements (Parker, 2007).
Organisation Response Continuum
Figure 1:
Comply means doing only what is required to meet the minimum
standards to comply with regulations.
Do More means in addition to comply also making changes to embed
new requirements into organisations processes and culture.
Do Extra means in addition to complying and doing more also anticipating
future regulatory requirements undertaking activities in preparation and
contributing to the debate about shaping future regulations.
Organisation Response Continuum
More
reactive
More
proactive
Thought Leadership Article 31
do not operate in isolation. Aspects of the regulatory
regime are also noted as impacting. This would include
the amount of duplicated, unnecessary or conflicting
regulations, the level of prescription and enforcement
and whether there are unintended consequences.
In addition, characteristics of the organisation could
also impact on how regulations are implemented
(Armenakis, Harris and Mossholder, 1993; Armenakis
and Harris, 2009; Pettigrew, Woodman and Cameron,
2001). These would include organisation size, capacity
and availability of resources to implement regulations;
receptivity of the workforce; and past experiences with
regulatory change. The impact of factors such as the
national cultures, social, economic and political context
are also important (Bloor, Datta, Gilinskiy and Horlick-
Jones, 2006; Haines, 2003; Healy and Braithwaite,
2006). These national level contextual factors were not
included in the 2009 study but will be considered in
the longitudinal research program.
Development of a conceptual model
Based on this review of the literature, a conceptual
model, shown in Figure 2, was developed for the 2009
study. This model combines the organisation response
continuum with the factors that can potentially
influence this organisation response. Consistent with
change theory (Mackenzie and Martinez-Lucio, 2005;
Pettigrew et al., 2001) these factors can be considered
at a number of levels with the more macro factors such
as regulatory context mediated through the more
micro level factors associated with specific regulations
and requirements for implementation.
The key question is which of these factors influence
the organisation to do more than the minimum to
comply. For the purpose of this research the term
regulation has been defined very broadly to include
legislation, rules, standards and codes that create a
requirement for an organisation to comply. As this is
an exploratory study, there are no formal hypotheses,
however, based on the literature discussed above, it
could be expected that organisations are more likely
to do more than the minimum if:
implementation, administration and reporting costs
are lower;
the clarity of the design and the benefits are higher;
the amount of consultation and time for
implementation are higher;
regulations are less prescriptive but have effective
enforcement powers; and
organisations are larger or have more resources
available for implementation.
Conceptual model about what influences an organisation’s response
Figure 2:
Characteristics of the
regulatory regime: eg
amount and type of
regulation, approach
to enforcement
Organisation
characteristics: eg
size, resources,
receptivity, history
and experience with
regulatory change
Introduction of a
new or amended
regulation that
must be
implemented by
the organisation
The cost of
implementing,
administering and
reporting on the
regulation
Clarity of the design
of regulations and
clarity of the benefits
to organisations
and/or the community
from the regulations
The amount and type
of consultation about
the regulation
Time allowed for
implementation of the
regulation
Proactive
Compliance
Do extra
Do More
Comply
Reactive
Compliance
Conceptual model about what influences an organisation’s response when
implementing new or amended regulations
Contextual
Factors
Introduction
of Regulation
Perceptual
Assessments
Organisation
Response
32 Compliance & Regulatory Journal 2009 Issue 7
Survey design
The questions in the survey were designed in a
perception-based framework consistent with
Brunswik Lens’ theory (Brunswik, 1955). In summary,
this theory says that it is a person’s perceptions of
situations that drive their decisions and subsequent
behaviour, regardless of the reality. Therefore
understanding the respondent’s perceptions of a
situation is more likely to provide useful information
about what influences their decisions about the
implementation of regulations.
The first section of the survey asked for background
information about the respondents so they could be
allocated to the appropriate group for analysis. This
information included whether the respondents role
provided an internal or external view of how
organisations implemented regulations and the type of
regulations they would use as a basis for their answers.
The internal view comprised people in designated
compliance roles within organisations or with roles that
include compliance responsibilities in organisations. The
external view comprised people in roles that involve
researching, developing or designing regulations and
people in roles that involve supervising or auditing of
organisational compliance with regulations.
Respondents could choose to comment on regulations
that relate to the core business activities of an
organisation or cross industry regulations relating to
activities that can be common to many organisations.
Section two of the survey asked about the levels of the
six factors in relation to the regulation and industry the
respondents had chosen as the basis for their answers.
These factors were: cost of implementation, cost of
administration and reporting, clarity of design, clarity of
benefits and amount of consultation and amount of
time for implementation. The relative importance of the
six factors was elicited using a Best/Worst experiment
(Finn and Louviere, 1992; Marley and Louviere, 2005).
The organisation’s typical response to implementing
those regulations was asked with respondents using a
slider to indicate a location on a continuum ranging
from comply, do more or do extra measured on a scale
of 0 (most reactive) to 100 (most proactive).
Section three of the survey asked about characteristics
of the regulatory regime and the organisations the
respondents were using as a basis for their answers. For
the regime these questions included issues of
duplication or unnecessary regulations, intended or
unintended outcomes, the level of prescription and the
level of enforcement. Organisation characteristics were
asked in terms of capacity, receptivity and experiences
with regulatory implementation. Section four was a free
form question that asked respondents for any other
comments.
Survey respondents and data quality
An online survey was run in from late May to early
June 2009 to collect the data for this research.
Invitations to participate in the survey were sent out
through a number of industry associations to their
members and directly to government and regulatory
organisations. Ethics clearance was given by the
University of Technology, Sydney (UTS) for this
research. Participation was voluntary and anonymous
and no incentives were offered to respondents for
participation apart from access to the benchmark
report about the results.
The design of the survey meant that respondents had
to complete all questions for their response to be
used in the analysis. The total number of useable
responses about the core FS industry regulations in
Australia was 221, with 157 respondents providing an
internal view and 64 respondents providing an
external view. Comments were provided by 27 per
cent of respondents.
The total number of useable responses for the cross
industry OHS regulations in Australia was 162, with 103
respondents providing an internal view and 59
respondents providing an external view. Comments
were provided by 38 per cent of respondents. A
response rate cannot be calculated for this survey
method because there is no way of knowing how many
people received the invitation. However the completion
rate was 2:1 meaning that for every three people who
started, two completed the survey, which is generally
considered a good result for a public survey.
An assessment of the demographics showed that
respondents for FS and OHS were diverse in terms of
age, years of experience and organisation size. The
gender balance was fairly equal for FS compared to
OHS where male respondents were in the majority.
Respondents utilised the full range of responses
available for each question to articulate their views.
There were significantly more respondents from
private sector organisations however all types of
organisations were represented. These included
regulatory agencies and government departments,
other public sector organisations, higher education
and the not for profit sector. For OHS most industries
using the ANZSIC Industry classification (Australian
Bureau of Statistics and Statistics New Zealand, 2006)
were represented.
Results of the survey
The following results were based on the internal view
from people in designated compliance roles within
organisations or with roles that include compliance
responsibilities in organisations. The internal view was
used because it provided information about individual
Thought Leadership Article 33
organisations, which is more appropriate when
exploring these causal relationships than the external
view which provided averages across industries and
regulations.
How measuring organisations vary response
Two methods were used to assess the variation in
how organisations responded when implementing
regulations. This was important to establish because a
wider variation in responses would enable a more
robust assessment of influences on the responses –
the key question for this study. This was found to be
the case for organisations reporting on both FS and
OHS regulations.
Firstly, how organisations respond was measured on a
continuum ranging from more reactive (0) to more
proactive (100) for both regulations. These results
shown in Table 1 indicated that organisations do vary
in their response across the full continuum from
reactive: doing the minimum to proactive: doing extra
when implementing regulations for both FS and OHS.
The second method used to assess variation by
measuring the relative importance of six factors in
implementation of regulations. This also found that
organisations varied significantly for both types of
regulations. These factors (for more details see
Hackman, 2009) were:
1 cost of implementation;
2 cost of administration and reporting;
3 clarity of design;
4 clarity of benefits;
5 amount of consultation; and
6 amount of time for implementation.
Relative importance was measured using a Best/Worst
experiment and a ratio scale was derived meaning
that relative differences could be accurately measured
and compared between groups of individuals (Finn
and Louviere, 1992; Marley and Louviere, 2005).
To assess variation in responses, the internal view was
divided into thirds, representing organisations with a
more reactive response (comply), organisations with a
mid range response (do more) and organisations with
a more proactive response (do extra). This analysis
showed that, at the aggregate level, as organisations
move along the continuum to be more proactive their
priorities changed. For FS regulations this ‘journey’
started with a greater focus on cost at the reactive
end of the continuum and this focus on cost
continued through the mid range but then shifted to
design issues at the proactive end of the continuum.
For the OHS regulations this ‘journey’ also started at
the reactive end of the continuum with a greater focus
on cost but moved to design issues in the mid range,
then onto clarity of benefits at the proactive end of
the continuum. Note that for this sample the relative
importance of factors acted only as a descriptor and
not a predictor of an organisation’s response.
In summary, organisations do vary in their response
across the full continuum from reactive: doing the
minimum to proactive: doing extra. There are also
differences between organisations at different levels
of proactivity about what was relatively important to
implementing regulations. This means an analysis of
what influences variations in these responses can be
undertaken.
Influences on the organisation response
Multiple regression was used to identify potential
causal relationships between the response by the
organisation (the dependent variable) and the
following factors measured in the survey shown in
Table 2 (the independent variables). The data was
assessed and found to meet the assumptions required
for using this statistical method of analysis (Coakes
and Steed, 2003; Hair, Anderson, Tatham and Black,
1998). This method was used to explore if changes in
any of the independent variables were associated with
a change in the dependent variable.
All independent variables were tested in the relevant
theoretical groupings for both regulations. This initial
analysis identified a number of relationships around
the 0.05 level of significance or higher. These
variables were rerun in a regression to identify the
Regulations Internal View
FISFS Mean: 47.0, Standard Deviation: 24.0, Range: 0–100
OHS Mean: 40.8; Standard Deviation: 28.6; Range: 0–100
Organisational response statistic
Table 1:
34 Compliance & Regulatory Journal 2009 Issue 7
causal relationships with organisation response for
each regulation. The results of this analysis are
provided in the Table 3. The adjusted coefficient of
determination (Adjusted R2) which indicates how much
of the variance is explained by the variables is
reported for each regression. A result around .3 is
reasonable considering the exploratory nature of
this research and that other events and constraints not
measured in this survey could impact on
organisation response. The standardised beta
coefficient (beta) is reported for each independent
variable. This describes the relative explanatory power
of each variable within each regression, the larger the
number the higher the relative explanatory power. The
level of significance is also indicated for each variable.
The level of success with previous regulatory
implementations, a factor in the Organisation
Readiness group, was the strongest causal factor that
influenced whether organisations do more than the
minimum to comply for both regulations (see Table 3).
For FS the resources available for implementation and
administration were also found to be a causal variable,
also part of the Organisation Readiness group. Other
causal variables identified for FS were whether
regulations were more mandatory and at a lower level
of significance and whether regulations require
material breaches to be reported. In contrast, the
other causal variable for OHS was time for
implementation of regulations. No other causal
relationships were identified.
Cost benefit Cost of implementation, administration and reporting, intended benefits of the regulations
Process support Clarity of regulation design and benefits, amount of consultation and time for implementation
Regime support Streamlining of regulations with no duplication, overlap, confusion, contradiction or
unintended outcomes
Prescription Whether regulations are more rules- or principles-based, take a risk-based approach, are
more mandatory or voluntary
Enforcement Whether regulations have effective enforcement powers and requirements for reporting on
performance and material breaches
Organisation Capacity, receptivity, resources, past experiences and level of success with previous regulatory
readiness implementations
Organisation size Size measured by the number of employees
Groups of independent variables used in the exploratory analysis
Table 2:
Financial & Insurance Services Industry Sector Regulations
Internal View: Adjusted R2= .279 Beta
1. Level of success with previous regulatory implementations .301***
2. Resources available for implementation and administration .251***
3. Regulations that are more mandatory rather than more voluntary .227***
4. Regulations with requirements to report material compliance breaches .151*
Occupational Health & Safety Regulations
Internal View: Adjusted R2= .287 Beta
1. Level of success with previous regulatory implementations .440***
2. Amount of time for implementation of regulations .228**
Significance: * at 0.05 level (95%); ** at the 0.01 level (99%); *** at the 0.001 level (99.9%)
Causal relationships with organisation response
Table 3:
Thought Leadership Article 35
Discussion
The key question for focus of this research was to
identify what encourages organisations to do more
than the minimum to comply with regulations. A
conceptual model was formulated based on insights
from the regulatory, change and decision making
literatures (see Figure 2). Although this is exploratory
research, a number of potential causal relationships
were suggested that could influence organisations to
be more proactive. The findings of this research
based on the FS and OHS samples identified only
about half of these relationships. Interestingly,
factors such as cost, enforcement and organisation
size were not found to directly influence organisation
response.
Shared dynamics
For both regulations it was found that previous success
with implementation of regulations was the most
important factor in encouraging organisations to be
proactive and do more next time. If an organisation has
a higher level of success in their view with implementing
the current regulation then the organisation is more
likely to be more proactive and do more next time.
Conversely if an organisation has a lower level of
success in their view with implementing a current
regulation then they are likely to be more reactive and
do less the next time. These dynamics are described in
Figure 3.
These findings are consistent with change research and
theory which has shown history to be a powerful
influence on subsequent behaviour (Pettigrew et al.,
2001) and more effective change is achieved when
people have the opportunity to experience the situation
first then choose to change rather than being told or
forced to change (Kotter and Cohen, 2002). However,
the basis for the assessment of success still needs to be
understood.
This research identified that organisations have different
priorities as they move along the response continuum to
be more proactive which would inform the assessment
of success. For example if an organisation is more
reactive and concerned about costs and the costs are
contained or managed appropriately by the
compliance and line managers, then the
implementation will most likely be assessed
as more successful. If a regulator can assist
the organisation with this issue again the
organisation is more likely to view the
implementation as more successful. Similarly
if an organisation is proactive and doing more
than the minimum but is concerned about the
clarity of design then the regulator may be
able to assist the organisation to be more
successful. For example the regulator could
explain how to interpret the regulation, whether the
regulation is likely to change and how the organisation
could accommodate the changes in design more
effectively. be more successful when implementing
regulations.
Regulation specific dynamics
There were also differences in causal factors identified
for each regulation, although these had a less
significant effect. For FS, organisations would be more
proactive if regulations were mandatory rather than
voluntary and also if there was a requirement to report
material breaches. For OHS, organisations would be
more proactive if there was more time for
implementation of regulations. This difference could
indicate that there are specific dynamics to consider
such as the stability of the regulatory regime. For FS
there has been a significant increase in new regulations
in the 2000s. These results could indicate that
potentially organisations only have the capacity to do
what is necessary. The OHS regime over the same
period has, in contrast to FS, remained relatively
stable, supporting a focus on amount of time in order
to be more proactive. There was also an indication of
this difference in the priorities for organisations as they
progressed on their ‘journey’ along the response
continuum to be more proactive with OHS moving
faster from cost to design and benefit issues compared
to FS. These differences highlight that the same
approach may not work for the implementation of all
types of regulations, indicating a need for flexibility
when introducing regulations rather than a ‘one size
fits all’ approach.
Implications
From this study, it is clear that positive regulatory
experiences are the key to encouraging organisations to
do more than ‘just comply’. Based on the insights from
this research there are a number of practical actions that
compliance professionals, policy designers and
regulators can undertake or augment if they are already
undertaking such action. It is recognised that these
actions may be challenging to undertake within the
dynamics organisations and in the context of the legal,
regulatory and policy frameworks in Australia.
The dynamics of encouraging organisations to do more
Figure 3:
Lower levels of success
encourage a more relative
typical response to develop
Higher levels of success
encourage a more proactive
typical response to develop
Typical
Response
More
reactive
More
proactive
Example: the dynamics of encouraging organisations to do more
36 Compliance & Regulatory Journal 2009 Issue 7
Nevertheless they also present an opportunity with the
growing imperative for organisations do more than the
minimum therefore some different or additional actions
are required.
Start by designing in success for organisations
To support organisations to be more successful when
introducing regulations compliance professionals can
analyse their organisation’s level of proactivity when
implementing regulations. This would enable them to
identify what factors are most important to their line
managers. Implementation plans can then be targeted
to address these needs thereby increasing the
probability of successful implementation. In the longer
term compliance professionals can develop plans in
conjunction with the business on how their
organisation can become more proactive. This may
require mapping the different types of regulations
their organisations must comply with to understand
the scope of the challenge and the appropriate speed
of journey for each regulation. Regulators for their part
can firstly identify different level of proactivity across
the organisations they supervise. Then they can
support implementation by addressing issues that are
relevant to this level for different organisations. This
portfolio approach to implementation would however
need to recognise and accommodate that an
organisation’s needs may change as they become
more proactive and therefore the approach to support
would also need to evolve.
Develop business relevant benefits
To develop business relevant benefits to gain support
for implementation compliance professionals can
develop value propositions about how implementation
of the regulations can help the firm achieve its business
objectives. This would require these professionals to get
close to and understand their business. Having a seat at
the table when business strategy is discussed would
facilitate this understanding. Using this approach,
regulations could be seen as contributing to business-
critical activities, rather than detracting from them or
only creating cost. Policy designers and regulators can
assist by assessing regulations in the context of the
business environment to identify how doing more than
the minimum to comply with regulations can benefit the
businesses. This would be in addition to identifying how
to achieve the intended outcomes of the regulations.
This broader approach to understanding the impact and
implications would also enable regulations to support
business innovation, a key area for all economies.
Avoid rushed implementation of regulations
To pace the introduction of regulations and ensure they
are implemented effectively compliance professionals
can plan for the implementation of new or amended
regulations to avoid rushing to implement at the last
minute. This would increase the experiences of success
and assist the business by ensuring surprises are kept
to a minimum. For their part policy designers and
regulators can adopt a measured approach to
introducing new or amended regulations being
cognisant of the burden on organisations. This would
require coordination between regulatory agencies and
levels of government to ensure that appropriate pacing
occurs across the range of regulations that can apply to
organisations. With such a blueprint available
organisations would know when and where to allocate
resources to maximise implementation. Rushing the
introduction of regulations which then require
significant amendments that cause further work for
organisations, should be avoided wherever possible.
This is important to consider with the expected
increase of regulation after the global financial crisis
and the expectation that organisations should engage
in ‘genuine compliance’.
Conclusion
The purpose of this research program was to identify
how to encourage organisations to do more than the
minimum to comply with regulations, an important
question with the growing expectations for ‘genuine
compliance’. Using FS and OHS regulations in
Australia, people involved in regulatory and
compliance activities in organisations were surveyed to
explore this question. Based on this sample it was
found that previous success with implementation of
regulations was the most important factor in
encouraging organisations to be proactive and do
more next time for both regulations. The study also
identified regulation-specific dynamics at play
indicating a need for flexibility when introducing
regulations rather than a ‘one size fits all’ approach.
While these results are very clear for this sample
further research is needed to establish the
generalisability of these findings. Nevertheless, these
insights present both an opportunity and a challenge
for compliance professionals, policy designers and
regulators to implement strategies to support
organisations to be more successful.
Acknowledgement
The 2009 survey was supported by many individuals,
organisations and associations. The University of
Technology, Sydney (UTS) and the Australasian
Compliance Institute (ACI) were the primary partners
and the survey was supported by the Safety Institute of
Australia (SIA). Other associations that assisted include
the Australian Institute of Project Management (AIPM)
and the Association of Superannuation Funds of
Australia (ASFA). Particular thanks go to ACI staff and
several of my risk and compliance colleagues who
assisted with refining and testing the online survey.
Thought Leadership Article 37
Finally, this research would not have been possible
without the many anonymous people who completed
the survey. Thank you.
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... Recent research investigating the implementation of new and revised regulations found that organisations do vary in their typical approach from a more minimalistic, reactive response, to a more comprehensive proactive response, reflecting the level of activity undertaken (Hackman 2009a(Hackman , 2009b. One key finding in a report undertaken on the AFS industry was that an organisation's level of success with previous regulatory implementations was the major influence on that organisation's response. ...
... As illustrated in Figure 2, combining the different views about what organisations want and need to achieve shows that success and failure are graduated and partially-overlapping bands of activity, rather than precise definitions. Two additional categories of belowminimum compliance are used, in addition to the levels of implementation activity suggested by Hackman (2009aHackman ( , 2009b. On this expanded continuum, failure can range from Not Comply, through Partially Comply, to Comply, with the upper level reflecting the view of regulatory agencies that organisations should do more than the minimum. ...
... This is unlikely to be satisfactory to organisations and regulators, when the focus for success is not only on implementing regulations, but also on achieving the intent of the regulations (Australasian Compliance Institute (ACI) 2009; APRA 2012b). Of concern, when considering Hackman's (2009aHackman's ( , 2009b) recent research, is evidence supporting the fact that organisations need to experience success before becoming more proactive in their next regulatory implementation. No doubt organisations do want to comply by implementing regulations appropriately, but continuing to experience mixed levels of success may reduce their enthusiasm, as well as make it harder for compliance professionals to argue for resources and to implement more than a reactive response. ...
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