Independent Regulators Conference: 29 November 2006
A summary of discussion points
Morning Session - Risk-inspection and enforcement:
The objective of morning session was to explore the practical application
of risk-based inspection and enforcement, and its implications in different
A risk-based approach to regulation can contribute to significant burden
reduction on those being regulated and also allow regulators to increase
Risk-based regulation equals intelligent regulation; however, developing
an understanding of what the risks are requires an investment of time and
resources. Discussions highlighted that risk-based regulation relies on:
Useful information. Understanding the market, including incentives,
behaviours and motivations of regulated entities, requires detailed
High quality people. Regulators need to consider the calibre of staff
they need to make sound judgements.
A robust intellectual framework. Regulators should make clear what
judgements it has made, including those with ethical/equity
characteristics, such as the level of risk occurrence the regulator
is willing to bear.
A risk-based model must continually evolve to keep pace with the changes
in the industry and the maturity of the regulatory regime. Random
inspections in addition to a risk-based approach may assist in evaluating
the regulatory environment.
The difference between 'good' practice and 'best'
practice was explored and whether regulators are often called upon to
provide a 'free consultancy' to those being regulated. The focus
should be to ensure that those being regulated meet minimum standards,
'good' practice. However, it was recognised that many
organisations may choose to strive for 'best' practice because it
represents sound business practice.
Discussions in this session explored the opportunities to place greater
reliance on self- assessment by companies, including when it is safe to
rely on self-assessment, and when this was inappropriate.
The issues surrounding risk-based regulation, and its variant
principles-based regulation were also explored.
Afternoon Session – Risk, regulation and society:
The objective of the afternoon session was to explore and discuss how
society responds to risk, improvements to risk management and what the
implications are for regulators going forward.
The overwhelming sense was that this area is not simple. If appropriately
addressed it can, however, facilitate significant burden reduction for
those being regulated.
It will take leadership on the part of a regulator to balance risk
protection and personal responsibility. It is important for regulators to
get behind the sometimes apparently"zany" preferences of the
public and to have an open and constructive conversation about acceptable
levels of risk. In this context, it is important to emphasise that the
public is not as risk-ignorant as is sometimes assumed.
The regulatory investment in public communication can be beneficial. What
binds all the discussions of risk and society together is the need for
courage from regulators - including perhaps explicit statements of
whatlevel of harms, accidentsand hazards the regulator is willing to
Regulators cannot, and would not want to try, to guarantee the removal of
all risk and this means that there needs to be:
greater public understanding of acceptable risk;
better analysis of the benefits of those risks deemed to be
political agreement so that blame is not subsequently attached when
something does go wrong;
transparency, to achieve a sensible debate and understanding about
where to draw the line when it comes to risk
There is also a need to engage the Board of a company (or the trustees of
a charity) so that discussions about risk management and regulatory
compliance are seen as legitimate areas for Board discussion.