COMPLIANCE & RISK ASSESSMENT
HOW TO PREPARE FOR REGULATORY INTERVENTION
Regulators, across all sectors, have not been immune to events of the last 20 months and, like many organisations, have had to adapt and evolve their operating models in response to the emergence of the pandemic and national stay at home orders.
During the course of 2020, most regulators issued Position Statements to confirm how they would continue to discharge their investigatory
and monitoring functions, despite the restrictions which were in place. Since that time, and the easing of restrictions, there has been a noticeable change in how regulators, across sectors, undertake their functions. For example, there has been an increased use of technology – such as drone footage and viewing of CCTV recordings. This technology has been available to the regulators for some time but has reportedly only recently started to be embraced in response to the situation which has been presented to them. How long these new methodologies will persist is unclear, but it is reasonable to expect that they will continue for the foreseeable future.
The use of new investigatory techniques, and increased use of technology, is against a background – across the majority of regulators – of reduced enforcement action over recent years. For example, whilst the Health and Safety Executive has traditionally prosecuted around 500-600 matters a year, this figure almost halved in 2019/20. Likewise with the Environment Agency, which is now prosecuting annually fewer matters than it was five years ago.
That being said, the one regulator which has experienced an increase in the number of enforcement actions is the Care Quality Commission, which since 2014/15 has experienced an increase of over 80% in the number of actions taken against providers, with criminal enforcement actions alone increasing by over 250% over the same period.
Regardless of these trends, it is important to remember that, whilst regulators may generally not be as active as they once were, that’s not to say their functions have disappeared, or that individual businesses won’t be subject to investigation and/or enforcement in any given scenario.
What is clear though, is that businesses need to prepare themselves for future engagement by their sector regulator and take steps now to address any
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Pannone Corporate Lawyer Bill Dunkerley offers his advice on how to respond to enforcement action by a regulator.
perceived (or actual) risk areas in anticipation of inspection and intervention.
The most effective management is to avoid the initial set of circumstances that bring about regulatory interest. To help minimise their possible exposure, organisation should consider:
● Identifying (if not already done so) the areas of their business which are likely to be of interest to their sector-specific regulator(s);
● Understanding who within the organisation is likely to have the first contact with a regulator should they make contact – it is often these early exchanges which can have a material and significant influence on the future course, and even outcome, of investigations;
● Assess areas of their operation requiring immediate improvement;
● Undertaking pro-active audits of other risk areas, and implementing remedial or control measures where necessary;
● Acting on concerns, responding to near misses and learning from them so as to prevent a recurrence;
● Ensuring that regulatory compliance and safety management is treated as a priority, at all levels of the business, and ingrained into an organisation’s culture;
● Arranging for sufficient insurance cover for those risks which may be encountered by a business, and which will provide an indemnity in respect of legal costs should the organisation be subject to investigation and prosecution.
It’s likely that, prior to 2020, a pandemic was not considered as anything more than a theoretical risk. However, events since March last year and the imposition of the first national lockdown in the UK have demonstrated that businesses must be prepared for all eventualities and risks, even those which may only be remote or fanciful in contemplation.
The last 20 months have also had a particular impact on regulators, forcing them to respond to the novel challenges presented. But, as we look to the future and to a post-pandemic world, and the introduction of some entirely new regulators, undoubtedly they will all grow in confidence and that’s something that every business must be alert to. With many regulators choosing now as an opportune time to revise and evolve their investigatory models, the regulatory landscape is certainly one to watch.
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