IMPROVING REGULATORY
ENFORCEMENT AND
INSPECTIONS
Draft Best Practice Principles
Daniel Trnka
OECD, Regulatory Policy Division
Directors ad Experts for Better Regulation Meeting –
Vilnius, 7 June 2013
Regulatory compliance &
enforcement
• Compliance crucial for regulatory efficiency
• A phase of the Regulatory Governance Cycle that
have been addressed less systematically
• Emerging issue –reforms in the area of inspections,
innovations, governance arrangements for
regulators
• Insufficient contact between those responsible for
regulatory policy and regulators/inspectors who
have front-line experience with implementation
Some key findings from the OECD
survey on inspections and enforcement
• 50% of respondents did not have cross sectoral policies
for organising inspection authorities.
• 58% do not have policies to reform inspection functions.
• 79% do not hold a central register of inspection
authorities.
• Performance of inspection authorities isn't measured
consistently or transparently.
• Accountability lines and the level of independence varies.
• 50% of respondents do not have to co-ordinate amongst
themselves to avoid duplication.
• Inspectors behaviour is key to improving compliance
with the majority of businesses needing advice.
• Inspection plans are not generally communicated.
OECD Principles - background
•
OECD was asked to develop a set of best practice principles
on improving enforcement and inspections
• Main goals are to:
• Summarise existing knowledge and good practice
• Present some overarching, common principles that can be
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used by policy-makers and “smart regulators”
Promote inspection reforms
Give those countries that are starting/considering such
reforms a comprehensive guidance
• Draft based on the 2012 OECD survey, two expert papers,
existing documentation and experience of non-OECD
countries
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Improving policies, institutions and
practices (1)
•
Draft principles cover the whole set of issues that allow to sustainably
improve regulatory enforcement and inspections – making them more
effective, efficient and transparent
•
Policies:
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Evidence- and measurement-based enforcement/inspections
Use enforcement/inspections only where strictly necessary
Risk-based and proportionate enforcement
“Responsive Regulation” approach
Institutions:
• Stable institutional mechanism for reform/improvements
• Consolidation/coordination of inspection functions
• Governance +HR policies geared towards professionalism, outcomes
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Improving policies, institutions and
practices (2)
•
Tools:
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Over-arching aims: maximize positive outcomes, minimize costs and
burdens
• IT to ensure risk focus, coordination, information sharing
• Clarity and rules of processes
• Promote transparency and compliance through toolkits, check-lists etc.
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1 - Evidence-based and measurement-based
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Do not inspect and actively enforce “everything that is
regulated”
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Rather, evaluate the risk level posed by different types of
regulations and regulated areas
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Allocate resources and efforts proportionally to potential
outcomes
•
Evaluate and adjust based on results
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2 – Whenever possible, “alternatives to
enforcement” should be explored
•
Market forces, civil litigation etc. all have considerable power
to prevent negative outcomes or enforce rules
•
State-driven inspections and enforcement should only be
used when these alternatives are demonstrably absent or
insufficient
•
In any case, stakeholders need to be involved – compliance
and outcomes cannot be obtained purely “by force”
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3 – Proportionate and risk-based
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Frequency of inspections should be proportionate to risk level
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Severity of sanctions and burden of enforcement should be
proportionate to actual hazard/damage
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Risk = probability x magnitude (scope x severity) of hazard
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4 – “Responsive Regulation”
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Enforcement modulated based on behaviour of regulated
entities
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“Honest mistakes” and one-off violations treated differently
from systematic, criminal misconduct
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Aim: promote compliance and positive outcomes
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5 – Clear objectives and stable institutional
mechanism to drive improvements
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Official policy, clear objectives for continued improvements in
enforcement – long term perspective
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Institutional set-up gathering all relevant ministries,
institutions, stakeholders
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Strong policy leadership
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6 – Consolidation and coordination of
inspection functions
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Less duplication and overlaps – reduced costs and burden
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Greater coherence, better information flow – more
effectiveness
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Core list of inspection/enforcement functions to match rational
analysis of types of risks – not “historical” list of institutions
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7 – Governance and HR policies to support
professionalism, outcomes orientation
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Governance: put inspections/enforcement “at arm’s length”
from political decisions for day-to-day operations – give more
stability to institutions through collective governance
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Ensure professionalism in recruitments and in particular for
top management
• HR policies, performance measurement etc. to support
improvements, promote outcome-orientation
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Inspectors’ training needs to incorporate risk-management,
compliance-promotion, and a whole set of “competencies”
related specifically to enforcement
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Aim to increase consistency, quality – reach better outcomes
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8 – Information technology for coordination,
information-sharing, risk-focus
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Interconnect databases and systems used by different
inspectorates / whenever possible set up single/joint systems
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Data sharing and shared planning mean less duplication,
more efficiency – but also better outcomes because key
information is shared effectively, risks are better identified
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Initial investment can deliver considerable benefits and
efficiencies
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9 – Clarity of rules and process
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Framework legislation/regulations to ensure that
inspections/enforcement process are clear and consistent
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Rights and obligations of all parties and stakeholders to be
clarified – and abuses prevented
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10 – Promote compliance and transparency
through toolkits, check-lists etc.
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Ensure that regulated subjects know what is expected from
them
• Enforcement to be consistent and predictable
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Compliance promotion achieves better outcomes at lower
costs
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Tools adapted to different types and profiles of
establishments
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Further process
• The draft should serve as a basis for triggering discussion
• Set of principles plus explanatory texts summarising main
issues
• OECD Regulatory Policy Committee agreed with publication
for comments
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The draft is be published on our website, the consultations will
be advertised and widely promoted
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We would like to ask you to kindly do the same in your
countries
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Questions for discussion
• Is the document fit for its purpose?
• Do the principles sufficiently describe all the issues important
for effective regulatory enforcement and inspections?
• If not, which issues should be added? Which ones should be
taken out?
• Do the principles provide sufficient guidance for reformers?
• How do these principles relate to the practice in your country?
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THANK YOU!
daniel.trnka@oecd.org
www.oecd.org/regreform