“Just like the banks it is supposed to supervise, APRA has developed a culture where internal challenge and debate appear to be lacking and even discouraged.”

— “APRA has same culture problems as the banks”, Australian Financial Review, 17 July 2019

In a previous article, we discussed the role of the Compliance Officer, and their need to be competent, capable and courageous. Our position was based on our experience and, ironically enough, on APRA’s Standards.

The one consistent message from various reviews, inquiries and investigations is the profound need to transform Compliance from a passive and reactive function to a strategic and critical one. What is seldom appreciated is that this transformation requires participants to significantly improve the competency and capability of their compliance functions.

In our experience, ‘compliance functions’ are often populated by the inexperienced, ill-equipped and ill-suited personnel. This is the case whether they are ‘long-timers’ or ‘new recruits’ and it’s not surprising given that many of them have assumed these roles despite the absence of a blueprint, qualification or career pathway.

Compliance is a growth industry and one that has proved financially rewarding for most practitioners – particularly given the current focus on large scale remediation programs – but, as advisers recognise, cost and value are very different. Bluewater executive, Phil Alexander, frequently argues that the compliance market in Australia proves the Pareto principle; 80% practitioners lack the skills, knowledge and character necessary to provide the strategic and critical expert advice that Licensees need.

In their defence, it is difficult to identify relevant training. Occasionally, practitioners can stumble across a mildly relevant elective in a graduate course or pick up a vocational qualification which is often underpinned by an out of date training package. Despite a range of providers, these weaknesses remain. Thankfully, the Australian Industry and Skills Committee (AISC) has allocated funding to set up a project to overhaul the risk qualifications.

The compliance profession needs more focus and attention, particularly given the mandate it has in the management of regulatory risks and the role it plays in managing the acts and omissions of the business it advises.

In an essay On Compliance authored by Professor Pamela Hanrahan, Professor Hanrahan described the scope and dimension of Compliance as concentric concepts, and that the norms which compliance is concerned with extend to legal, regulatory and social norms. The article suggests that corporations have legal obligations that arise under legislation, or legislative instruments and that beyond these legal obligations, corporations are subject to wider controls, which may encompass industry or firm specific codes of conduct, internal rules and procedures and principles of business ethics. Professor Hanrahan explores how this operates in the real world of (shifting) social norms and community expectations about corporate social responsibility and social licence.

Think of ‘compliance capability’ as concentric circles with law at the core of the rings. The innermost circle, the critical core, is statutory and case law, regulatory guides, information sheets, and other guidance. The further out you go, the lighter the colours become, until you get to the outer circle, which is white and represents community expectations, social and corporate responsibility. In fact, you might extend further to include influence, strategy and data analytics as required competencies.

“But today there is no day or white
Today there is no dark or light
Today there is no black or white
Only shades of grey”

— Monkees, Shades of Gray

Compliance officers should all be able to reason from their solid base of foundational skills, knowledge and experience and use these as their ‘true north’ to guide them with most problems. It takes considerable more skill and experience to guide a business through the outer circle, but these skills can be taught and learnt.

So how do ensure that our compliance officers have a solid foundation on which to develop their skills? What skills, knowledge and experience do they need to work our way through the rings.

Assured Support has long argued that we need to lead and develop a capability framework for the compliance officers. We are, in fact, laser focused on this, and have developed a capability framework to assist in the development of the compliance function.

Our capability framework covers both technical and non-technical skills and uses diagnostics to establishing current levels of proficiency. The data we collected via the diagnostic, informs the development activity and allows us to focus on the exact individual proficiency areas requiring uplift.

If you need help enhancing or building your foundation and would like to utilise our Capability Framework or are interested in getting involved in this industry initiative, please call us.