How to Assess The Fundamental Attributes of Regulatory Excellence

The attributes of regulatory excellence are governance, accountability, competence, alignment, engagement and public interest focus.

Governance

Our Regulatory Excellence Model (REM™) recognizes that principles of accountability, transparency and independence are foundational attributes to effective governance. Moreover, performance is a by-product of Board decision-making effectiveness, strategy, risk-taking behaviour, operational excellence, financial and regulatory management practices. In the final analysis, the actual colours of a regulator shine through during significant unforeseen events. However, there is a large variance for governance requirements and expectations. Furthermore, entities must follow by a range of existing regulation, based on the jurisdiction.

Regulatory Excellence Model

Principles always include independence, transparency, and accountability. Furthermore, good governance needs to show public interest effectiveness and ensures that the attributes for excellence reflect in all work.

The Role of the Board of Directors

REM™ validates that oversight and stewardship of the strategic direction of the entity. Moreover, the Board is acting in the best interest of the organization, ensuring legislative compliance and distinguishing between the role of management and that of the Board.

Governance and Enterprise Risk Management

REM™ reviews Board oversight responsibilities of the enterprise risk management framework. In addition, it examines the supporting assessment, mitigation, monitoring and reporting requirements of management to the Board align with the attributes of excellence.

Committee Structure — Roles And Responsibilities

REM™ reviews the Board committee structures and terms of reference (e.g. Audit & Finance, Governance & Risk, HR) to ensure alignment.

The Audit and Finance Committee focuses on matters of financial and regulatory reporting and the effectiveness of the internal control framework.

The Governance and Risk Committee focuses on governance issues including nominations, new member orientation, training and development, overall Board and individual director effectiveness, and enterprise risk. Correspondingly, the committee maintains the criteria and a process to measure the overall efficiency of the Board and for individual Board members, including periodic third-party assessment of the governance practices. In the long run, succession should consider the unique challenges of the Board nomination and selection process in the shareholder/member environment.

The HR /Compensation Committee focuses on compensation and executive performance issues.

The Technological Stewardship Committee focus on the use of technology for the greater good. It ensures data proivicy and cybersecurtity.

Board-Management Delegation

The Board’s connection to the working organization, its achievements, and conduct are through the chief executive officer. Particularly, REM™ ensures clarity on financial and regulatory reporting, progress against the strategic plan, key performance indicators including customer satisfaction, health, safety and environment, infrastructure performance and replacement, emergency response and crisis management.

Regulatory Filing Requirements

Often organizations treat requirements as a compliance checklist. Nevertheless, if it files the required documentation, the organization has “passed” for the year. REM™ encourages a more proactive and targeted examination.

REM™ examines critical strategic and operational decisions such as new investments, partnerships, changes in strategy, increased financial or operational risk or a real change in Board independence. Just increasing the number of filings or artifacts required is by no means a method of preventing unwise risk-taking behaviour through ineffective strategic and significant operational decisions.

Board Composition

Governance, from a Board composition perspective, is highly variable across entities. It ranges from highly independent Boards supported by professional skills and experience base representative of the critical business requirements including strategy, knowledge of the industry, finance, legal/regulatory, engineering, customer service, health, safety and environment, to those whose Board members are primarily representatives of shareholders.

Entities have different governance practices, as a result of their size, ownership structure, the degree of shareholder influence, the complexity of the structure and operations, strategy, and risk profile. REM does not focus purely on the arrangement or artifacts of governance. REM focus is effective oversight.

Shareholder / Member Board Representation

The unique challenges of governance in a shareholder/member environment include conflicts of interest, and the skills and professional experience of Board members to oversee and govern. However, this structure challenges Board independence. Decision-making depends on the degree of shareholder/member influence and control exercised. It is incumbent upon a shareholder/member to act as an informed and active owner. They must set up a clear and consistent ownership policy. This ensures that the governance is carried out in a transparent and accountable way, with the necessary degree of professionalism and effectiveness. Further compounding these challenges is access to ongoing training and education of the Board.

Also, where many stakeholders are involved Boards tend to become too large to work effectively. REM provides models and transition plans for Board size and composition.