Deirdre McMurdy: keynote speaking notes for May 6th, ACCP
Bit daunted by invitation….
Former women’s Olympic hockey player as your speaker last year, giving a very motivational speech
Not sporty. Not inspirational. Hockey mom.
Compliance professionals are on a roll these days and getting a lot of positive, public attention
I’m usually called in when there’s trouble or something has gone terribly terribly wrong: pentagram
When there’s a profile of SNC-Lavalin’s compliance head on the front of the ROB, profession has swagger
Family Christmas explanation to aunt but at work no longer the buzz-kill department/ corporate broom closet
Sundance Festival last year called…Compliance
Short version of my CV – just so you know where I’m coming from
Business journalist Globe, The Financial Post, Maclean’s magazine, CTV and Global Television…. Ottawa …politics…PPF ….Jim Prentice and Peter Kent at Environment Canada….not partisan…oil sands /climate change…environmental compliance and enforcement
Moved back here, been consulting on various projects: CICA, Edelman, Olympics
Can’t weigh in on specific issues: but can give you the benefit of an outside eye
External analysis and perspective – as do for clients
Essentially build you a dust bunny
Gather the lint of experience and observation…trends…reflections on human nature and markets…politics…and some dog hair…no, politics doesn’t count as dog hair
Won’t clatter on too long
Hope for conversation post-remarks…aids digestion
Thought about this alot
Struck me that compliance like flossing teeth
Know that flossing is important for healthy gums in the long-term
Know ill save pain and money down the road
Know healthy gums and nice teeth make you look good
But nuisance to keep up with it every single day, especially “best practice”
When dentist asks if you floss regularly, have to say you do
Chances are you’re going to say you do more than your really do
All have the capacity to floss: own several of those little boxes of floss, little floss stick and floss threader
None of that means it’s part of your routine, something you automatically do…especially when you’re in a rush to get going
And these days, everyone is in a rush to get going
Not a lecture on oral hygiene –mother of a 12-year old boy with braces
About corporate culture
About need to fully integrate the compliance function into the collective mindset, the corporate culture
About the opportunity that stems from a high public profile
About regulation and it’s twin siblings deregulation and reregulation
To be truly effective, compliance can not be something that’s just tacked on at the end of a process because you have to (though not a bad start)
Like flossing…have to commit and make it part of routine
Huge progress that compliance has become a very distinct function
No longer folded into the CEO function or the legal department… has it’s own place at the table
When started covering Bay Street in late 1980s…was some guy usually known as Buzzkill sitting off on his own
Chronic temptation for organizations to just check the box, to assume that just because they have a compliance officer and some staff dedicated to compliance issues, they’ve dealt with it
You know: if you own dental floss, gums must be healthy
That’s always one challenge but I want to attempt to frame – and analyze – some others with an outsiders eye:
· companies grow quickly, grow through acquisition, diversify into new directions, constant evolution of product lines, competitive markets, social media
· contending with national sales force and a great many offices spread across the country
· tough to instill the values and the practices of world-class compliance on such a scale
· regulations are always evolving – not always consistently or coherently
· expectations and requirements are high: budgets are tight
· in a competitive climate where growth is so highly prized, telling people what they can’t do is tough
Have I got it right? Miss anything?
Education, engagement and awareness are key: obvious
Internally, rules and best practices clearly and constantly communicated: PMO daily message and talking points
Externally, too, you want to provide as much input/feedback to regulators as possible….also participate in the consultation phase that shapes regulation
But have some extraordinary scope on both counts that you may not be optimizing
Consider broader context: the psychological or emotional advantage you command
Time of volatility…constant change.. uncertainty
People feel vulnerable: feel have lost control (markets, foreign ownership, unemployment, environment…terror attacks on home ground)
Not sure who to trust for information or advice – given proliferation of both on internet and elsewhere
Not sure who can protect them: government record not compelling
Creates a political problem that tends to get addressed by regulation
Government leaders need to demonstrate that are “taking action,” protecting public interest: restoring control
But it’s not regulation per se that matters, it’s application and enforcement that counts
That’s where you enter the picture: you are viewed as protectors…in that role you command exceptional trust
Trusted because you are perceived to transcend short-term political and profit agendas
Deficit of trust in business and political leadership gives you authority
Must use that authority and lever it both within organizations and when dealing with regulators
Throw some numbers at you…
Annual trust survey done by Edelman Canada:
· 50 per cent said that government and business leaders were credible sources of information:
· 35 per cent said CEOs are credible
· 45 per cent said government officials were credible
· 10 per cent trust business leaders to make ethical or moral decisions
· 7 per cent trust them to tell the truth – however complex or unpleasant it may be
On top of all that uncertainty described, people feel disillusioned
Betrayed by the financial crisis…by corporate scandals…by corporate cutbacks and unemployment
Absence of trust and credibility isn’t something soft and fluffy from the land of unicorns and butterflies…it’s a rock hard issue with a very real and quantifiable bottom line cost
The trendy term for it is “social license to operate” but it’s really just the cost of not being trusted
Current example of this is pipeline sector
Absence of trust in the leadership of TransCanada Pipelines and Enbridge, is making it infinitely tougher – and more expensive – to proceed with the multi-billion projects they’re trying to push forward
Both spending untold millions on lobbying efforts…then there are the costs of delay…the cost of impeded growth…it adds up fast
Slow to engage the broad community of stakeholders whose support they must have to succeed with their plans: First Nations bands, environmentalists, municipal and provincial governments…it’s a long list with a long list of agendas…
The same has been true in the oil sands…and to a lesser extent in the financial services sector
Against this backdrop, you’ve got everyone’s attention…learn to use it
Internally: notion of “social license to operate” relates to individual success and that success in the context of the larger organization
One individual who is unaligned or careless can do damage to all
Cost of damage repair so much higher than constant effort
Back to analogy of flossing
Want to move a mindset need a plan
Strategy: in addition to those within your own organization, reach further: inform/build awareness with customers/grassroots…even go as far as some stakeholder mapping
Communicate in simple, clear language why compliance matters to them: why relevant
Clear and consistent messaging/narrative : PCO daily notes
Use repetitive words and phrases: with employees and customers
Use trust to create demand for the highest standard of compliance
When end-users start to ask the right questions and apply the pressure of expectation, that’s when you’ll get some significant traction – internally and with regulators
Execution never been easier: social media, traditional media, hybrid (overlaps and intersections), blogs, Twitter
Few points to emphasize:
· Discipline of keeping message simple and clear
· Complex subject: technical and legalistic zone
· More accessible you can make it, the more traction in shaping the agenda (esp.since regulators don’t spend time communicating in accessible terms)
· Lever power of trust and public profile: use values-based concepts and language
As said earlier, you have everyone’s attention these days – and with that public profile comes opportunity
Proactively look for opportunities to weigh in on issues and put forward key messages
Make friends with the communications and marketing folks in organization
Pitch them on including compliance issues/record in their external-facing communication
If there’s a broad issue that has a compliance component, send them a note they could incorporate into any reports or press releases are preparing
Educate them, break it down for them
Make sure all senior executives have compliance-related talking points…ask to be included on agendas and at events
The more you drive the conversation, the more you control it: people need to be told what to think..why it matters…if too complicated, tune out
The more transparent it is, the more that holds regulators feet to the fire: sets a standard of discourse and consultation
If making a submission or appearing before a panel or committee, make a version publicly available
Don’t assume people aren’t interested: they are…especially if you make it interesting/relevant and not too hard to grasp quickly
All of this enhances your profile, your integrity/trust, your power
Also look for alignment outside of organization
Alliances with other organizations…with lobby groups…with politicians
Won’t all be obvious..pharma has compliance issues as do mutual fund companies…as do oil companies
Don’t use narrow definitions: expand own mindset while expanding that of others
Then, when a regulatory initiative or issue surfaces where want to weigh in, have a voice….have credibility already established
Regulators are politically-sensitive – and that gives you considerable leverage, especially if you have the trust and an existing connection with an educated and empowered end-user
Reality of re-regulation for forseeable future: might as well get in front of it
Inevitable that after de-regulation, the pendulum has swung to the other extreme
Post-financial crisis governments under extreme pressure to “do something”
Public perception that roots of crisis in lack oversight and inadequate regulation
True developed countries in particular were keen on deregulation, giving banks greater leeway on how much capital they should hold and how much risk they could take on
Canada got international praise for being a prudent regulator, something that was credited with containing the damage here
Also created appetite for more and broader regulation : if a little is good more must be better
In scramble to put things right, regulators expanding previous limits and reaching much further down into the innards of organizations
See more “conduct regulation” supplementing traditional “prudential regulation”
Banks and mortgage rate competition….CRTC
In past, supervisors were simply referees trying to ensure that the game was played fairly.
New tolerance for more prescriptive supervision like a regulatory War Measures Act
Regulation proportional to the degree of harm suffered during financial crisis
Can be dangerous when rules and laws are written with the benefit of hindsight: Sarbanes-Oxley
Ideas that might have prevented the last crisis can make regulators dangerously overconfident about being able to predict and prevent the next one
If any comfort: financial services isn’t the only sector to feel the pinch of regulation
Environment has also became a focal point of domestic and international concern: government response was to regulate
In short-term regulation attractive option
Relatively inexpensive and easy way for government to appear responsive and attentive to public concern
Because it’s narrowly focused on specific issues of prevailing agitation, tougher for political opponents to oppose
Who want to argue against “taking action”?
Breaking issues down into regulated chunks also makes it easier for governments to promote and to quantify
Instead of a sweeping, national environmental policy, for example, you set to work chopping it up into bite-sized chunks
Regulate emissions from coal-fired power plants… toughen tailpipe emissions for the transportation sector…monitor water around the oil sands
Real consideration in times of prolonged minority governments
Building consensus in a minority government tough accomplishment… can squander a lot of political capital if it’s not a highly focused process
Example of that repeated efforts by the Conservative governments – and very particularly by Minister Flaherty – to create a single, national securities regulator.
That burned quite a bit of political capital to little apparent end
Another reason why regulation such a popular response:
provinces retain jurisdiction over all or significant chunks of key areas something that regulation can accommodate more easily (except of course, when it comes to creating a national securities regulator)
Reinforces Canada’s chronic problem with widely divergent rules and regulations and standards of enforcement…inefficient/expensive
Also not sure the federal government – a year later – has quite figured out how to manage majority status
Lack of discipline in caucus…issues drift…Cabinet shuffle…staffing
Finally, regulation appealing because downloads much of the cost by putting the onus on the private sector to implement and enforce the rules
An emerging issue is regulatory sustainability
Like getting a dog: it’s easy to choose an adorable puppy and bring it home, but once it’s there, it takes a huge amount of time, money and commitment to maintain it…you have to walk the dog, scoop after it, take it to the vet….
Regulations are in place, they have to be maintained and tended and constantly refined or adapted
Another lever to consider in regulatory process is lack of internal consensus
Shocking lack of communication and co-ordination among departments…all have a piece of key files
Federal environmental regulation doesn’t lie with Environment Canada: NRCan; Finance; Industry and Trade; DFAIT; Fisheries and Oceans; Health; CIDA; Agriculture
Then provinces…often municipalities
Any group/initiative that understands that can navigate that, also has an edge
It’s intricate and it’s more about art than science
Realize it puts onus on all of you – already stretched thinly
Just some things to bear in mind…including the points on oral hygiene
Hope that this can lead to some conversation now…
1