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Strategy for engaging with regulators

  • Does your business have a strategy in place to deal with regulators?
  • A recently released green paper from Governance Institute of Australia in partnership with LexisNexis discusses who is the custodian of regulatory engagement within a business and how culture, remuneration and transparency of information can help businesses re-establish trust while adequately dealing with regulators.
  • Submissions on the green paper on engaging with regulators are due on 28 August 2019.

Following the fallout from the banking royal commission, companies, particularly those in the financial services sector, will need to adapt to a very different regulatory environment and are on notice that they now need to change their approach to dealing with regulators.

Against that background, Governance Institute surveyed members in March this year in order to gain greater insight into members’ current strategy for dealing with regulators. In May this year, Governance Institute and LexisNexis convened a roundtable of distinguished participants to further explore the rapidly changing regulatory environment post the banking royal commission.

Governance Institute of Australia in partnership with LexisNexis is now encouraging relevant organisations and other key stakeholders to comment on the recently released green paper Strategy for engaging with regulators.

The green paper can be accessed here on Governance Institute’s website and the closing date for submissions is 28 August 2019.

The current regulatory landscape

In a post-banking royal commission world, the regulatory landscape has changed fundamentally. The twin peaks model remains, but the approach to enforcement has changed.

ASIC has a new, more intensive supervisory approach — close and continuous monitoring involves regularly placing ASIC staff onsite in major financial institutions to closely monitor governance and compliance with laws. If successful, this program may be rolled out more broadly. Its supervisory initiative, the Corporate Governance Task Force is undertaking targeted reviews of corporate governance practices in large listed entities to allow it to shine a light on ‘good’ and ‘bad’ practices observed across these entities.

In addition, the regulators will be subject to external scrutiny through a new oversight body and four-year capability reviews.

The laying of criminal cartel charges by ACCC against ANZ, Citigroup and Deutsche Bank arising from an institutional share placement in ANZ shares broke new ground for ACCC enforcement.

Amendments to the Corporations Act 2001 which came into effect on 13 March 2019 significantly increase maximum penalties for directors for civil and criminal contraventions. This means that ASIC will now be able to seek much higher penalties against those who contravene the Act.

What the survey found

  • 60 per cent of respondents have a strategy for dealing with regulators
  • Of those 60 per cent who do have a strategy for dealing with regulators, 70 per cent believe that their strategy is fit for purpose post the banking royal commission
  • 43 per cent of respondents reported that compliance department is the custodian of regulatory engagement in their organisation, 34 per cent reported that the custodian was the risk management department while 23 per cent reported the legal department was custodian
  • There does not appear to be evidence of any groundswell for change of custodian, with nearly 90 per cent of respondents reporting no change of custodian was anticipated
  • Nearly 40 per cent of respondents believe that the recent whistleblowing amendments do not go far enough
  • Despite the banking royal commission, almost 50 per cent of respondents currently have a defensive or reactive approach to engaging with regulators and there appears to be little appetite for change
  • Of the 36 respondents for whom the compliance department has the responsibility for regulator engagement , 22 describe their approach as proactive, eight describe it as reactive and six as defensive
  • Of the 19 respondents for whom the legal department has responsibility for engaging with regulators, ten describe their approach as reactive, eight as proactive and one as defensive. These responses suggest that where the responsibility for engaging with regulators sits with the legal department, the organisation’s approach is more likely to be reactive.
  • Of the 25 respondents to the survey for whom the risk management department has responsibility for regulatory engagement, ten described their approach as reactive, one as defensive and 14 as proactive
  • Interestingly, almost 70 per cent of respondents to the survey reported that the findings of the banking royal commission will not impact their organisation’s approach to remuneration.

The survey participants were also asked how the regulators’ new, more intense supervisory and enforcement approach will influence management decision-making around the consequences of compliance breaches and funding allocations for enhanced risk and compliance measures.

Survey participants were also asked about the implications for the roles of board and management and the possibility of any blurring of responsibilities. The consensus appears to be that there is little likelihood of blurring of the roles between board and management.

The roundtable discussion: Resetting the dial

A distinguished group of members and other key stakeholders, including an ASIC representative, academics held a Chatham House discussion about the results of the Survey and explored how companies and their leadership will navigate this new engagement model. Roundtable participants agreed it was now time to again reset the dial on what is acceptable corporate behaviour to restore trust and confidence following the significant breaches of trust and failures of leadership uncovered in the banking royal commission.

According to one roundtable participant, ‘There has been massive value destruction. When we hold investor meetings, investors want to talk to us about risk management, suppliers and how the board is testing the temperature on this. It’s a whole new world and organisations have to adapt accordingly and that includes how they engage with regulators.’


In his final report, Commissioner Hayne emphasised the important connections between culture, governance and remuneration on the one hand and regulatory, compliance and conduct risks on the other.

The survey and roundtable were designed to capture in real terms what this means for organisations in a post banking royal commission world.

Seventy per cent of survey respondents with a strategy of dealing with regulators believe that their strategy is fit for purpose in a post-banking royal commission world.

Nevertheless, roundtable participants highlighted the challenges for boards and management of dealing with regulators with new enforcement and supervisory approaches. There is no ‘one size fits all’ approach to dealing with regulators — each regulator will need its own approach.

The challenges for boards and management will lie in ensuring the right information reaches the board and embedding an open, transparent and accountable culture within the organisation.

Call for submissions

Governance Institute encourages key stakeholders and other interested parties to participate in this discussion and looks forward to receiving submissions. The submission questions are:

  1. What specific processes do you have in place to engage with regulators?
  2. Does the process differ depending on the regulator and/or the magnitude of the issues?
  3. What are the key challenges of engaging with regulators?
  4. Given ASIC continued focus on culture, do you believe the current culture in organisations meet ASIC’s expectations?
  5. Do you think that in the post banking royal commission environment boards and senior management will be challenged to meet the expectations of both shareholders and regulators and why?
  6. In your view will increased scrutiny from regulators impact what is and what is not recorded in the minutes?

Submissions are due on 28 August 2019. Submissions and feedback will be treated as confidential, unless you indicate you agree to have your response made publicly available on our website.

To complete your submission, simply complete the editable PDF on the website, save it and email it to

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