1. International Practices in Inspections Reform
IMPROVING EFFECTIVENESS, EFFICIENCY, LEGITIMACY
INSPECTIONS REFORM CONFERENCE
MOSCOW, JULY 2017
Florentin Blanc

2. What is regulatory enforcement? Why are there regulatory inspections?

3. Policy goals, regulations, outcomes
Laws: concrete goals? values? symbols?
Regulations are expected to have concrete, tangible results - measurable
Regulations include both ‘substantive provisions’ (what people are expected to comply with) and ‘procedures’ (supposed to ensure compliance)
“Enforcement” or “Regulatory Delivery” – actions aiming at ensuring that regulations are implemented, complied with
Do they deliver intended outcomes? To what extent?

4. From rules to outcomes – no straight line
Expectation: rules prescribe behaviour that produces desired outcomes
Problems:
(1) what the rules prescribe may not be adequate to achieve results
(2) how to ensure that behaviour really changes to follow the rules
Different procedures, institutions, methods to enforce rules and change behaviour – which ones work better?

5. Different visions, different approaches
Check everything before start: permits, licenses etc.
Very frequent controls, zero tolerance OR
Focus controls based on risk
Differentiate responses based on history, overall compliance level, risk
Use information, outreach etc. to change behaviour

6. Findings from practice: “more” is not “better”

7. Occupational Safety in Britain, Germany and France – diverging numbers
Long-term: significantly lower number of inspections per business than in other two countries
Further decrease in recent years –
2006: Inspections in DE 3 times more frequent than in GB
2013: Inspections in DE 5 times more frequent than in GB
Same overall picture comparing FR to GB
Increasing risk focus in Britain => lower number of inspections does not mean overall less enforcement notices, prosecutions (stable in past 10 years)
No use of administrative penalties (no administrative fines at all) in GB vs. very intense use in FR (and “intermediate” in DE)

8. Assessing Occupational Safety outcomes (1)
Fatal Occupational Accidents Rate per 100,000
2012
2013
(including transportation)
Great Britain
0.58
0.51
1.4
0.62
1.59
Germany
0.9
0.81
2.1
0.87
1.68
France
2.64
2.94
2.97
2.62
3.83
EU 15
1.3
1.19
2.4
1.5
2.38
EU 27/28
1.46
2.6
1.63
2.59

9. Assessing Occupational Safety outcomes (2)
Fatal occupational injuries – wide agreement that reporting rates are high, mostly consistent, and that data is comparable – Eurostat provides standardized rates
GB best performer in Europe for decades – Germany gradually improving to come in the top group (happens while inspectors and inspection numbers strongly decrease – but legislation changes with introduction of risk management requirement for employers) – France very poor performance (worse than EU-28 average)
GB performance far superior when considering only safety “on premises” [where Health and Safety Executive is involved] than when including work- related transportation [where they are not involved] => good “regulatory delivery” has results

10. Evidence from other sectors, countries etc.
United States: comparing states/activities with/without licensing – no improvement in safety or quality, major decrease in employment, higher prices
No apparent correlation in country/between countries between level of tax inspections and tax revenue level (IFC study in Eastern Europe)
Research on tax enforcement shows that compliance may increase if control increases from a very low base – but above a certain point compliance decreases as resistance develops against perceived excess of enforcement
Fear of fines may punctually increase compliance with rules of the road – but often has no effect on most dangerous behaviour – and improvements in safety seem to happen across countries with very different approaches to road traffic controls and enforcement (=> different factors at play)

11. Comprehensive model of compliance drivers

12. Complementary compliance drivers – and tensions
Conformity (“everyone does it”)
Ethics (“this is the right thing to do”)
Legitimacy of authorities
Procedural justice in interaction with regulators
Deterrence (control, enforcement)
Economic benefits of compliance (reputation…)
Knowledge
Financial ability to comply
Enabling Conditions
Economic Incentives
Social and Cultural Drivers
Legitimacy and Interactions
Tension: excessive dissuasion efforts reduce voluntary compliance (decrease legitimacy, weaken social conformity, increase costs). Approaches based primarily on heavy dissuasion are not effective.

13. Approaches to improving inspections

14. Elements for increased efficiency and effectiveness?
Risk-based targeting
Risk-proportional and responsive enforcement
Guidance, assured advice, support to compliance
Information management and integration
Not only institutional and technical aspects – culture, expectations, performance management all essential

15. Defining risk
Probability: how likely is it that something bad will happen?
Severity and magnitude: how bad will be the impact, and how large will it be?
Risk = likelihood x potential magnitude of hazard
Understandable - to whom: to Lawyers? to Citizens & Businesses?

16. Building the Liberian Economy: Risk, regulation and growth
Types of intervention pyramid
Profile of businesses
Specialist Intervention
High Risk
Inspection (more frequent when risk increases)
Medium risk
Businesses will fall into this profile of risk – most low risk, small number high risk
the type of regulatory activity carried out depends on the risk
Alternatives to inspection
Low risk
August 2013

17. Is the set up, equipment safe? Does anyone check? Regularly?
Risk-focus during inspections
Select the areas you will focus on for this inspection
For each area, look at
….physical controls
…and management controls.
Make a judgement for each area sampled about how well (or not) the business is managing risks in this area
Consider what action you will take
Is the set up, equipment safe?
Does anyone check? Regularly?
Good?
Bad? ?
(This and following slides reproduce HSE material – with kind permission)

18. Assess the risk gap
In this example, without the guard, there is a possible risk of minor injury, and the benchmark is remote risk – the gap is therefore
Nominal
Actual risk
Actual risk
The green arrow on the left hand side is pointing to where, without a guard on the drill, the duty holder is with respect to this risk – ie possible risk of a minor injury.
Looking across the table, the green arrow at the bottom is pointing to where, with the guard on the drill, the duty holder should be with respect to this risk – ie remote risk of a minor injury
The paths of the two arrows intersect in the green box above the upward pointing arrow on the right hand side
The key beneath the table indicates that a green box is classed as a nominal risk gap – ie the lowest class of risk
Now we need to look at the “Initial Enforcement Expectation” table.
Benchmark risk (what is tolerable under law)
Benchmark risk
Risk gap:
Extreme
Substantial
Moderate
Nominal

19. Promoting compliance – the enforcement pyramid
Source: Ayres and Braithwaite, Responsive Regulation, 1992 19

20. Providing SMEs (and inspectors) with a clear “toolkit” of what to do (or not) and why – “Safer Food, Better Business”
In reaction to the high number of problems in small-scale food business operators and observed ineffectiveness of inspections, the UK Food Standard Agency and local regulators launched the “Safer Food, Better Business” toolkit in 2005, available in 16 languages etc.
The SFBB toolkit is given to all new food SMEs in catering, trade etc.:
Guides small businesses step by step, explaining not just “how” but “why” this is important
Includes all points checked by regulators – no “surprise”, inspectors will not suddenly penalize due to requirements not covered in the toolkit [it is de facto also a “checklist”]
Goal: safer businesses – less hazards for consumers – better business (no bureaucracy, no loss of consumers because of contaminations etc.)

21. “Best Practice” – the OECD Principles

22. IMPROVING POLICIES, INSTITUTIONS AND PRACTICES – OECD PRINCIPLES
Evidence- and measurement-based enforcement/inspections
Selectivity - use enforcement/inspections only where strictly necessary
Risk-based and proportionate enforcement
“Responsive Regulation” approach
Institutions:
Long-term vision & stable institutional mechanism for improvements
Consolidation/coordination of inspection functions
Transparent governance + HR policies geared towards professionalism, outcomes
Tools:
Information integration, ICTs to ensure risk focus, coordination
Clear and fair process, rules
Compliance promotion through toolkits, check-lists etc.
Professionalism, inspectors’ training 22

23. 1 - Evidence based enforcement
Do not inspect and actively enforce “everything that is regulated”
Rather, evaluate the risk level posed by different types of regulations and regulated areas
Allocate resources and efforts proportionally to potential outcomes
Evaluate and adjust based on results 23

24. 3 – Risk focus and proportionality
Frequency of inspections should be proportionate to risk level
Severity of sanctions and burden of enforcement should be proportionate to actual hazard/damage
Risk = probability x magnitude (scope x severity) of hazard 24

25. 4 – “Responsive Regulation”
Enforcement modulated based on behaviour of regulated entities
“Honest mistakes” and one-off violations treated differently from systematic, criminal misconduct
Aim: promote compliance and positive outcomes 25

26. 5 – Long term vision, clear objectives and stable institutional mechanism
Official policy, clear objectives for continued improvements in enforcement – long-term perspective
Institutional set-up gathering all relevant ministries, institutions, stakeholders
Strong policy leadership 26

27. 6 – Co-ordination and consolidation of inspection functions
Less duplication and overlaps – reduced costs and burden
Greater coherence, better information flow – more effectiveness
Core list of inspection/enforcement functions to match rational analysis of types of risks – not “historical” list of institutions 27

28. 8 – Information integration
Interconnect databases and systems used by different inspectorates / whenever possible set up single/joint systems
Data sharing and shared planning mean less duplication, more efficiency – but also better outcomes because key information is shared effectively, risks are better identified
Initial investment can deliver considerable benefits and efficiencies 28

29. 10 – Compliance promotion and transparency
Ensure that regulated subjects know what is expected from them
Enforcement to be consistent and predictable
Compliance promotion achieves better outcomes at lower costs
Tools adapted to different types and profiles of establishments (checklists, guidance, etc.) 29

30. 11 – Professionalism and training
The whole training, management, incentives need to be aligned with objectives and principles of “better enforcement”
Inspectors’ training needs to incorporate risk- management, compliance-promotion, and a whole set of “competencies” related specifically to enforcement
Aim to increase consistency, quality – reach better outcomes 30