How to Avoid Compliance Risks by Effective Communication: A Case Study

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Compliance managers in the energy sector face many challenges in ensuring that their businesses comply with the regulatory framework. One of the most common and frustrating situations is when their advice is ignored or overridden by senior management or other stakeholders, exposing the business to potential compliance risks and penalties.

In this article, we will present a hypothetical case study of a compliance manager in an energy retailer who faced this scenario and how it affected the business outcomes. We will also provide some practical recommendations for compliance managers on how to communicate effectively within the business and avoid compliance risks.

The Case Study

Anna is a compliance manager in a medium-sized energy retailer that operates in several states. She has been working in the energy sector for over 10 years and has a good understanding of the regulatory requirements and obligations for energy retailers. She is responsible for developing and implementing compliance policies and procedures, conducting compliance audits and reporting, and providing advice and guidance to the business on compliance matters.

One of the key compliance issues that Anna has to deal with is the customer hardship policy, which is a mandatory requirement for energy retailers to assist customers who are experiencing financial difficulties in paying their energy bills. The policy requires energy retailers to offer flexible payment options, waive fees and charges, provide access to financial counselling and energy efficiency advice, and refrain from disconnecting customers who are participating in the hardship program.

Anna has been working on updating and improving the customer hardship policy for her business, as she noticed that the current policy was outdated and not aligned with the best practices and standards in the industry. She also observed that the business was not following the policy consistently and effectively, resulting in poor customer satisfaction, high complaint rates, and increased compliance risks. She conducted a thorough analysis of the current policy and its implementation, consulted with various stakeholders within and outside the business, and drafted a new policy that addressed the gaps and issues that she identified. She also developed a training program and a communication plan to ensure that the new policy was understood and followed by all staff and customers.

Anna presented her proposal to the senior management team, expecting that they would approve and support her initiative. However, she was met with resistance and criticism from some of the senior managers, who argued that the new policy was too lenient and generous to the customers, and that it would reduce the revenue and profitability of the business. They also claimed that the current policy was adequate and compliant, and that there was no need to change it. They dismissed Anna’s analysis and evidence, and accused her of being too soft and naive. They overruled her proposal and instructed her to continue with the current policy.

Anna was shocked and disappointed by the response of the senior management team. She felt that her expertise and professionalism were not respected or valued, and that her efforts to improve the compliance performance and reputation of the business were wasted. She also felt that the senior management team was putting the business at risk of non-compliance and potential sanctions from the regulators, as well as damaging the trust and loyalty of the customers. She tried to explain and justify her proposal, but she was ignored and silenced by the senior managers.

The Consequences

As a result of the senior management team’s decision, the business continued to operate with the outdated and ineffective customer hardship policy. This had several negative consequences for the business, such as:

  • Increased compliance risks: The business failed to comply with some of the regulatory obligations and standards for customer hardship, such as offering adequate payment plans, providing timely and accurate information, and reporting on the performance and outcomes of the hardship program. This exposed the business to the risk of audits, investigations, and enforcement actions from the regulators, who could impose fines, penalties, or orders to remedy the non-compliance.
  • Reduced customer satisfaction and retention: The business received numerous complaints and negative feedback from the customers who were dissatisfied with the way the business handled their hardship situations. Many customers felt that the business was not empathetic, supportive, or fair, and that they were treated as second-class citizens. Some customers decided to switch to other energy retailers who offered better hardship assistance and customer service.
  • Lowered staff morale and engagement: The staff who were involved in the implementation of the customer hardship policy felt frustrated and demotivated by the lack of support and guidance from the senior management team. They also felt that they were not equipped or empowered to deal with the complex and sensitive issues that the customers faced. Some staff experienced stress, burnout, or turnover due to the high workload and pressure.

These consequences had a negative impact on the financial performance and reputation of the business, as well as the compliance culture and governance of the business.

The Recommendations

The case study of Anna illustrates the importance of effective communication and collaboration between compliance managers and senior management teams in the energy sector. Compliance managers play a vital role in ensuring that the business complies with the regulatory obligations and expectations, as well as enhancing the customer experience and trust. However, compliance managers also need the support and endorsement of the senior management team, who have the authority and responsibility to make strategic decisions and allocate resources for the business. Therefore, compliance managers need to communicate and influence the senior management team in a way that demonstrates the value and benefits of compliance, and addresses the concerns and objections that they may have.

Based on the case study, we suggest the following recommendations for compliance managers on how to communicate effectively within the business and avoid compliance risks:

  • Understand the business objectives and priorities: Compliance managers should align their compliance proposals and initiatives with the business objectives and priorities, such as revenue, profitability, customer satisfaction, and reputation. They should show how compliance can contribute to achieving these objectives and priorities, and how non-compliance can jeopardize them. They should also use relevant and reliable data and metrics to support their arguments and recommendations.
  • Engage with the stakeholders early and often: Compliance managers should engage with the senior management team and other stakeholders, such as customers, staff, regulators, and industry associations, early and often in the compliance process. They should seek their input and feedback, understand their perspectives and expectations, and address their questions and concerns. They should also build rapport and trust with the stakeholders, and demonstrate their credibility and expertise.
  • Use clear and simple language: Compliance managers should use clear and simple language when communicating with the senior management team and other stakeholders. They should avoid using jargon, acronyms, or technical terms that may confuse or alienate the audience. They should also use examples, stories, or analogies to illustrate and explain the compliance issues and solutions.
  • Highlight the risks and opportunities: Compliance managers should highlight the risks and opportunities that the business faces in relation to compliance. They should explain the potential consequences and impacts of non-compliance, such as fines, penalties, reputational damage, or customer loss. They should also emphasize the opportunities and benefits of compliance, such as customer loyalty, competitive advantage, or regulatory recognition.
  • Provide options and alternatives: Compliance managers should provide options and alternatives for the senior management team to consider and choose from. They should not present their compliance proposals and initiatives as the only or the best solution, but rather as one of the possible solutions. They should also outline the pros and cons of each option and alternative, and the implications and trade-offs that they entail.

By following these recommendations, compliance managers can communicate more effectively within the business and avoid compliance risks. They can also foster a positive and proactive compliance culture and governance, where compliance is seen as a strategic asset and a shared responsibility.

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