Regulatory toolkit to enhance compliance culture

A. Overview

B. Introduction

311. As regulator of architects and architectural firms, the ARBV is uniquely positioned to enhance compliance culture within the architecture sector.
312. Equipped with insights about compliance culture within the sector, the ARBV can proactively and constructively deter or prevent non-compliance from occurring. More specifically, these insights can enable the ARBV to better target and tailor its regulatory activity to maximise its effectiveness and avoid harm.
313. The purpose of this chapter is to explore regulatory tools available to the ARBV that could be used to implement its commitment to ensuring a strong culture of compliance among architects and architectural firms.

C. Stocktake of regulatory tools

314. This section contains a stocktake of some commonly used regulatory tools to enhance compliance culture. The purpose of this discussion is to illustrate how these tools could be used in the architecture sector by the ARBV, as well as by other regulators in the broader construction sector.

Education and guidance to enhance practical understanding of compliance requirements and the need for them are critically important

315. Education and guidance by a regulator are critically important for strengthening compliance culture because they help bridge the gap between regulatory expectations and day-to-day practice. Clear, accessible guidance and targeted education equip practitioners with the practical knowledge needed to apply compliance obligations confidently and consistently.[75]
316. This proactive support can reduce the incidence of non-compliance particularly for small firms,[76] but can also foster a shared understanding of professional and ethical standards, reinforcing a culture where compliance is viewed as an integral part of professional practice rather than a regulatory burden.
317. Education and guidance is particularly important in the following circumstances:

• Regulatory requirements are ambiguous and/or complex: The risk of misunderstanding and misinterpretation can increase when regulatory requirements are ambiguous or complex (e.g. some technical requirements under the NCC). In such cases, clear, accessible guidance that helps translate compliance obligations into practical steps that are relevant to day-to-day professional practice can be helpful.
• Regulatory requirements change: Guidance can also help entities interpret and apply changes to regulatory requirements, reducing confusion and non-compliance during transitional periods (e.g. when the revised Code of Professional Conduct is introduced).
• Newly regulated entities: Education for newly regulated entities (e.g. architects when they are first registered by the ARBV) can help establish an important foundation of compliant behaviour from the outset of professional practice.
• Common compliance issues: Targeted guidance can address recurrent compliance issues (such as, failure to ensure that a written and compliant client-architect agreement is in place when providing architectural services), which can avoid further non-compliance and address vulnerabilities that may be leading to non-compliance.
• Situations where the risk of non-compliance is high: Support in the form of education, training and guidance can be particularly useful to explain how compliance can be achieved during challenging scenarios faced by regulated entities (e.g. in the context of large building projects and/or particular procurement models) or when the practical context for the provision of architectural services changes, which may make it unclear as to how the regulatory requirements apply.

Regulatory incentives can be effective to encourage a good compliance culture

318. Some regulators use incentives to strengthen compliance culture among regulated entities by encouraging and rewarding proactive, compliant and ethical behaviour. Incentives can be used to demonstrate the importance and value of embedding compliance as a core part of professional identity and organisational culture.
319. These incentives include:

• Recognition: Some regulators publicly recognise firms that have demonstrated a strong commitment to compliance, which sends a signal to the rest of the sector about the value of doing the same.[77]
• Easier regulatory processes or lighter regulatory burden: Firms with a proven track record of good compliance may be the subject of fewer audits or simplified reporting requirements as an incentive to maintain a strong compliance culture.[78]
• More lenient response to non-compliance: In cases where non-compliance occurs, some regulators may opt to impose a more lenient regulatory response for entities that do not have a history of non-compliance, proactively report non-compliance and/or can demonstrate that they are committed to compliance.[79]

Enforcement that is targeted at entities that repeatedly fail to comply can send a strong signal to the sector about regulatory expectations about compliance

320. Targeted enforcement against entities that repeatedly fail to comply with regulatory requirements can send a clear, sector-wide signal about the seriousness of compliance expectations.[80]
321. The use of enforcement action for persistent non-compliers demonstrates the regulator’s commitment to protecting public interest and maintaining professional standards and can also deter similar non-compliance by other regulated entities. The combined effect can strengthen compliance culture across the sector.

Public censure of entities that have a poor compliance culture can also be effective to incentivise other sectoral participants to improve their compliance practices

322. Public censure by regulators can be a powerful tool for driving improvements in compliance culture across a sector.[81] When regulators publicly name and hold to account entities with poor compliance practices, it sends a strong and visible message about conduct that is unacceptable and will not be tolerated.[82]
323. In sectors where professional reputation, client trust, and peer perception are important, the fear of public censure can be a more effective motivator than warnings or regulatory penalties alone. Public censure not only holds the individual entity accountable, but also acts as a deterrent to others, encouraging firms to proactively review and improve their own practices to avoid reputational damage.
324. Over time, consistent and proportionate use of public censure can help to lift professional standards overall and may contribute to a culture where compliance is seen as integral to professional reputation and credibility within the sector.

D. Ways to maximise the effectiveness of regulatory tools

325. Regulators can maximise the effectiveness of regulatory tools to assess and strengthen compliance culture by adopting a holistic, risk-based, and adaptive approach that is responsive to the context. This involves tailoring the regulatory response by using the insights derived from the evaluation of compliance culture.

A mix of regulatory tools may be needed to drive meaningful cultural change and secure positive compliance outcomes in the long-term

326. An effective use of regulatory tools can drive meaningful cultural change and enhance long-term positive compliance outcomes. However, the optimum mix of regulatory tools may change over time as the context in which they are applied evolves.[83]
327. A well-calibrated approach uses education and support to build understanding, incentives to reward good practice, and targeted enforcement to deter non-compliance. In this way, each tool reinforces the others.
328. Regular evaluation of sectoral data and emerging trends allows regulators to adjust the mix over time, making the regulatory approach both responsive and effective in embedding a strong, sector-wide culture of compliance. Optimisation of the mix of regulatory tools will come down to the skill of the regulator in devising a regulatory strategy that is finely tuned to the current context.[84]

An emphasis on education and guidance may be needed for sectors with many sole practitioners and small firms, like the architecture sector

329. It is important to acknowledge the limited resources that may be available to regulated entities to dedicate to compliance in a sector with many sole practitioners and small firms[85] – like the architecture sector. In this context, regulatory activities may need to emphasise education and guidance to promote compliance awareness and encourage adoption of best practices.
330. Personal accountability is also heightened in this context because each professional is directly responsible for their own actions, decisions, and compliance with the applicable regulatory requirements. This is in contrast to larger firms, where responsibility may be shared across teams.
331. Regulators can address heightened personal accountability by focusing on education and guidance that helps individuals understand their own responsibilities. Additionally, creating a system of incentives, such as public recognition for compliance excellence, can motivate individuals to uphold high standards.

Different regulatory tools could be employed at the individual, firm, project and sectoral levels to establish a holistic approach to strengthening compliance culture

332. Discrete regulatory tools could be used by a regulator at the individual, firm, project, and sectoral levels to strengthen compliance culture.

• Individual level: At the individual level, the focus is on empowering individuals to comply, but also holding individuals accountable for their compliance behaviour. Targeted and tailored CPD can help individuals to understand their regulatory obligations and how to apply them in practice.
• Firm level: In comparison, firms should be held accountable for ensuring a strong compliance culture within their organisation. Recognition of firms with effective compliance management systems can encourage other firms to adopt best practices.
• Project level: For projects, it is important for compliance to be maintained throughout a project’s lifecycle. Education and guidance could be directed at specific compliance issues that could arise in the context of particular types of projects and/or where particular types of procurement methods are used.
• Sectoral level: At the sectoral level, the emphasis is on establishing a strong compliance culture across the entire sector. Sector-wide reviews can be used to highlight sectoral compliance issues. Engagement with industry bodies can also be employed to encourage sector-wide initiatives.

333. Application of regulatory tools at all of these levels can help to embed a strong compliance culture at each level, ultimately leading to a more effective regulatory framework that helps to avoid harm.

A coordinated and collaborative approach is needed to establish a strong compliance culture across the broader construction sector

334. Architects operate within the broader construction sector, which comprises many different types of sectoral participants each with their own incentives and attitudes towards compliance. The approach of these other sectoral participants towards compliance will inevitably influence compliance culture within the architecture sector.[86]
335. In this context, co-regulators need to work together to establish clear and consistent compliance expectations. Sector-wide resources, awareness campaigns, and training can be used to educate all sectoral participants about their respective compliance obligations (where they exist), best practices and emerging issues. Industry bodies also play an important role in showing leadership and setting the tone about compliance expectations within the sector.

E. Context for application of regulatory tools

336. Having taken stock of the regulatory tools that could be used to enhance compliance culture in the architecture sector, the results of the survey undertaken by the ARBV provide important context for their application in practice.
337. As summarised below, the survey results reveal that, while Victorian architects are committed to acting professionally and maintaining a strong compliance culture, many feel that doing so is challenging without greater support:

• Education and training for architects: When asked to identify the changes that would most help architects to act professionally and maintain a strong compliance culture, over 50% referred to the need for more support to handle legal and commercial pressures and practical training on compliance and risk management.
• Regulatory simplicity, clarity and support: In response to the same question, around 70% called for simplified and clarified regulatory requirements, and more than 50% called for more guidance from ARBV and other regulatory bodies. These responses confirm that regulatory complexity and ambiguity are barriers to confident, consistent compliance by members of the architecture profession.
• Education of construction sector participants: Notably, 75% of survey respondents identified the need for better education for clients and builders about architects’ professional roles and obligations. This result implies that architects consider that other construction sector participants do not understand or disregard architects’ professional role, which could, in turn, undermine their capacity to discharge their compliance obligations.
• Industry-wide guidance and sectoral support: Notably, over 50% called for industry-wide standards for professional behaviour and close to 30% considered that stronger peer networks and mentoring could help.

338. These results indicate that strengthening compliance culture in the architecture profession will require a multifaceted response, combining clearer expectations, targeted education and broader sectoral engagement.

F. Concluding remarks

339. The regulatory tools that are available to the ARBV to strengthen compliance culture are not new. In fact, they are tools that are already employed by the ARBV in the context of its proactive strategic plan, which is designed to detect, deter and prevent non-compliance with the regulatory framework from occurring.
340. However, the insights available from the evaluation of compliance culture in the architecture sector will enable the ARBV to optimise the mix of those tools to strengthen compliance culture. More work will be done to determine how this can be accomplished.
341. The survey results also highlight that education and training bodies, industry bodies and regulators across the broader construction sector each have a role to play in strengthening compliance culture more generally.