CSG: Who Will Watch the Watchers? The Case for Internal Audit

Posted on www.csg.co.uk/blog on January 29th 2018

https://www.csg.co.uk/blog/will-watch-watchers-case-internal-audit

“Quis custodiet ipsos custodes?” wrote the Roman satirist Juvenal around the turn of the 2nd century, raising questions of the capability of those in authority to discharge their duties responsibly. It’s a question that for the almost two thousand years since, civilisations have grappled with, resulting in the notion of auditing – to ensure that others can see that responsibilities are being met, as they should be.

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What happens when the watchers aren’t being watched?  Photo: Paul Bentham

Auditing and compliance are terms that every business has had to embrace more fully over many years, with ever-stronger obligations in areas of employment law, health and safety and day-to-day environmental standards. Beyond those more mainstream areas, a company like CSG, operating within a tightly-regulated arena such as waste processing and hazardous chemicals, you can imagine the sheer volume of regulation (and the consequences of getting it wrong) can be mind-boggling.

Of course, as a large, reputable company with many years’ experience in the field, this isn’t quite as daunting as it sounds – very many systems, processes and job roles have evolved over time to enable the management of the multitude of technical and bureaucratic requirements required of us. For the last ten years, though, we’ve felt it necessary to create our own extra layer of applying checks and balances, in order better to understand the way we continue to work within a constantly-changing regulatory landscape and, of course, to minimise risk.

That layer is the IAG, our Internal Audit Group, a committee of several Senior Managers and Directors who meet every two months and report to the CSG Board on all areas where compliance with regulations is a necessary requirement. Central to that mission is CSG’s Permitting & Compliance Manager Antony Gerken.

“The IAG came about as a result of our drive to gain ISO accreditation”, Antony explains. “From that initial requirement, it was clear that best practice involved learning from mishaps made by other people – to prevent issues from happening, rather than cure those that have happened.”

It is a sign of CSG’s stability and competence that most of the matters the IAG oversees are generally delegated back the team directly involved – it means the IAG’s principal role is an advisory one, where consultation from within CSG is sought and given.

“The very existence of the group is a means to encouraging the culture of every part of the company to continually accept and work better within our regulatory parameters”, adds Antony. “We’ve found that simply by raising the internal profile of the IAG within CSG, all the external audits we are regularly subjected to have become much smoother.”

The ‘box-ticking’ nature of ensuring compliance, especially with the more technical, seemingly less urgent areas of ‘red tape’, like Financial Compliance, gives the impression that this is very dry area of operation, suited to diligent bureaucrats with little need to apply ‘real-world’ understanding of the rules, like the Vogons of Douglas Adams’ ‘The Hitch-hiker’s Guide to the Galaxy’ – but that rather harsh stereotype falls down when you hear why it’s of interest to the IAG.

“Financial compliance sounds dull but it can often be the opposite: for example, one of our chief requirements is to be seen always to be working within the auspices of anti-bribery and anti-[money]-laundering laws”, Antony explains before adding, with a knowing nod, “which is especially important a consideration in certain other countries”, neatly making the point that, where compliance is required, the very nature of the exercise is to guard against problems and abuses that the rest of us, naively, would barely consider.

There are other advantages to all this watching. On a very basic level, having a broad range of experienced professionals to assess operational processes, bringing their collective experience to bear, means the remit goes beyond mere compliance. Inevitably, it leads to suggestions that make processes quicker or easier and therefore more efficient. Many times, real efficiency savings have occurred simply because a process has been more effectively scrutinised.

There’s also the secondary benefit of being better able to deal with upcoming rule changes from bodies such as the Environmental Agency, which is this: being seen to be better able to predict and respond to rules that affect the industry makes CSG stand out from its competitors. In other words, just being known to be more diligent is its own virtue, offering us a commercial advantage.

The nature of auditing is about understanding the fine detail, the micro-level of day-to-day matters but there’s one macro-level looming uncertainty that threatens to change so many areas of compliance that it’s already occupying much of the IAG’s thoughts – the expected impact of Britain’s impending exit from the European Union. It threatens to be a subject so wide-ranging, it will undoubtedly require its own blogpost, possibly several, and it’s still an area that offers so many unanswered questions.

Juvenal’s words are most commonly associated with the need to apply visibility to those in power. In order for the IAG’s questions about compliance in the world after Brexit to become answered, we’ll all have to watch a different set of watchers…

ETN: Do You Know Enough About Your Trade Association?

It should be safe for me to assume that you have some idea of the existence of BETA. It may be something of a leap to expect that, as a consequence, you’re reading this as a representative of a BETA Member company. I hope you are but you may not be. You may not even know, one way or the other. Whether member or not, do you feel confident that you know enough about the body that represents your industry?

I sat on the BETA Council for over twelve years and, to me, it’s a quintessentially British institution that manages to combine world-leading expertise and professionalism with a noble, amateur ethos. Like Schrödinger’s cat, it exists simultaneously in a competitive environment and the realm beyond mere commerce. It’s a benefit-laden private members’ club, an upholder of safety standards and a powerful lobbying force for an entire industry. It stands up for the interests of the retailer and also those who would supply them, even when the two positions can seem incompatible. BETA is, in many ways, a litany of contradictions that defy simple definition. For all of these reasons, it seems that it has an unrivalled capacity to polarise opinion, “damned if it does and damned if it doesn’t”.

BETA_only_colourI’ve met non-members who’ve claimed it’s an ineffectual body that’s happy to charge for membership but offers little value and questioned if they’d done enough research to justify that position. I’ve also encountered staunch members who were frustrated at the limits of BETA’s influence or what they deem to be its over-inclusivity and wondered if they think they’re paying to be part of a cartel. Like the BBC, BETA only seems able to demonstrate its impartiality by displaying an uncanny ability to court equal dissatisfaction from all sides – which, when you think about it, takes some doing.

To me, it’s a telling comparison because there are lots of similarities between the two institutions. I love the BBC but I’m well aware that there are many who do not. I’ll be the first to admit the Beeb is not perfect but I wish it wouldn’t spend so much time justifying itself to those who happen to dislike paying for it. Of all the taxes I’ve ever paid, my ongoing contribution to maintaining it is the one I make the most gladly. Having done so, I still accept that merely buying a TV licence gives me no divine right to complain the second the schedules include something I might not want to watch, however expensively-produced. The BBC is consistently included in independently-compiled lists of the world’s most-trusted brands and it seems to command a level of affection overseas that’s wholly disproportionate to its reach and appeal. Does any of this sound familiar?

There’s also the issue of ‘mission creep’ in a changing world. Yes it’s important to have a clear vision of one’s raison d’être from the outset but robust self-definition can be a hampering factor when changes occur that the writers of the constitution couldn’t possibly have foreseen. The BBC’s website has undergone several culls of material since deemed ‘non-core’ to its Reithian principles in order to demonstrate value and retain overall relevance. Equally, BETA has had to exercise some re-enlightenment from time to time to accommodate an explosion in the number of forms of selling. Both institutions must also tailor their offering to a changing demographic, continually challenging all the safe assumptions of the past. In the case of ‘Auntie’, it’s all about ensuring minority communities are commensurately given a voice. Similarly, today’s less stereotyped horse world must be more effectively understood and represented. I remember one particular late-night debate at which I argued about the dangers of BETA aligning itself too closely with the pro-hunting lobby simply because that’s what it had always done.

And then there’s the issue of what BETA doesn’t do. When commercial disagreements occur between parties, I’m afraid “it’s business”, governed ultimately by the law of the land. There’s obviously a limit to what BETA can do in such disputes. It can advise its members but don’t expect it to stand in binding arbitration. BETA can’t enact any level of direct enforcement beyond rescinding a membership – and even then only where clear infractions have occurred.

I suppose the most easily-thrown hand grenade is the belief that BETA is somehow a secret club, more interested in its own self-enrichment than fulfilling any greater purpose. Again, just like the BBC, BETA’s stakeholders are entitled to regular disclosure of all the finances, something that, oddly, most conspiracy theorists seem not to have taken the trouble to establish. When I was first invited onto the Retail Committee by BETA’s founding father, Antony Wakeham, he promised me no benefit from my involvement beyond “altruism” and, I have to say, he was true to his word. For each meeting attendance, I was able to claim the princely sum of £35 in expenses – if you think that’s a sign of a gravy train, try getting from Wigan to London and back for that amount!

We live in an age where information has never been more freely available so there’s really no excuse for not knowing more about BETA and what it can do for you. As this is an opinion column, I’ll end by giving you mine: BETA is run by a dedicated team of talented, knowledgeable people, led for almost twenty years by, Claire Williams, who, I assure you, is nothing less than an absolute star. It is guided by a broad selection of highly-experienced, poorly-rewarded Council and Committee members who, above all else, care deeply about the future of your industry – perhaps occasionally, a little too much. BETA may not be perfect, it may cost a little more than you’d prefer and it won’t ever be a panacea to cure all ills but it’s what we have – and, I might add, it’s an asset much-envied by those in many other industries. Please don’t ever take it for granted.