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In recent months while reviewing several ESG reports I noticed that these reports have evolved from simply reporting on Environmental, Social, and Governance as ambiguous as that can be. They have expanded to include many other topics of interest to stakeholders such as: Diversity, Equity, and Inclusion Sustainability Health and Safety Cyber Security Privacy Protection Information Security Climate Adaptation Enterprise Risk Management ESG Priorities and Initiatives And many others ESG reports are also becoming a significant source of internal obligations as they are filled with board level commitments, goals, and targets. In previous blogs I discussed that ESG has more to do with a social license to operate rather than a legal one. In this context, "social" can be substituted for "stakeholder" – anyone who has a stake in the activities of the business. As a result, managing ESG commitments will most likely fall outside traditional compliance programs structured around legal and mandatory obligations. In fact, ESG commitments tend to be performance and outcome-based which requires organizations be proactive and integrative in their approach. This will mean more programs to introduce change rather than only systems that resist change to achieve consistency and conformance. The need for compliance to adapt to performance and outcome-based obligations has been happening for some time for those in highly-regulated, high-risk industries specifically around safety. It appears that ESG commitments will be added to these and may now become a key and perhaps dominate driver of compliance change. What we can be certain of is that reactive, check-box compliance focused on audits and action items will not be enough to address ESG commitments. Instead, compliance will need to be re-imagined and engineered to advance outcomes and meet targets in the presence of uncertainty. If you want your compliance team to learn how this is done consider joining "The Proactive Certainty Program™". This program teaches you how to take a proactive and integrative approach to compliance so you can always stay between the lines and ahead of risk. Take the first step and complete the scorecard available here .

As T.S. Eliot wrote: “It is impossible to design a system so perfect that no one needs to be good”. Professional engineers are those that promote that good. Engineers and more broadly the engineering profession have for years applied scientific knowledge for practical purposes and the good of the public at large. This comes with significant responsibilities to “do good” and protect the public from the harms that might come from the technology used. Over the course of the last several decades the original fields of engineering have grown to include other applied sciences such as: computer, sustainability, environmental, bio-medical, social, cybersecurity, safety, aerospace, risk, process safety, and many many more – most likely hundreds of fields. Unfortunately, the role of a professional engineer has not progressed to participate in these other domains. For example, the use of engineering stamps on drawings as a way to help provide assurance of public safety has not found its equivalent for other areas of the profession. However, far worse, engineers have more broadly been left out of the conversation regarding ethical aspects and protection of public harm. Back in the day, although my degree was computer engineering its core was electrical so that it could be accredited by the professional engineering association. Technically, the profession had not found a spot for computer engineers. Even today this has not really changed. Upon graduating I pursued a professional engineers license in support of my duty to protect the public something that I strongly agreed with. However, what would a computer engineer do with a professional engineer's stamp? Would we stamp computer architecture diagrams or other design documents? I never have or was every asked to. As my professional association is currently heading towards elections there is talk about modernizing the profession specifically governance and regulatory aspects. However, I wonder if we might do better to work towards the elevation of professional engineers beyond the traditional five to all engineering practices. Engineers need to have a voice to speak up to the ethical and societal aspects of the growing list of technologies that are used. We need to find an equivalent of the engineer's stamp for all of engineering. Now, I realize that there is nothing special about the stamp. What is important is what the stamp symbolizes. The stamp represents that the engineer takes responsibility for the engineering work and will be held accountable for it. It is a stamp of assurance – a seal of trust. The public today still needs the same assurances. We need engineers more than ever as we look to science and technology to help address climate change, sustainability, cyber risk, and many other public concerns. However, we just don't need their technical knowledge and skills. We also need their commitment to public safety and to do good which requires a modern day stamp of assurance and seal of trust. So yes, there is still a role for professional engineers and we need more of them in every field of engineering.

This week we explore a question that was posed in reference to IIA’s 3 line model “should risk management be connected more closely with internal audit?” As a quick overview: The 3 lines model is an updated version of what was previously known as 3 lines of defence. This updated version clarifies and strengthens how key organizational roles work together to provide strong governance and risk management. The first line of the IIA model focuses on management responsibility to deliver products and services. The second line of the IIA model provides assistance to the first line to contend with risk. The third line is the audit function providing independent and objective assurance and advice. Governance provides oversight across all lines enabling accountability, assurance, and actions. The model depends on all functions working together to create and protect value With respect to risk we can make the following observations: The first line has managerial accountability for meeting organizational objectives and obligations. Management is responsible to contend with common risk (i.e. strategic, operational, tactical) along with specific risks associated with safety, security, sustainability, environmental, quality, and other organizational objectives. The second line provides expertise, advice and support to manage specific risks and to ensure that effective measures are in place. There can be overlap in responsibilities between the first and second line, however, the second line is usually not accountable for the outcomes of risk. The third line (audit) does not have managerial accountability for organizational objectives or responsibility to contend with risk. Internal audit does have accountability with respect to the delivery of audit services. Audit effectiveness depends on many thing but mostly on its independence and objectivity. Discussion: The 3 lines model (diagram above) shows internal audit connected to management (first and second lines) as well as governance. The question of how close this connection should be is a reasonable one and worth investigation. With respect to accountability for obligations and its risks they do not belong to internal audit (3rd line) or risk management (2nd line). As a consequence, contending with uncertainty remains a first line obligation assigned to those answerable for outcomes which IIA clearly calls out. Risk as most now define it, are the effects of uncertainty on objectives. To contend with risk you need clear and concise objectives (lacking ambiguity) and have estimated the level of uncertainty associated with meeting them. From this measures can be put in place to improve the probability of meeting those objectives. These activities need to be managed, monitored, and continuously improved to ensure risk levels or below specified risk tolerances. This function is primarily proactive in nature which is defined as to anticipate, plan, and act to increase the probability of the outcomes we want and decrease the probability of the outcomes we don't want. Audit on the other hand, follows reactive and retrospective behaviour and practices most often concerned with verification of processes (i.e. controls) and procedures. Audit seldom validates effectiveness of programs and systems as measured by the realization of targeted outcomes. As risk management is concerned with both value protection and value extraction its focus includes outcomes produced by the underlying systems and something that audit struggles with measuring. Audit most often focuses on if things are done right rather than if the right things are done. This is not to say that some may provide advice on the latter, however, this works against audit being objective and independent. When businesses lean to much on audit’s advise, managerial accountability is diminished along with audit’s objectivity. This is something that should be avoided. Aligning risk management more closely with a function that is reactive such as internal audit also introduces the risk of reinforcing the wrong behaviours. Risk management needs to remain proactive and requires a culture that reinforces practices that are more prospective than retrospective. Audit’s reactive culture would compete and dominate to the detriment of risk management. If risk management should be connected more closely to something it should be connected with proactive functions involved in visioning and goal setting such as governance. However, what is more important is for risk management to work more closely with first line management. They need to be part of the team to provide assurance (confidence) that objectives will be met. This can best be done when risk management is integrated with the business something that audit cannot do as it must remain independent. Conclusion: Should risk management be connected more closely with internal audit? Probably not, for reasons that include: Different cultures: proactive versus reactive Different purpose: ensure objectives versus verify objectives Different strategy: integrate with business versus independent from business What do you think?

Compliance leaders know that when it comes to risk there is more than one type of dragon to contend with. Effective compliance is about handling uncertainty to decrease the probability of non-conformance as well as increase the probability of conformance associated with meeting legal, regulatory, and stakeholder obligations.

Effectiveness: the final frontier. These are the voyages of USS Integrity, our continuing mission to meet and advance stakeholder obligations. To seek out new levels of performance and new standards. To boldly go where no organization has gone before. Ships Capabilities ... STAR-FLEET (board of directors) - identify corporate risk and commission compliance missions. STAR-FLEET DATABASE (obligations & risk register) - register of stakeholder obligations, risks, and corporate objectives. OFFICERS (CEO, corporate officers) - accountable for achieving compliance mission success. BRIDGE (management, steering committees) - plan, execute, and monitor compliance effectiveness and performance. COMMAND (management) - execute projects, initiatives, and tasks to achieve compliance objectives. CREW (staff, contractors) - provide skill, talent, and capability to meet compliance objectives. THRUSTERS (risk & compliance programs) - provide capabilities to move forward and stay on course. ENGINEERING (risk & compliance specialists, lean, etc.) - maintain risk & compliance measures running at peak efficiencies. MAINTENANCE (reliability and preventative programs, integrity management) - maintain the health of the organization. MEDICAL BAY (health and safety, first responders, primary care) - maintain health of crew. STELLAR CARTOGRAPHY (obligations map) - map the regulatory compliance terrain, organizational goals, outcomes and objectives. HELM (management) - plot course to higher standards while avoiding obstacles and taking advantage of opportunities. NAVIGATION (balanced scorecard, KPIs) - maintain course, stay between the lines SHIELDS (resiliency, integrity, margin, safety, etc) - protect organization and staff against threats and obstacles. ESCAPE PODS (emergency response) - save crew in case of emergency TACTICAL (risk and compliance measures) - defend crew and organization against threats and pursue opportunities. SHIPS LIBRARY (document management) - database of regulations, standards, policies, procedures. ALERT STATUS (change management) - adapt to changes in objectives, terrain, threat levels. AWAY MISSIONS (Gemba, investigations) - first contact, reconnaissance LONG RANGE SENSORS (leading indicators) - threat detection MISSION LOG (records management) - add to and update knowledge base Act 1, Scene 1 USS Integrity ready to leave space dock after making needed repairs ... Captain's quarters ... Captain makes log entry: Star Date : now Our last incident almost took us out. We lost some of our crew and star fleet is unsure we can complete our next mission. Work is proceeding on the USS Integrity as the crew completes needed repairs and modifications. Will they be enough? Will our defences hold this time? They must. The galaxy is depending on us to succeed. Bridge hails the Captain: This is Spock. Repairs completed captain. Captain responds: Do we have any problems with compliance? Spock responds: Compliance presents no problem. Captain speaks: Then, Mr. Spock. Let us comply. and let's hope we don't run into any auditors. Spock: Indeed.

When it comes to safety there are two schools of thought. The oldest one is focused on behavior and its by-line is, " Act Safe ." This is the domain of Behavior Based Safety or BBS and has been around for many years and has contributed significantly to improving occupational safety. However, a major problem with this approach is the tendency to blame the person should an incident or mishap occur. This results in workers not wanting to report incidents or even near-misses, and who would blame them for not wanting to under a climate of fault finding. The second school of thought focuses on systems and processes and its by-line is " Be Safe ." This is the realm of Human and Organizational Performance or HOP . This is relatively new and parallels the work in process safety management. The goal is to use systems and processes to create the conditions for people to be safe. In a manner of speaking, this approach reduces risk so that individual behaviors are less likely to cause an incident. This approach is also not without its problems as it can sometimes lead to "blaming" the system and loss of accountability for human action. Nevertheless, HOP has helped to address systemic safety issues that would otherwise not be addressed by human behavior alone. There has been much debate in recent years as to whether HOP will replace BBS or whether they will merge into one approach, or even turn into something new altogether. It is my belief that both are needed as they deal with two different aspects of safety and here is why. Root Cause Analysis Dean Gano, the creator of the Apollo Root Cause Analysis method [2][3], goes back to St. Thomas Aquinas (13th Century Philosopher) to help us to understand the nature of cause and effect. Aquinas writes that the existence of potency (i.e. capability) cannot reduce itself to act. As an example, "the copper cannot become a statue by its own existence." For that to happen you need a sculptor to act on the copper to make it into a statue. In other words, for an effect you need both a condition and an action . In fact, an effect needs a prior cause and that cause needs both a condition and an action and so on. This leads to the conclusion that a cause and an effect are the same thing. This distinction is an important one and one that is often lost when using other methods for attempting to discover the "rootiness" of a cause. The point that I would like to highlight is that at every branch (see previous Figure) in the analysis you always have at least one condition and one action. A condition by itself is not enough and neither is an action. This is where the two schools of safety come in. Without the presence of a risky condition (the focus of HOP) an adverse effect is less likely to occur no matter what the action might be (of course there are exceptions). Similarly, risky actions will not be a problem if there are no risky conditions. You cannot have an explosion without bringing an ignition source (the action) into the presence of a flammable gas (the condition). The consideration of both actions and conditions is helpful to understand why we might need both the benefits of an effective BBS based program to address behavior as well as a HOP based approach using systems and processes to create safer conditions. However, we cannot so neatly put everything into one of the camps or the other. The two towers need to work together. The Apollo Root Cause Analysis would have us look for a prior condition and action for every behavior and a prior condition and action for e very condition. To put it another way, each camp needs to be resident in both towers. Perhaps, this might suggest that the two towers might indeed become one and using methods like the Apollo Root Cause Analysis might help to integrate the two schools of thought. Until then, no matter what approach you choose, Be Safe, Act Safe Further reading: Aurisicchio, Marco & Bracewell, Rob & Hooey, Becky. (2016). Rationale mapping and functional modelling enhanced root cause analysis. Safety Science. 85. 241-257. 10.1016/j.ssci.2015.12.022. The Apollo Root Cause Analysis, https://www.apollorootcause.com/ RealityCharting, https://www.realitycharting.com/ Behaviour Based Safety, https://en.wikipedia.org/wiki/Behavior-based_safety Safety and Performance Excellence: The Two Dimensions of Safety, https://www.ehstoday.com/safety-leadership/safety-and-performance-excellence-two-dimensional-safety

"Compliance, in many ways, is about doing the right thing at the right time in the right way. Collecting evidentiary material is an important aspect in providing assurance, and for many companies, it is a way to improve compliance. This evidence often comes in the form of data and plenty of it. Companies measure, gather, and store data of all kinds and in increasing amounts. In fact, as companies continue their digital progression, the amount of data is expected to balloon. All this data will be analyzed, and patterns will be discovered. This will help in updating our system models and processes to make them more efficient. Recent advancements in artificial intelligence and machine learning will take this to even higher levels and discover patterns that we currently cannot see, and all of this can be used for improvement. However, even with these advancements, what this data will never be able to tell us is how things “ought” to be. In other words, data cannot be used to determine what is right." – Raimund Laqua Read the full article in the Sep/Oct 2018 Ethikos - Journal of Practical Business Ethics which you can download here . Copyright [2018] Lean Compliance Consulting, Copyright [2018] ethikos, a publication of the Society for Corporate Compliance and Ethics (SCCE), Copyright [2018] Compliance & Ethics Professional, a publication of the Society for Corporate Compliance and Ethics (SCCE).

Effectively managing risk is essential to every business. To achieve this, companies will typically have several programs to address different sources of risk such as: asset integrity, damage prevention, injury reduction, process safety, corporate risk, and others. All of these programs inherently serve to reduce risk to business, people, assets, and the environment. However, each program may differ in how they think about about risk and how it should be addressed. This can lead to confusion when cross-functional teams are brought together to identify risk when changes are being considered. It is common during organizational changes to bring various groups together to assess any new risks arising from the proposed changes. Far too often, these discussions are not as productive as they could be because of the definition each group has for risk. For example to: Engineers , risk is a hazard, Management , risk is about uncertainty on system objectives, Health and Safety , risk is a threat to personnel, Finance , risk is threat to return on investment, Project Managers , risk are threats to schedule, cost, and quality In addition, in recent years, regulators and standards organizations have started using broader definitions for risk beyond just simply referring to hazards. These different views of risk can lead to uncertainty concerning what assessment tools to use, how risks should be treated, and the controls and measures that need to be in place. For example, to those involved with process safety, risks are tightly connected to hazards. If you remove the hazard, you remove the risk. So the discussions tend to focus on hazard identification and barriers. However, this technique does not have parallels when considering impacts arising from organizational changes, cyber threats, and other sources of risk. For the latter, there are other techniques that need to be used to identify and address risk. To help reduce confusion when discussing risk it is helpful to use the same definition for risk. Using a consistent risk framework and specifically for the definition of risk across compliance programs can help ensure that risks are adequately identified and treated. The ISO 31000 risk management framework offers a definition for risk that can be used across multiple risk domains. This definition focuses on the effects rather than the chance that a risk will occur: With some work, compliance programs can be re-framed using this definition (or one similar to it) to provide a consistent vocabulary for talking about risk. Over time, this change will improve the outcomes of risk identification discussions, minimize the misapplication of risk assessments and treatments, and bring greater clarity as to the level of risk contained in corporate risk registers. Plan- Do-Check-Act Questions : In what ways has different meanings of risk affected your compliance programs? How would your risk program benefit from using a common risk framework? What step could be taken to increase the effectiveness of risk management within your organization?

There is much discussion these days about the need to create an improved safety culture particularly in high-risk, highly-regulated sectors. The question is how do you do this? According to Dr. Jordan B. Peterson, professor of Psychology at the University of Toronto and clinical psychologist, "Culture is the remnant of our actions." Therefore, if you want to change your culture the place to start is by changing your actions.

Culture is difficult to define and hard to measure, but without the right one a company cannot succeed. A common definition for culture as it applies to businesses is: "Corporate culture refers to the beliefs and behaviors that determine how a company's employees and management interact and handle outside business transactions. Often, corporate culture is implied, not expressly defined, and develops organically over time from the cumulative traits of the people the company hires." Peter Drucker's well-known statement, "Culture eats strategy for breakfast," captures the importance of culture extremely well. Culture reinforces what is valuable and acts as filter (i.e. eats up) to keep out what is not valued. No wonder when it comes to transforming a business it is important to start with culture transformation. But how do you do this?  Do you start with changing paradigms and beliefs or with behavior and actions?  When you look at the success of LEAN in transforming businesses, the answer appears to be that you need to do both at the same time. LEAN is a set of beliefs based on respect for people, although, it is also a set of practices reinforced by tools and methods. However, what sets it apart is its focus on continuous improvement of both processes and people . LEAN introduces the role of " coach " whose primary function is as an agent for cultural change which may seem surprising to some. However, challenging paradigms and beliefs is the key to LEAN's success. Improvement initiatives become the vehicle not only for cycle time reduction or the elimination of waste, but also for changes to beliefs, biases, and behaviors. Companies that have adopted this approach find that LEAN is a powerful mechanism for transforming culture. These same principles can and are being used to transform compliance culture to advance quality, safety, environmental and regulatory compliance outcomes. Almost all compliance programs and standards include the need for continuous improvement. However, this is not the last step after all the compliance gaps have been addressed, common among improvement roadmaps. Instead, it is the first step and the means of changing culture to realign, reinforce, and sustain the values that really matter.

Saying what you will do and doing what you say is essential for organizations where staying between the lines is critical to mission success. If you want to lower your risks you need to foster a culture of integrity across all levels of your organization. For compliance, integrity is manifested when organizations take ownership of all their obligations and hold themselves accountable to them. In order to say what you will do requires that you first know what your obligations are. This means taking inventory of both regulatory requirements and voluntary commitments. Companies must then set appropriate organizational outcomes, targets, and goals commensurate with their level of commitment and operational risk. The way that companies say what they will do is by documenting their promises usually in the form of policy. To be effective policies must be put into practice. This is demonstrated when organizations operationalize their promises by embedding compliance objectives into programs, systems, processes, and procedures. You can call this compliance-by-design but it is really just ensuring that you do what you say. This is still not is not enough. Organizations must also hold themselves accountable. In fact, they must regulate themselves to provide assurance that they meet their obligations today and will meet them in future. Sustainability is the goal and integrity is the means. This involves continually evaluating performance and effectiveness of risk & compliance programs. Culture is a remnant of our actions. Organizations that continually say what they will do and do what they say will build and strengthen a culture of integrity.

When it comes to compliance many believe that it all comes down to integrity. When it comes to integrity, according to Dr. Henry Cloud, it all comes down to being whole. Dr. Henry Cloud in his book, "Integrity" suggests that a person of integrity is a person of balanced integration of all that character affords. In his book he explores six qualities of character that defines integrity: The ability to connect authentically The ability to be oriented towards the truth The ability to work in away to get results and finishes well The ability to embrace, engage, and deal with the negative The ability to be oriented towards growth The ability to be transcendent If people are able to perform well in these areas good results are inevitable. However, as Dr. Cloud reminds us, " integration of all the parts is key." The opposite of integration is compartmentalization or reductionism. This means that a part of you is operating without the benefits of the other parts, and that usually doesn't end well. When one part of our character is preference over the others we become "unbalanced" or "misaligned." We have all heard the phrase, "he is just too trusting to be of any good." What we mean by this is that the person trusts too much and is possibly ignoring reality or negative signals. The trust ability has become corrupted and in many ways and ironically, "cannot be trusted." Considering integrity as a whole – an integration of the parts – not only applies for people who desire to live lives of integrity, it also applies to the use of compliance programs intended to keep an organization aligned with their mission, vision and values. Compliance programs and systems need to operate as a whole – an integration of its parts – if good results are to become inevitable. Unfortunately, for many organizations, compliance is seen only as one part that is "internal audit." Very little is done to develop other essential capabilities needed to continuously keep organizations between the lines towards mission success. This results all too often in an increasing non-conformance debt leaving a wake of missteps, failure, and possible ruin rather than a wake of good results. Dr. Cloud subtitles his book on integrity, "the courage to meet the demands of reality." You could say that this is a good subtitle for all people, organizations and communities that operate with integrity. They are the ones who are facing reality one aspect of which includes that their parts need to operate as a whole. Each part contributing to and keeping each other balanced and on course. We can take Dr. Cloud's character qualities for integrity and adapt them to compliance where characteristics of effective compliance programs would include the following all working together: The ability to connect authentically with stakeholders which leads to trust The ability to be oriented towards the truth which leads to focusing on what really matters The ability to work in a way to continuously achieve better outcomes which leads to a reduction of harm, improved reputation, and increased stakeholder value . The ability to embrace the negative which leads to improving the certainty of mission success. The ability to be oriented towards growth which leads to an increase in the things that are valued by all stakeholders. The ability to understand that it is only one part of a larger whole w hich leads to an integrated system. The gaps we find are the opportunities for growth. The good news is that these gaps can be developed and improved over time. We often refer to this growth as "capability maturity" when it applies to systems or just "maturity" when it refers to you and I. Maturing is something that we all need to continue doing because we all know we are not yet all that we can or need to be and this is true for compliance systems as well.