This item addresses the 2007 report, Self-regulated professions Balancing competition and regulation , from Canada’s competition watch dog, the Competition Bureau:   The Bureau has also indicated that it plans to release a follow-up report in 2009.

The challenges

This report challenges all regulators of professions and occupations to prove that regulations serve the public interest more than they stifle competition and the benefits that consumers derive from fair competition in the marketplace. Foremost, it challenges regulators (particularly SROs) to be clear about what public interest is being protected by regulation.  Is it really public interest or the self interest of the profession that is being protected?  The Bureau’s view is that unnecessary regulation stifles the marketplace. The report is also clear that it is not about deregulation — it’s about unnecessary regulation.  In this category of unnecessary regulation the Bureau presents many challenges; here are three examples:

1. Prove the merit of advertising restrictions on professional services since these restrictions prevent the public from learning about and differentiating services and making better choices;
2. Prove the merit of overly restrictive entry to practice conditions that act as barriers to qualified newcomers who would otherwise add zest to a marketplace that is perhaps too comfortable for established incumbents;
3. Prove the merit of practice exclusivities and too broadly defined scopes of practice that limit work that can be competently performed by assistants or other professionals at lower cost.

The overall challenge is this, prove that your regulations serve a greater public interest because unnecessary regulations have a damaging effect on competition and in the aggregate, masses of unnecessary regulation damage overall productivity in the economy.

Concern about low productivity is driving this

On this theme, the report opens with this zinger, followed by a solid economic analysis:

Despite comprising a significant part of the service economy in Canada, perhaps as much as one fifth, the professions comprise one of the overall economy’s least productive sectors.

The economic analysis makes it clear that the costs associated with professional services find their way into every other product and service in the economy; hence the concern about low productivity.

Mission clarity is important

Harm reduction or protecting the public interest is the core mission of regulation and it’s reasonable that there needs to be clarity about the primary mission–about what public interest is being protected. Taking a cue from risk management, clarity about the objective is the starting point.  What harm are we to prevent or mitigate and what good are we trying to foster? For a regulator, it’s all about the public interest. If the public interest involves crime prevention, a safety issue, then the public interest is likely quite clear. Regulations are put in place to prevent theft, personal injury or worse. However, in some areas of social regulation or economic regulation, the idea of the public interest becomes harder to define–but nevertheless, important to define.  Regulators need to define the public interest or be vulnerable to the criticism of creating unnecessary regulations that damage another public interest–a healthy marketplace.

Defining the public interest

Standards are useful in establishing public interest-especially if they have been developed through an open process of stakeholder consultation. Public expectations are also useful if there is a systematic and reliable method of establishing this: perhaps through an analysis of complaints, surveys or media reports.

The ultimate risk for a public institution

A recent strike by Toronto Transit Commission workers presents an interesting case demonstrating how unexpected behaviour can swiftly damage reputation.

From sigh of relief to gasp of disbelief

Last week, city of Toronto residents, collectively, took a huge sigh of relief. The city and union officials, representing the Toronto Transit Commission (TTC) workers, had just negotiated a deal that promised to advert a crippling strike.

Granted, the deal had to be ratified by the union executive and accepted by members. However, given that the deal seemed generous, and that negotiations seemed long and arduous, most residents did not expect a strike. Union spokespersons had also made it clear that any possible strike would be preceded by 48 hours of notice.

So when transit workers walked off the job on Friday evening (April 25th 2008), without notice, creating havoc for thousands of people whose plans depended on the service, the collective sigh of relief became a gasp of disbelief. A diverse mixture of views and emotions about TTC workers, union leadership, and city officials got thrown into a public pot that started to brew early Saturday morning.

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Here’s our review of Felix Kloman’s new book, The Fantods of Risk, Essays on Risk Management.

The word fantod is an unusual word, especially coming from an expert on risk management. Felix Kloman has practiced the discipline and written authoritatively on the subject for many years.

The word, which refers to a mind in a state of restlessness, has an interesting literary history. It’s been associated with some … well, restless characters: for instance, Charles Dickens memorable Mr. Pickwick and Mark Twain’s Huckleberry Finn. Here’s how Huck uses the word in a comment about the impact of his Aunt’s “pictures” on him:
“These was all nice pictures, I reckon, but I didn’t somehow seem to take to them, because if ever I was down a little, they always give me the fantods.”

Huck was at unease about the practices of a civilized world, which he viewed through the lens of superstitions and his unconventional experiences.

The word fantod in the title of this book, then, serves to remind readers who think they know a lot about risk that they should never delude themselves about uncertainty. It is inappropriate to feel certainty in the face of uncertainty. It’s reasonable, however, that risk should give you the fantods!

This is not an admission that risk management has little value. It’s a statement of conviction that, when confronted with risk, a know-it-all attitude must never super-cede inquiry, curiosity, careful thinking, and even some humility.

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To reduce risk, expand your awareness of the risks and what’s happening in your jurisdiction

Bravado and confidence, admirable in some fields, can be disastrous if unchecked in high-risk professionals

In the past few months we’ve been reading about the public inquiry into Dr. Charles Smith, the Ontario pathologist whose questionable testimony led to wrongful convictions, and the financial scandal generated when French trader Jerome Kerviel evaded bank controls leading to the loss of 4.9 billion euros at Societe Generale SA.

The Dr. Smith case is particularly disturbing. Smith was a forensic child pathologist with no training in forensics - none was required or available in Canada when he rose to prominence. In frequent testimony as an expert witness, Smith, by his own admission, supported the prosecution in disregard of his obligation to provide balanced, objective testimony. Smith’s poor practices and mistakes, many of which date back to the early ’90s, resulted in wrongful imprisonment and financial and emotional devastation for several Ontario families.

Through the lens of risk management

The Smith (and Kerviel) examples illustrate how we are underestimating risk and using inadequate controls.

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