Delivering proportionate and targeted regulation – Ofwat’s risk-based approach
In ‘Delivering sustainable water’, we explained that we face a number of major new challenges that could affect the services we all rely on every day. To continue protecting customers in the face of these challenges we need to ensure we have the capability to be agile in responding to emerging or changing risks, and (where necessary) take swift and decisive action.
That is why, in October 2011, we published a consultation paper ‘Regulatory compliance – a proportionate and transparent approach’, which set out our proposals to adopt a risk-based approach to regulation – a significant change in how we collect and assess data, and in how we manage risk. It also required changes in culture for both us and the companies, and in our relationship with the companies.
Respondents welcomed our proposed approach, so we have not needed to make major changes to our risk-based approach, which is described in our policy document:
We are already using the tools outlined in the policy document. These provide a structured process to assess the costs and benefits of the work we do in the round, informed by our assessment of risks.
Changes to regulatory reporting tools
To support our risk-based approach, we also proposed a number of changes to regulatory reporting tools, which we are now implementing for the 2011-12 reporting year.
- We will no longer collect the June return.
- Companies will instead submit a risk and compliance statement and publish a suite of key indicators.
- Companies will take responsibility for assurance of their data and systems.
We provide further information about the new regulatory reporting tools in:
Timing of submissions
In response to what companies have told us, we are asking companies to submit their risk and compliance statement to the same timetable as their regulatory accounts this year.
We expect companies to publish key indicators at least annually, and by 15 July 2012.
We will review how the new reporting tools are working (including the timing of future regulatory submissions) following this year’s company submissions.