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Executive reporting obligations under the Chain of Responsibility

04 June 2019

#Transport, Shipping & Logistics

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Executive reporting obligations under the Chain of Responsibility

Under the amendments made to the Heavy Vehicle National Law (HVNL) in October last year, you must have certain business practices in place to ensure the safety of your transport activities. In this article we focus on performance reporting for executives.

With ongoing changes to the HVNL framework forecast and seven more National Transport Commission (NTC) issues papers to be released in the coming months, it is important to stay abreast of developments. Your business must continue to establish, implement and document business practices to ensure Chain of Responsibility (CoR) compliance. The most recent amendments to the HVNL requires that all parties in the Chain take all reasonably practicable steps to ensure the safety of their ‘transport activities’.

A recap on the Big 5 mandatory business practices

We have previously outlined the ‘Big 5’ required business practices to get you acquainted with the legislative changes. In this article, we will address number 5: Compliance performance reporting.

The ‘Big 5’ business practices include:
1. Policies and working procedures.
2. Induction and ongoing education processes.
3. Assurance contract terms in every supply chain contract.
4. Assurance systems.
5. Performance reporting for executives.

Under the HVNL, executives (directors and any person concerned in the management of a corporation, partners in a partnership and managers of an unincorporated association) have a proactive and positive duty to exercise due diligence to ensure their business complies with all its CoR obligations.

How to meet your proactive and positive duty

The amendments to the HVNL expressly set out specific requirements for executive compliance. Mandatory positive executive due diligence includes taking reasonable steps to:

  • obtain and keep up-to-date knowledge about how the business is ensuring its transport activities are safe
  • understand how and in what capacities the business engages in transport activities
  • understand the hazards and risks, including risks to the public associated with the business’s engagement in transport activities
  • ensure the business has and uses appropriate resources to eliminate or minimise those hazards and risks
  • ensure the business has and implements processes:
    • to eliminate or minimise those hazards and risks
    • for receiving and considering information about those risks
    • for responding to information about those hazards and risks
    • for complying with the business’s duty to ensure, so far as is reasonable practicable, the safety of its transport activities, and ensure it does not cause or encourage contravention of the HVNL.
  • check that the resources and processes referred to above are in fact being provided, used and implemented by the business, its management and staff, and that they are effective in eliminating or minimising identified hazards and risks.

It is not feasible to expect executives to personally go out and obtain all of that knowledge and perform each of those compliance checks. So, for executives to be able to discharge their duty, they will largely depend on receiving information from others within their business. Without receiving such information, executives will not be able to discharge their duties.

Tips on CoR compliance reporting

Once your business has designed and implemented its CoR compliance management framework, you must measure and monitor compliance to ensure that the systems implemented are successfully ensuring safety. In order for executives to discharge their duty at this point, they need to receive compliance performance reporting.

Executives need the right information and only the right information. Anecdotal evidence suggests that, where there is any doubt about relevance, information is included and submitted to the executive. As a result, the executive ends up with pages of figures and tables, which they typically cannot properly assess in context, either in a reasonable time or at all.

CoR is directed at safety, not business performance, and CoR compliance reporting must reflect this. Furthermore, it must be targeted to provide only meaningful information, so that its details are not lost in the crowd.

Anecdotal evidence suggests that the majority of executive reporting comprises financial reporting measures. These are unlikely to give any insight into CoR compliance and performance on a day-to-day basis. At best, financial information might reveal the totality of fines or penalties imposed after the event. CoR compliance reporting should primarily be directed to occurrences and incidents, not dollars.

CoR compliance reporting limited to information on breaches and remedial action only goes halfway to discharging this duty. Ideally, CoR compliance reporting should also be used to forecast non-compliance trends, so that compliance measures or further information, supervision and training can be put in place to prevent breaches from occurring.

What are the most important things to report?

For each CoR compliance component, the most meaningful report is the number and severity of breaches that have occurred. Breaches slipping through the cracks are the things that most need to be addressed. These incidents suggest defective compliance management, training or implementation.

After that, it is also important to know the number of incidents that are still arising but are, thankfully, being picked up before a truck hits the road - that is, the number of CoR near-misses. These incidents suggest either that system and process design is not eliminating incidents at the source, or that training on how to conduct processes is not effective, but that at least final checks and balances are detecting and remedying problems.

Finally, some general CoR compliance system ‘health check’ information is useful. For example, confirming that all supply chain contracts have mandatory CoR compliance clauses included and that all CoR-facing employees and contractors have been properly inducted and received any scheduled refresher training.

However, reporting those figures in a vacuum is of little benefit. The executive needs context. For example, how do the compliance reporting figures this period compare with those of the last period and/or the 12-month average?

Common mistakes in executive reporting

Executive reporting statistics are not merely points of interest. Depending on what the figures show, the executive will be called on to actually do something (or ensure that something is done) to address the figures.

The biggest pitfall is treating the compliance performance figures as ‘for noting’. They are not ‘for noting’, they are ‘for assessment and action’. Where the performance figures indicate a problem, the executive must either develop and implement a response plan, or ensure that their compliance team is doing so.

Executive reporting and CoR compliance

Executive reporting is one of the essential five pillars of CoR compliance. Without it, executives won’t be doing their job or discharging their duties. Thankfully, some relatively straightforward reporting metrics should easily be able to be put together to ensure that the executive is armed with the necessary information to keep the business and themselves out of trouble.

Author: Nathan Cecil

* A version of this article was originally published in CoR Adviser. This article is © 2019 Portner Press Pty Ltd and has been reproduced with permission of Portner Press.

Nathan Cecil, Partner
T: +61 2 8083 0429

Geoff Farnsworth, Partner
T: +61 2 8083 0416

Harry Kingsley, Partner
T: +61 3 9321 9888

Suzy Cairney, Partner
T: +61 7 3135 0684

The information in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this publication is accurate at the date it is received or that it will continue to be accurate in the future. We are not responsible for the information of any source to which a link is provided or reference is made and exclude all liability in connection with use of these sources.

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