It is no easy matter cutting through the regulatory red tape that ties many of our institutions, but Richard Hobbs, director, regulatory consulting at Lansons Communications, explains why it is vital for PROs to appreciate how regulators, such as the FSA, operate so that they can safeguard client reputations.

“Some might wonder at the logic of a communications agency like Lansons branching out into regulatory consultancy. It is, though, a sign of the times. Many large sectors of the economy are heavily regulated. The rising tide of consumerism ensures that the burden of regulation will only head one way, even if the occasional deregulatory initiative reduces progress. For PROs, regulation poses considerable risk to the very clients’ reputations they are working so hard to enhance or defend.

“Retail financial services has been heavily regulated since 1988 but the banking crisis of 2007/08 has taken the mistrust of financial institutions by both the general and special publics to a new level. And it's not just banking and bankers are in the cross wires. All retail financial services have experienced collateral damage whether in the eyes of their customers or through the costs of greater regulatory scrutiny.

“That regulatory scrutiny is not just the burden of having to supply more information to the regulator and jump through more hoops, such as interviewing senior board appointees to establish their suitability: it is the so-called credible deterrence regime of Financial Services Authority (FSA) enforcement. In a calculated way, this strikes directly at the reputation of regulated firms. Whether or not this is an effective strategy on the FSA’s part is a moot point. Its punishments are not really draconian enough to change practices which might be viewed as the bureaucratic inertia common in large organisations. In the end, pretty much every market participant is punished, the perception of which is much the same as none of them having been. Nevertheless, as an individual enforcement event unfolds, clients are particularly anxious to limit the damage. So understanding how the FSA thinks and operates should be a natural part of the PRO’s toolkit.

“More generally, many regulated firms rightly conclude that prevention is better than cure, irrespective of the sad reality that fines and censures do more to give a whole industry and activities like saving a bad name. In consequence, PR and regulatory consulting go hand in glove as closely connected service offerings.

“However, the good commercial sense of this is one thing, the wider implications of reputation damage affect not only a whole industry, but the good it can do for society, (such as facilitating retirement savings and providing families with protection when tragedy strikes). This is a public affairs issue. Egregious behaviour by financial institutions can cause one type of consumer detriment (for example, the mis-selling rip-off), but regulators can cause a different type of consumer detriment, by contributing to so-called pensions and protection gaps by alienating consumers from the very idea. This will happen where individual brands are insufficiently strong for the opprobrium to stick uniquely to them.

This is a lesson the regulators seem reluctant to learn. In the meantime, there is an education task on hand in the public affairs arena about what regulatory strategies will work and which are failing. So public affairs and regulatory consulting have a natural affinity.

“In the medium term we can expect to see more strategies based on providing clients with a service that more closely fits what they are actually experiencing rather than the specialised offerings of traditional PR and public affairs.”