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When regulators introduce new rules, the first question is often who they apply to.
In this case, the answer is water companies. But the more revealing question is what this says about the direction of regulation more broadly.
Because Ofwat’s new fit and proper rule is not really just about board appointments. It reflects a wider regulatory shift towards continuous accountability, structured oversight and evidence-based leadership vetting.
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From one-off checks to ongoing accountability
At first glance, the rule looks fairly simple. From April 2026, water companies must assess whether directors are fit and proper before appointment, and reassess existing directors by April 2027.
But the detail matters.
This is not a one-time check carried out at the point of appointment and then filed away. Organisations will need to assess directors before they join, review them annually, and reassess them again if new concerns arise.
That is a meaningful shift. Fitness and propriety is no longer being treated as a moment in time. It is becoming an ongoing obligation.
| Previous mindset | What Ofwat’s rule points to |
|---|---|
| Check once at appointment | Reassess regularly over time |
| Focus on initial suitability | Focus on ongoing suitability |
| Background screening as a hiring task | Vetting as part of governance and compliance |
| Limited evidence after appointment | Clear audit trail and reporting expectations |
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What “fit and proper” actually covers
Ofwat defines fitness and propriety across three main areas: honesty and integrity, knowledge and experience, and financial soundness.
Some of this will feel familiar. Honesty and integrity may include issues such as criminal convictions, especially for fraud or dishonesty, regulatory enforcement or disciplinary findings, director disqualification, or involvement in serious misconduct. Knowledge and experience looks at whether the individual is genuinely capable of performing the role they hold. Financial soundness may include bankruptcy, insolvency history, or outstanding debts and judgments.
Two things stand out straight away. First, much of this can be assessed through evidence rather than opinion. Second, the structure closely resembles fit and proper frameworks already seen in financial services and other regulated sectors.
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The real requirement is not checks, but systems
The most revealing part of the rule is not the list of criteria. It is the expectation around process.
Organisations must have robust processes, systems and governance in place. They must also be able to evidence assessments, report outcomes to Ofwat and publish annual statements confirming compliance.
That changes the nature of the challenge.
This is not just about running a few checks on senior individuals. It is about building a repeatable, auditable framework for leadership vetting that can stand up to scrutiny.
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What that means in practice
To comply, organisations will need to manage pre-appointment screening, annual re-screening, event-driven reassessments, ongoing monitoring triggers, and clear audit trails for reporting.
For many employers, that is likely to expose an operational gap. Most screening processes today are still fragmented, manual and designed primarily for hiring rather than governance. They may work reasonably well when bringing someone into the business, but they are often not built for structured review over time.
That is the real challenge behind the rule. The criteria themselves are manageable. The harder part is creating a process that can be applied consistently and revisited when required.
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A familiar pattern in a new sector
While this may be new for the water industry, the broader direction is not.
We have already seen similar expectations take shape in financial services through SM&CR and fit and proper testing, as well as in other regulated environments where integrity, accountability and ongoing suitability are central concerns.
Ofwat is not creating an entirely new model. It is reinforcing one that is already emerging elsewhere. Regulators increasingly expect organisations to do more than show that someone was suitable at the point they were appointed. They expect firms to demonstrate that those in positions of power remain suitable over time.
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What this means for screening
The implication is clear. Screening is shifting away from being a one-off pre-employment step and towards lifecycle monitoring. It is moving from an HR-led task to a broader compliance and governance responsibility. And it is moving away from tick-box checking towards something closer to infrastructure.
That means organisations will increasingly need systems that can verify identity reliably, assess integrity and risk factors consistently, support ongoing rechecks and monitoring, and evidence decisions clearly if a regulator asks questions later.
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The bigger shift: trust, but verify continuously
At its core, this rule reflects a simple change in regulatory thinking.
Point-in-time assurance is no longer enough. Regulators want visibility, consistency and accountability, and they want those things backed by process and evidence rather than assumption.
That is why this matters beyond the water sector. Even where the rules differ, the principle is becoming more common across regulated industries.
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Final thought
Ofwat’s fit and proper rule may be sector-specific, but the shift behind it is much broader.
It is part of a move towards continuous, evidence-based trust in leadership. For organisations in regulated sectors, the question is no longer just whether someone was checked once.
It is whether the organisation can show, at any point, that the person is still fit to lead.
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