A significant amount of risk and governance regulation is being rolled out across the UK and Europe. Driven by recent events in the banking and financial sectors as well as other high profile disasters, regulators are becoming ever more assertive.
Light touch regulation was the driving force behind much regulation in the early 2000’s. This will change. Corporate governance and risk regulation is becoming highly visible and political. Politicians and other leaders will have to be seen to take regulation very seriously as well as actually doing so.
Regulatory risk is the risk that changes regulations and laws will materially impact an organisation, sector or market. This may increase the costs of doing business, reduce the competitive advantage of a business or expose it to fines, reparations or reputational damage. Typical risks include:
The cost of regulation is rising, which may lead to some companies being disadvantaged over others. For example, regulatory compliance has a fixed cost element and may favour larger players in a sector. Industry consolidation is increased by this process.
Regulatory risks increase as firms expand overseas. Each country has different regulatory regimes, increasing complexity and costs.
Regulators may become more assertive. Due to the many recent high profile disasters, regulators may become more intrusive, authoritarian and and less collaborative.
Onerous regulation may be a deterrent to investment in new businesses or projects and impact the bottom line.
Increasing regulation may impact products and services already in place and therefore may cost significant amount to rectify.