Four Reasons We Need to Talk about Regulation
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Regulation has become immensely complex and is impacting organizations’ opportunities to grow and innovate, according to the Global Regulation Survey, an IFAC survey of 313 accounting, finance, and business professionals on six continents.
As our CEO, Fayez Choudhury, put it, “Good regulation is essential to the fairness, efficiency, and effectiveness of economies, and making it work as well as it can is a never-ending mission. Growth remains a concern globally, and these results should be a wakeup call for us to examine the impact of regulation, including the regulation and reform introduced in response to the global financial crisis.
Survey respondents had a lot to say about regulation, business, growth, and opportunity.
1. Growth and innovation
Approximately two-thirds of respondents said regulation is having a significant or very significant impact on their organizations’ opportunities to grow and innovate.
- “Introducing new regulations by civil servants who do not understand the operations and issues of day to day business operations are of little value and demoralizing.”
- “[Regulation] has its place, no doubt, but it must be practical and take into account the relative “risk’ profile of organizations.”
- “Regulation will ultimately kill first world entrepreneurship culture. There needs to be less regulation but more principles based responsibility on business and business leaders.”
- “The regulatory burden seems to have been materially increased with no consideration of the cost to the real economy of industry and commerce, hence to society.”
2. Complexity and risk
Approximately four in five respondents reported that the regulation impacting their organizations is complex or very complex.
- “The problem is that legislatures are micromanaging government, not-for-profit, and business.”
- “We would regularly feel that regulations are missing key areas of risk and focusing on areas which are over regulated.”
- “As the impact of regulation grows and grows, the more harmful effects of ‘regulation without accountability’ become more and more noticeable, more and more obvious. It’s time that changed.”
3. Consistency and collaboration
Almost half of respondents reported that collaboration between regulators is ineffective, and a third said they found the approach to regulation inconsistent or very inconsistent across different regions.
- “There are instances where local jurisdictions have a set of regulations prescribing differently to global regulations.”
- “We need to review the regulatory agenda to have a more consistent and aligned framework. Currently, the approach is often piecemeal in nature and contradictory at times.”
- “More effective communication to ensure alternative voices are heard.”
4. Looking ahead
Four in five respondents expect the impact of regulation will continue to become more or much more significant in the next five years.
- “Our profession is now highly over-regulated and politicians still seem not satisfied—I am afraid the profession will face much more regulation in the near future.”
- “There appears to be more duplication in regulation, with standards setters failing to align policies and processes, despite an overall commitment to reducing red tape by government.”
Again, our CEO said it best: “There are urgent questions surrounding regulation’s impact on growth and innovation, as well as how its complexity is affecting the agility needed to face emerging risks and, potentially, the next financial crisis. IFAC aims to collaborate with policy makers, regulators, and the organizations impacted to examine these questions and probe the impacts as a major priority.”
IFAC plans to publish an issues paper later this year elaborating on principles of good regulation and the current state of post-crisis reforms, to be discussed and debated at high-level roundtables.