Recently I participated in a study conducted by FTI Consulting on ‘The Business of Regulation’
Their audit provides deeper insight into:
- the drivers of politically-motivated regulation
- the importance of conduct and compliance in managing that risk, and
- how a new approach to communication and engagement can help companies shape their regulatory environment.
The Business of Regulation has been developed against a background of increasing, and increasingly reactive and punitive, regulation in Australia. This situation is being impelled by higher community expectations about what constitutes good corporate behaviour and the role of business in advancing social and economic aims.
These increased expectations have coincided with a decline in the level of trust in business and other institutions. An increasing body of research shows that trust in civic institutions – from political parties, trade unions, the bureaucracy, business and media – is declining. In 2016, a national survey found an alarming lack of trust by Australians in institutions, with just 23% trusting business groups and trade unions and only 14% trusting political parties.
This is in line with the blog I recently wrote: Today’s key problem is the lack of trust.
The survey did find an overwhelming majority of stakeholders believe that Conduct, Compliance and Communication are the keys to creating a more predictable and less reactionary regulatory environment. In The Business of Regulation, respondents overwhelmingly considered the current level of regulatory threat the result of:
- Poor corporate behaviour – real and perceived
- Industry failing to recognise that its conduct is not meeting political and community expectations
- Businesses outright opposing regulation as a first response rather than proactively seeking concession and compromise to achieve better outcomes
- The lack of genuine transparency around business compliance as a mechanism to mitigate the need for regulation and build trust
- Industry being outmanoeuvred by activists and failing to effectively engage and communication with influencers outside of “the beltway” in Canberra
- Corporate Social Responsibility (CSR) programs failing to meet community expectations of good corporate behaviour
These key issues are inter-related. Where corporate conduct is found wanting, companies must be prepared to remediate, reform and rehabilitate. Corporate positioning, both proactive and reactive, can only be effective if founded on transparent, measurable and meaningful activity. Regulators and government expect compliance to be culturally embedded across an organisation to entrench good conduct.
The study also highlighted areas that will come under increased regulatory scrutiny in coming years. The sectors relevant to our industries include: The Sharing Economy, Cyber Resilience, Energy/Utilities and of course Financial Services.
You can download the report here.