What are the Challenges of Regulations?
Regulation is a method used by the government to control certain actions that affect the public and their welfare. It can be used to reduce risks and improve the well-being of its citizens. Keep on reading to find the challenges of regulations and much more about them!
The general principle is that companies may take advantage of consumers and commit fraud without regulations. Regulation can be put in place in several different ways; it can be set through federal laws or state/local laws, or it could just be something that an organization decides to do on its own in order to better gain approval from the public eye.
While public policymakers are increasingly aware of the need for regulations to promote innovation, most have not yet begun to think about the specific challenges that innovation raises for regulation. This paper is intended as a first step in that process – an effort to help regulators and policymakers begin to think about how regulation impacts innovation and what they can do about it.
How regulations could impact the organization
The United States of America is very competitive with other countries. The more competitive the market, the harder it will become for companies to compete. It is what made so many companies go abroad to get ahead of their competition; however, this has become a problem because if the company goes abroad, they are not able to be regulated within the country's specific laws and customs if regulations should change, due to something such as internet privacy laws or intellectual property laws that could negatively impact an organization.
The paper will be divided into three parts to analyze how regulations could impact the organization. The first will focus on regulating a company and how that would help or hurt the company. The second part of the paper will focus on how regulations are set up and what a regulator expects. Finally, the last section of this paper will focus on specific regulatory issues facing companies, specifically Google's privacy policy change, and whether or not it should be changed.
Regulations are extremely important for an organization.
Having regulations in place is extremely important for an organization because it can help to reduce the risk involved with the company. It will allow the business to spend more time on other matters that they may need to worry about instead of having a problem that they caused themselves. Regulations can also help protect against different hazards by setting standards for services and products.
The importance of having regulations set in place is that the business will not be at a disadvantage compared to other businesses. Having equality amongst all businesses allows each business to work at its best and utilize its strengths to gain an advantage against its competition. The regulation can also stop businesses from taking advantage of their consumers, which benefits the companies. When this is not followed, it can lead to commercial competition and industrial health problems that could severely impact the company.
The Need to Innovate
Regulations must take into account changing circumstances but need not be entirely static. On the contrary, regulations should probably be more responsive to conditions than the "metronome of government" that James Buchanan popularized in the 1960s. Most regulations will probably need to be somewhat flexible, and this is all the more so in light of changing conditions.
Such flexibility can be accomplished in several ways. First, regulators may consider new ways to adapt regulations based on experience with past policy changes rather than rigidly following guidelines. For example, in the 1990s, there was much debate about an initial draft of the Information Quality Act (IQA), a law designed to ensure that information provided to consumers is truthful, objective, and of reasonable quality.
What are the Challenges of Regulations?
These days, it's a pretty common sentiment that regulations only get in the way. But what people often forget is that business and society run on regulations. Businesses don't have to worry about constantly running into ambiguities and errors in their codes when they're strict with themselves because they know all their rules inside and out. Suddenly mistakes are less likely, lawsuits are less frequent, and everyone has the peace of mind of knowing the ground rules.
That's part of why so many people decry regulations as a hindrance to businesses. They're looking at it from the perspective of the business and not from a holistic approach that considers both sides' needs. Businesses should be subject to regulations because those regulations can help them grow and prosper, not weigh them down and strangle them until they're forced to give up.
Fraud:
People are always going to try and push the boundaries when dealing with money, paying their taxes, etc. Regulations help address situations where that's working against society. They also help instill confidence in businesses.
Focus:
Just as every country has a constitution outlining what will happen when and in what order, sometimes businesses need a set of rules to focus them; the more regulations exist, the clearer what needs doing, where, and how. That way, everyone gives their best efforts because they're not worried about missing something big or small.
Standardization:
Every business transaction has its own set of issues from one business to another. Sometimes businesses will have to respond to a policy or procedure in a specific way because of the unique circumstances of that business. But if everybody does things the same, it's easier for the staff and customers.
Transparency:
A prime example of this is the health care industry and the relationship between doctors, patients, and insurance companies. Sometimes, one company might be doing something that they know isn't the best thing for their customers, but they have to do it anyway and keep quiet because it's standard procedure. When everybody knows what one business is doing, it makes it easier for everyone else to decide which practices they want to support or avoid.
Safety:
Even more than the other areas, regulations in the workplace are important because they can save lives. Businesses' minimum standards, like having a safe working environment, are necessary to protect everyone's health and safety. Not only that, but they can also be beneficial in preventing business-related injuries or illnesses.
Stability:
Regulations exist to prevent accidents from creating even bigger problems - it's possible that regulations could stop an accident altogether if they're strict enough with dangerous materials or practices. Safety regulations can make the workplace safer, protect employees from the harmful effects of chemicals, and help them avoid conditions that will make them ill.
Quicker Progress:
Regulations are put in place when a particular practice happens more than it should due to a lack of standards. Regulations can be set up as penalties or policies where every person who knows about the problem is made aware of what's happening and then is given time to inform others so they can have it removed or corrected.
Stability:
Sometimes the regulations come first, and the standards are decided upon later. It doesn't mean they're not important - it means that the government is setting a general guideline that everybody can base their specific practices on, but not worrying about every little detail. Still, when it comes to legal matters, most businesses are dealing with a common standard because of the law.
Ten key regulatory challenges
The growing complexity of the U.S. regulatory landscape has been a hot topic of discussion for the last few years. In order to keep up, regulators must continually adapt and change their approach to meet this changing landscape. Industry stakeholders have also taken note and are finding new ways to work with regulators in an effort to align regulations with their business models. As these changes occur, it is important that companies recognize what might be happening with regulatory enforcement across different sectors. This study highlights ten key challenges that will likely shape this coming year in regulation.
1. Online Privacy
The enforcement landscape for online privacy issues will continue to be active in 2013 and beyond. Back in March 2009, the FTC Act Section 5 enforcement powers were extended to include the emerging area of online privacy. The FTC's involvement in this area began with a complaint against Google in 2010 over how it used cookies on its website. Since then, it has continued its focus by bringing charges against other companies such as Facebook and Twitter relating to how they use cookies. In addition to these ongoing cases, other regulatory and non-regulatory bodies in the U.S. have also become involved in this space. For example, the White House has proposed a Consumer Privacy Bill of Rights that would provide consumers with certain protections on how their personal information is collected and used by companies.
2. Data Breaches
Although there are no federal laws requiring businesses to report data breaches, state laws quickly give way in this area. For example, a recent Illinois state statutory amendment expanded the state's data breach notification laws by including any unencrypted personal information. This change will likely cause companies that store data on their networks to rethink how it is stored and handled.
3. Mobile Payments
The Payment Card Industry Data Security Standard (PCI DSS) has been a continued confusion point for merchants looking to implement more mobile payment capabilities on their sites. There have been discussions about a possible update on the PCI DSS draft version 3.1 to include more mobile payment requirements. In addition to the PCI DSS, other regulatory bodies are establishing standards for mobile payments. The U.S. Security and Exchange Commission (SEC) has proposed a new rule for public companies that would require their audit committees to address the risk of cyber-attacks in its risk assessment.
4. Bankruptcy Filing
Although no specific federal law addresses bankruptcy filings, a recent court decision has created interest among regulators and banks. The first was the decision by a judge in New Jersey regarding a massive $11 billion bank failure of IndyMac Bank. The second decision was a case where a judge in Delaware said that the bankruptcy filing of Lehman Brothers was too remote to have affected most creditors of the failed firm.
5. Financial Regulation
In fact, the SEC has entered into multiple settlements with companies such as Goldman Sachs, JP Morgan Chase, and Citigroup for violations relating to their disclosure practices. Additionally, the Treasury Department's Financial Stability Oversight Council (FSOC) issued an intrusion directive in response to large financial institution failures. The FSOC directive addressed key elements of a comprehensive plan to prevent further failures.
6. Sovereign Debt
Although there are no specific federal laws or regulations addressing sovereign debt, the U.S. has always been reactive when it comes to its position on central bank financing of national governments. In 2012, the United States was supportive of European efforts to provide financial aid to struggling countries. This support is being put into play in the form of a multi-billion-dollar bailout package for Greece that includes debt relief and privatization initiatives. This type of support will continue this year, with the U.S. looking at ways to provide assistance to other countries in need.
7. State Aid
The SEC and the Federal Reserve have become more involved in state aid issues by placing limits on the interests they will provide to subordinated debt of their banks. In addition, regulatory agencies are taking an active role in state aid issues by participating in joint task forces with state and federal regulators.
8. Bank Mergers
However, 2013 will prove to be another year where this area is closely watched as more and more mergers occur. The biggest deal of 2012 was the acquisition of Bank of America Corporation by the U.S. government for $45 billion in what has been described as the largest bank bailout ever. The second trend in mergers is one where larger banks are acquiring smaller banks to help alleviate any concerns from regulatory agencies that they are too big to fail.
9. Market Manipulation
In March 2012, the U.S. Attorney General announced a criminal investigation into possible market manipulation on Wall Street. This announcement followed research done by the SEC and CFTC into market manipulation by certain large banks. The investigation into this aspect of bank regulation will continue in 2013, with meetings and discussions about potential action between federal prosecutors and regulators.
10. Credit Default Swaps
In addition to the SEC issuing a formal warning about the use of CDS issued by investment banks, several high-profile lawsuits have been brought against banks for alleged misuse of CDS. Furthermore, in this area of regulation, the rules around regulatory agency powers are being called into question. In fact, Federal financial regulators are considering whether they should have oversight jurisdiction over CDS given that they do not back the underlying security.
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Written and Published By The Strategic Advisor Board Team
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