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  • How To Manage Regulatory Risk

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    A change in laws or regulations made by the government can increase the costs of operating a business, reduce the attractiveness of and / or change the competitive landscape. Regulatory risk can be hard to plan for and quantify. However regulatory risk management has been a field of practice and opportunity.

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    How to Manage Regulatory Risk

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    A change in laws or regulations made by the government can increase the costs of operating a business, reduce the attractiveness of and / or change the competitive landscape. Regulatory risk can be hard to plan for and quantify. However regulatory risk management has been a field of practice and opportunity.

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    146 views3 pages

    How To Manage Regulatory Risk

    Uploaded by

    k3wlm3
    A change in laws or regulations made by the government can increase the costs of operating a business, reduce the attractiveness of and / or change the competitive landscape. Regulatory risk can be hard to plan for and quantify. However regulatory risk management has been a field of practice and opportunity.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOCX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 3

    c  

    
      
    The risk that a change in rules and regulations will materially impact a security, business, sector
    or market. A change in laws or regulations made by the government or a regulatory body can
    increase the costs of operating a business, reduce the attractiveness of and/or change the
    competitive landscape .An Earnst and young report 2008 ranks regulatory risk the highest in the
    10 global risks.

    Regulatory risk can be hard to plan for and quantify. However regulatory risk management has
    been a field of practice and opportunity.

    There are 3 main elements in managing risk

    Ê ÷dentification

    Ê |easurement

    Ê |onitoring

    Ê
      Ê  Ê
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    |any small business are surprised when regulations change in an industry causing
    financial loss but all regulations are publicly announced before these regulations are
    even implemented even practitioners are given an opportunity to participate in the
    making of new rules and regulations.

    For example, the implementation of the U.S. Financial Accounting Standard 133:
    Accounting for Derivative ÷nstruments and Hedging Activities, was announced in June
    1998 but did not take effect until 2000, so those affected could take time to understand
    the necessary changes. When technology could not keep up with the changes the
    standard required, the FASB under the guidance of the Securities and Exchange
    Commission delayed the date.

    Adopt a global view:- Domestic regulations are no longer enough if a business has
    foreign suppliers, clients or merchants . Keep a check on the issues foreign clients,
    customers or merchants have to face and how regulations affect your industry in all
    foreign markets.
    E. g Agricultural regulations affecting pesticides in ÷ndia requiring certain, more
    expensive pesticides can affect markedly net income and cash flow.

    Stay flexible.

    |ake a culture in the organization that allows change to occur easily and smoothly at
    all levels of the organization. |any companies that suffer without a reason are the ones
    who do not want to mould themselves in a new culture.

    For example:-Enron, shortly before the fall, did not change its risk management policies
    to accommodate the new accounting standards. The company decided to bypass the
    standard and opened itself up to high-risk energy and commodity transactions. When
    Enron tried to mitigate the financial hit with creative accounting, disaster ensued.

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