It is widely believed that legislators are driven by the need to attract votes and there is little which loses votersâ affection faster than a government which seems not to be doing its job effectively. These days, government often chooses to delegate much of its dirty work to regulators - transport and financial services spring to mind - but the government takes the blame whatever happens. Unfortunately when something goes wrong, the loudest call is usually for more legislation.
For example, recent food safety concerns have resulted in much hand-waving and media coverage. Not to mention many a jaundiced gaze at the list of ingredients in humble sauce bottles. In the food sector, due to increased public awareness, increased activity by pressure groups and the growing ability of technology to track ingredients, legislation mandates a huge number of actions on the industry.
The food industry has reacted with the deployment of technology such as RFID (Radio Frequency IDentification) to track food elements from their source to the supermarket customerâs basket. It has to be accepted though that the potential for cost reduction as well as the wish to please consumers and food safety pressure groups are behind this move. Happily there is at least one cost effective solution newly available in Europe and the Middle East. This is Qudos, a complete compliance solution designed and widely used in Australia and now distributed here by Avanquest U.K. Limited. It is a modular solution which includes excellent support for all such compliance concerns. Qudos is flexible and can either be supplied as a skeletal framework or, with consultancy, as a turn key response to compliance in the round.
Similarly, when money goes missing from companies - as it so spectacularly has in a few isolated but highly publicised cases such as Enron - the call once more is for new legislation. Yet a survey of the banking industry published recently suggests that "the remorseless rise in regulation has become the greatest risk facing the banking sector" bears examination. Conducted by the CSFI, the independent City of London think tank, and sponsored by PricewaterhouseCoopers, the internationally-sourced research finds that "regulatory overkill saps bank resources, reduces risk diversification and creates a false sense of security." Witness the Basel ll Accord, not to mention Sarbanes-Oxley where appropriate to ownership â and the particularly virulent Clause 404. Qudos includes a powerful and fully-integrated modular system which allows users to set checks, balances, and operational risk assessments.
Organisations must understand that there are two quite contradictory forces at work. On the one hand, governments need to legislate or introduce codes to regulate corporate practice for various reasons, some political, others more pragmatic in nature. On the other hand, while enterprises would by and large prefer to be left to their own devices, in some areas, it's clearly in everyone's interest that codes are in place to prevent rogue operators staining â in the case of certain food additives quite literally - the reputation of an entire sector. Food safety is one such case, and the financial industry is sadly another.
Within the financial sector, the 'Banana Skins' survey referred to above follows a report showing that the big four accounting firms' fees more than doubled in one case as a result of the additional work relating to the USAâs Sarbanes-Oxley Act's (SOXA) imperatives. A recent survey of 43 companies, almost all in the Fortune 500, showed that they spent between $5 million and $8 million on compliance measures related to SOXA. Britainâs biggest company B.P. estimates that it will spend U.S.$ 1.25 in the USA alone on compliance.
Therefore, the banking industry's concerns about the cost of regulation, much of which is sector-specific in addition to more general codes such as SOXA, carry a great deal of gravitas. And much of today's legislation consists of what some might argue is knee-jerk reactions following high-profile events such as Enron, 9/11, the bursting of the technology balloon, and the rise in international tensions, money laundering and terrorism.
That having been said, experience suggests that laws introduced on the crest of a crisis are frequently ill-thought out â or through, and result in as many if not more problems than they are intended to solve. In Washington, the legislature has acknowledged that SOXA in particular places a heavy burden on companies and has made the right noises about moving towards a slightly more relaxed regimen, most especially for overseas companies. A message repeated by their securities head on a recent visit to London. This in the face of European organisations looking to lose their once highly prized USA stock quotations.
Within the UK, the Prevention of Terrorism Act, brought in following atrocities in the 1970s, has since been acknowledged as a desperately flawed piece of legislation. And yet the UK government is now drafting new laws introducing both identity cards, and increased powers of surveillance, house arrest and imprisonment without trial on the shirt tails of the threat of international terrorism. Many oppose such knee-jerk legislation, even within Parliament, arguing that it poses an even greater threat to the democracy it purports to protect.
Finance is probably recognised as the most heavily regulated sector, therefore it is hardly surprising that itâs more vociferous champions complain from time to time about the weight of such compliance imperatives. In fairness, they seem to have a point at the moment.
The greatest need is for governments to reflect on the simple truth that regulation by legislation is not a bottomless bucket, and that each new law adds cost and complexity, increases the likelihood of mistakes, and ultimately places upward pressure on prices to consumers - which may not be popular with the electorate, and can damage both the economy and the body politick. It is not clear that this side of the equation is being properly weighted in government debates surrounding recent legislation. But, at a time when large banks are reporting record profits, government needs to know that the electorate is also largely the consumer â and the consumer will not be content when the eventual cost of such compliance is rolled out to them. Happily, the launch of Qudos means that, for organisations willing to consider another option, there is now a truly cost effective and complete compliance solution at a price which their customers will be grateful for. That in turn will make for a more compliant electorate.