The key to a successful regulatory regime

The key to a successful regulatory regime lies not in the quantity of regulations, but in their quality and execution, says AICD CEO Mark Rigotti. 

Early last month, the AICD hosted a roundtable of senior directors for AFR Boss magazine to air issues that are top of mind in boardrooms. SBS and I-MED Radiology Network chair George Savvides AM FAICD described the current proliferation of regulation as a “risk compliance tsunami”. Even if well-intentioned, each additional piece of regulation has a cumulative effect of adding to this wave. I have mentioned the concern of this accumulation effect regarding regulation before, and it is becoming a lived experience for many directors and the companies they serve.

The key to a successful regulatory regime lies not in the quantity of regulations, but in their quality and execution. The way a regulatory regime is crafted and implemented can greatly influence the strategic response of organisations and boards to issues policymakers are asking them to address.

Heavy-handed regulation, characterised by rigid mandates and little flexibility, can lead organisations to adopt a compliance-first mindset. That can be compounded by overlapping and accumulating regulation. In such environments, the primary goal shifts towards meeting the minimum regulatory requirements, potentially overlooking the broader intent behind these rules. This approach not only stifles innovation and productivity, but also limits the ability of directors to exercise judgement and leverage their unique insights for the benefit of their organisations and stakeholders.

Conversely, a lighter-touch regulatory framework encourages a more thoughtful and holistic response. Such an approach recognises the critical role of directors’ judgement and encourages organisations to delve deeper into the underlying issues regulations aim to address. This not only fosters compliance, it also promotes a culture of proactive risk management and strategic foresight. A flexible regulatory regime can be an opportunity rather than a constraint, inspiring organisations to adopt practices that not only meet, but exceed the baseline requirements.

The concerted cybersecurity effort in Australia exemplifies the benefits of a collaborative and flexible regulatory approach. Facing an evolving and multiplying threat, Australian businesses and government agencies have embraced a Team Australia mentality. This collaborative stance underscores the importance of sharing best practices, insights and intelligence. Such a partnership not only enhances the cyber resilience of individual organisations, but also strengthens Australia’s collective security posture. While many directors are worried about cyber threats, many are also supportive of and grateful for the thoughtful policy and regulatory response that is emerging.