How changing regulatory environments affect your business
Photo by Christina Morillo
No matter how well-meaning, capable, and inventive your business is, if it’s not operating legally within the operative framework prescribed to you by your nation-state and financial market, you won’t operate for long. For example, a restaurant kitchen may pump out the best-tasting food within an entire city, but without meeting appropriate hygiene standards, they will quickly be shut down.
These facts are obvious, and unlikely to serve as a light-bulb moment for any business owner. However, it’s important to recognize that frameworks aren’t static. We’ve seen how evolving trading standards can have a big impact on certain companies, such as how Brexit has shifted regulatory and commercial norms for importing and exporting out of the United Kingdom.
Regulatory environments can change for a plethora of reasons. They may shift as a response to political influences as discussed above, they could be shifted by new norms or laws put into place, or they can even be influenced by foreign markets. In this post, we’ll discuss three examples of regulatory environments and standards that may shape your business going forward.
Environmental standards
Sustainability standards such as lowering emissions, tightening restrictions around waste disposal, and improving recycling efforts will become more and more prevalent as industries seek to respond to governmental regulations and shifting consumer norms. This also includes reductions in plastic, paying tariffs on international shipping if not meeting the right material specifications, and hitting essential emissions tests depending on the products being sold. We’ve seen this in the automotive sector which is a clear example of a need for environmental protection, but we can expect these norms to shift as sustainability becomes a prime focus.
Regulatory loopholes tighten
It’s only a matter of time before even the most egregious loopholes tighten with a focus on how new industries or lax financial centers can be targeted if they have enough of an effect. We need only see how FTX, the ex-crypto empire has become a stark example of how unregulated new industries can fall into difficulty based on mismanagement and fraud. Moreover, in this article, Western International Trust Company Limited eloquently lays out how regulatory environments like the Cayman Islands are being inspected and laws are shifting to synchronize them with expected market standards. We’ve also seen the similar measures in Ireland. Your business operates in a financial climate, so it’s essential to keep abreast of these changes.
Your supply chain
It’s essential to note that even if a regulatory change doesn’t affect you directly, it may affect companies you work with or for, and that can influence the supply chain that keeps your business running. Here, you might have to switch suppliers, or even figure out better methods towards manufacturing or replicating your value. For example, a lack of Taiwanese semiconductors due to paused production during Covid – absolutely a regulatory shift, even if temporary – caused many companies like Sony trouble with producing the amount of video game consoles they were hoping to. Keeping abreast of this news and always having contingency plans in place is key.
With this advice, you’re sure to note how changing regulatory environments affect your business.