Time for a Different Approach to Financial Regulations
A few weeks ago, a report by the UK Treasury Committee revealed both the enormous scale of economic crime in the UK (estimated to be worth between tens and hundreds of billions of pounds) and a perceived large-scale resistance by UK accountancy & legal companies in tackling the issue. For example, there are little or no co-ordinated efforts to tackle money laundering between different industry sectors. Estate agents and their financial services arrangements are highlighted in particular by the Committee as being a weak link in Anti-money laundering efforts – for failing to protect the UK from proceeds of corruption being stashed in the property sector.
Damaging and irresponsible? Certainly. Surprising? Not so much.
Indeed many industries have a long and tarnished history of fighting any kind of regulatory efforts. Examples in recent decades including the damaging effects of cigarettes, excessive use of refined sugar in food specifically targeted at children, opposing the use of seatbelts in cars, the negative environmental impact of factories…. the list is bleak and depressingly long.
Even in sectors where responsible products have become mainstream (such as ESG investments, now valued at over $22trillion in managed assets), there’s little or no sign that firms apply such important principles to their own businesses.
Why do organisations fight such changes?
Almost always, because the organisational focus is on minimising immediate costs and maintaining short term revenue – rather than what’s genuinely in the best interests of their customers, employees and communities.
Moreover any change in regulations and standards are usually seen as merely a change for the whole industry - rarely helping to deliver differentiation or immediate growth. So instead, billions are spent on lobbying and other efforts to resist change.
There is a different possibility though.
What if the key question is not “what is the minimum we have to do to comply?” but “how can we embrace this to make our business better?”
What if that becomes the fundamental question, not just for compliance and risk, but for the entire organisation – starting with the leadership team and then embracing and pervading the culture and all levels of the business. Putting customer value and purpose at the heart of the organisational mission.
By default this embraces the core purpose of regulation, i.e. the safety and protection of customers and other stakeholders. At the same time, it provides leading organisations the opportunity to go much further - and be the thought leaders and value creators that the industry so desperately needs.
Certainly, this requires a big effort and challenge to the status quo. But also what an opportunity to have an impact. And in a world of other businesses fighting regulation, this also provides an opportunity for differentiation and growth.
Wouldn’t that be a refreshing and different approach?
It’s 2019, and it’s time to turn business into #wellbusiness!