Unleashing Our Economic Potential
A Primer on the Transatlantic Economic Council
Commercially, the world is more connected now than ever before. However, although the basic conditions for market access have been secured through trade agreements, a range of other obstacles make competing in multiple markets around the world a significant challenge. Primary among these challenges are diverse regulations that can be unique to every country in which a company tries to operate. Big businesses struggle to cope with multiple complex, burdensome, overlapping, and, at times, conflicting regulations. However, regulations are an especially critical problem for small or medium enterprises, as the cost of regulatory compliance can be so great that it keeps them from expanding overseas.
Ernst & Young’s 2008 Strategic Business Risk - the Top 10 Risks for Business report confirms that regulation and compliance is the number-one risk facing global businesses. Below is an excerpt from the report outlining these pressures.
The compliance challenges are particularly strong in highly regulated industries such as banking, insurance, pharma, and biotech, where the regulatory burden is increasing fast, and where firms are feeling pressure to demonstrate a return on investment for long-term risk management initiatives. One banking panelist noted, “Banks are experiencing significant fatigue around managing the myriad of often redundant compliance and regulatory reporting activities, the cost of which is massive and burdensome.” Similarly, a biotech analyst wrote, “A mounting regulatory compliance burden in areas such as privacy, post-marketing monitoring of drug safety and sales force compliance… poses a management and internal controls challenge to biotech companies.”
The report goes on to make the case for increased cooperation between regulators around the world.
As companies become more and more global, compliance becomes a greater challenge, forcing them to manage diverse regulations in different markets. A specialist in business strategy noted, “Managing regulations in 10 jurisdictions is one thing. What happens when a firm has significant markets in 30–40 countries at varying levels of development and with very different regulatory traditions? This is not to say that global regulatory [diversity] is necessarily increasing; but rather, that corporate exposure to existing [diversity] is increasing."
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