Why risk regulation is the new mantra for business organisation?

Updated on: Monday, February 06, 2012

The reason why risk regulation is becoming increasingly important in business organisations is because the quest for regulation is expected to grow in the near future. As an illustration, one may think of how risks related to food, drugs, infectious diseases, climate change and financial crises have steadily been penetrating all conditions of life in recent times.
One of the most immediate consequences of a world risk society is that the decisions, acts and omissions of 'few' entail risks for 'many.' A major source of these risks can be traced to the growing complexity and connectivity brought about by a global economy.

A contemporary world has to be prepared to encounter challenges of emerging risks. An interesting debate today is on whether societies are currently facing 'more' or 'less' risks than in the past. Our societies have never been so wealthy, healthy and lived as long as today. Yet the perception of risk has increased .

The success of governments in regulating risks depends on how they approach this debate. Although regulation can solve social problems, it can impose its own problems, including compliance costs, inhibition of innovation, ancillary risks and rent-seeking .
Similar to rising greenhouse gases and environmental degradation , lifestyle risks largely derive from another detrimental effect of individual and corporate consumption. As illustrated by the ongoing obesity pandemic, these new risks are increasingly calling for the attention of policymakers across the globe.

Until now, government's stance to lifestyle risks has relied heavily on self-regulation . However , the economic perspective seems to emerge, showing that market failure might provide a solid argument for government intervention with respect to the prevention of obesity. The same argument may apply to other government intervention in lifestyle choices, which bring about externalities.
This seems to be the new challenge of governments in both the industrialised as well as the less developed world.

Times of India

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