What you don’t know can hurt you: Beware invisible regulatory risk

What you don’t know can hurt you: Beware invisible regulatory risk | Insurance Business America

What you don’t know can hurt you: Beware invisible regulatory risk
The risks involved in doing business in unfriendly regulatory environments go way beyond the minefield of paperwork and regulation. Imagine you have operations in a country where the regulatory environment isn’t the friendliest, but you’re confident that your compliance function is managing it effectively. Until one day there’s a knock at your door and you find out you’ve been slammed for not complying with a new regulation that you were never even made aware of.

Transparency is a crucial consideration when assessing the regulatory risk of doing business in any given country. Your risk of noncompliance could be exacerbated in countries with poor regulatory governance. The World Bank’s Regulatory Governance project put together a set of indicators to rate countries’ regulatory governance in the following areas:
  • Publication of proposed regulations
  • Consultation around their content
  • Use of regulatory impact assessments
The composite scores (on a scale of 0 to 6) reflect how the government interacts with the public and the business community. Countries with higher scores allow for higher levels of engagement surrounding the measures, are well-informed of changes, and are free to challenge them.

Income a key indicator
High-income countries consistently report higher levels of regulatory governance

Expect your regulatory risk to be high if you’re doing business in one of the 42 countries that scored 0. Half of them are in Sub-Saharan Africa, where only Kenya received high marks. The trends largely fall in line with income level. Brazil, Macedonia, Mexico, and Serbia were the only upper middle-income countries to receive a 6, and Costa Rica was the sole Latin American or Caribbean country to break 5. Otherwise, high-income OECD countries have a big lead over all other regions.

Notably absent:
  • Germany didn’t make the top 20, instead tying Ukraine with a score of 5.2.
  • None of the Scandinavian countries ranked higher than 26
The scorecard:
  • Hong Kong (6) vs Singapore (4)
  • Japan (4) vs South Korea (6)
  • Brazil (4.2) vs India (3.4)

Related stories:
Water risk: Is your basin bad for business?
Employees responsible for 66% of cyber breaches