Suitable for industries subject to May lead to uncertainty as to Performancebased changing circumstances (e.g. due to whether actions undertaken satisfy standards technological change) standards set by regulation Greater flexibility in dealing with Generate uncertainty because technical matters circumstances giving rise to Encourages leastcost means of prosecutions may be determined achieving the outcome subjectively Lower compliance costs May require high levels of guidance May encourage continual Increased risk of noncompliance improvement through innovations because standards may not be uniform across the industry Suitable for controlling substantial May be costly to administer Processbased but diverse risks (particularly for small firms) regulation Can be applied to complex areas of There is a risk of regulatory creep different operations subject to where scope of risks covered or technological change standards of controls required May promote innovation in the increase over time development of risk mitigation Potential for overlap with other practices general regulation May encourage greater ownership and accountability for risk mitigation practices Suitable where regulated entities or May only be feasible where there is Targeted activities pose varying risks a detailed understanding of the risk regulatory Enables proportionate targeting of profile and ability to differentiate requirements regulatory requirements (and risk across regulated activities focussing of enforcement activity) on the basis of risk Effective in ensuring that regulatory burden faced by regulated entities is not disproportionate/excessive Regulation can also be viewed along a with explicit government regulation ‘continuum’, representing one end of this continuum, and selfregulation at the other extreme (see Figure 2). Figure 2: Regulation continuum Selfregulation Selfregulation (or voluntary codes of practice or standards) refers to the benchmark actions or procedures, as determined by the particular industry or profession, that are generally acceptable within the peer group and the wider society. The relevant industry is solely responsible for enforcement, although government may also be involved in a limited way for – example, through the provision of advisory information. Selfregulation usually implies that firms in an industry or members of a profession have accepted mutual obligations. These obligations are often described in a code of practice or conduct. Advantages Disadvantages Because of agreement between major industry No legal remedies exist for breaches of the participants and therefore high levels of code or agreement awareness, compliance may be high
Performancebased standards Suitable for industries subject to changing circumstances (e.g. due to technological change) Greater flexibility in dealing with technical matters Encourages leastcost means of achieving the outcome Lower compliance costs May encourage continual improvement through innovations May lead to uncertainty as to whether actions undertaken satisfy standards set by regulation Generate uncertainty because circumstances giving rise to prosecutions may be determined subjectively May require high levels of guidance Increased risk of noncompliance because standards may not be uniform across the industry Processbased regulation Suitable for controlling substantial but diverse risks Can be applied to complex areas of different operations subject to technological change May promote innovation in the development of risk mitigation practices May encourage greater ownership and accountability for risk mitigation practices May be costly to administer (particularly for small firms) There is a risk of regulatory creep where scope of risks covered or standards of controls required increase over time Potential for overlap with other general regulation Targeted regulatory requirements Suitable where regulated entities or activities pose varying risks Enables proportionate targeting of regulatory requirements (and focussing of enforcement activity) on the basis of risk Effective in ensuring that regulatory burden faced by regulated entities is not disproportionate/excessive May only be feasible where there is a detailed understanding of the risk profile and ability to differentiate risk across regulated activities Regulation can also be viewed along a ‘continuum’, with explicit government regulation representing one end of this continuum, and selfregulation at the other extreme (see Figure 2). Figure 2: Regulation continuum Selfregulation Selfregulation (or voluntary codes of practice or standards) refers to the benchmark actions or procedures, as determined by the particular industry or profession, that are generally acceptable within the peer group and the wider society. The relevant industry is solely responsible for enforcement, although government may also be involved in a limited way – for example, through the provision of advisory information. Selfregulation usually implies that firms in an industry or members of a profession have accepted mutual obligations. These obligations are often described in a code of practice or conduct. Advantages Disadvantages Because of agreement between major industry participants and therefore high levels of awareness, compliance may be high No legal remedies exist for breaches of the code or agreement
Toolkit%201%20Purposes%20and%20types%20of%20regulation.docx