Posted: July 01, 2011
Strategy for a shifting planet
Businesses need to prepare for today's regulatory environment
Today's businesses face a unique regulatory environment. Corporate scandals, new technologies, increased globalization and worldwide economic concerns have led to both new and shifting regulatory regimes.
Companies that take the time to understand and prepare for these changes will position themselves for success in this new environment.
Major regulatory reform efforts are under way for both the state and federal governments. At the federal level, significant change will be spurred by President Obama's Executive Order 13563, "Improving Regulation and Regulatory Review." The Administration sees the order "as a kind of constitution for the 21st century regulatory state." The order made fundamental changes to how federal regulations are reported and reviewed.
Federal agencies had until May 18 to propose a preliminary plan to conform to the order and until Aug. 8 to finalize their plans. Moreover, other new federal initiatives such as the Consumer Financial Protection Bureau (opening for business on July 21) are likely to lead to new rules and regulations for a host of industries.
In Colorado, Gov. Hickenlooper signed a pair of executive orders on his first day in office directing changes in Colorado's regulatory scheme. The scope and impact of those changes likely will be debated in the 2012 legislative session. Moreover, in the 2013 session, the General Assembly will undertake a comprehensive review of some of the state's most regulated industries including banks, credit unions and architects.
Regulatory trends and structures are an undeniable part of the business landscape. A failure to consider and plan for regulatory issues on an ongoing basis is a failure to optimize your business opportunities. Every business needs to have a regulatory strategy that is a part of its overall business planning.
A regulatory strategy should include certain key components: monitoring, compliance, advocacy and forecasting.
Monitoring: Smart companies keep track of trends that may impact their bottom line. Regulatory changes should be one of the trends to track. One simple way to do that at the state level is to sign up for alerts from the Department of Regulatory Agencies' Office of Policy, Research and Regulatory Reform ("OPR"). OPR sends subscribers regular e-mail notices apprising readers of the consideration of any regulation and whether the subject agency has concluded a cost-benefit analysis of the proposed rule.
When you sign up for an OPR alert you can tailor the notices you receive based upon subject matter (e.g., securities, corporations or insurance). The creation of basic processes to stay current on proceedings affecting your business may serve to protect your long-term interests and even the very foundation of your market.
Compliance: Various industries have well-established and significant compliance programs. But every company that is subject to regulatory oversight should maintain some kind of compliance program. At a minimum, someone in your organization should be responsible for setting up compliance policies and conducting a regular review of your company's adherence to applicable rules. The rigor of the program should be tied to regulatory requirements, the cost of noncompliance and the stability of your particular regulatory environment.
Advocacy: The rules are made by the ones who show up. Under the Obama Administration's executive order and the Hickenlooper "red-tape" initiatives, companies have a variety of new avenues to engage in a dialogue about appropriate regulatory frameworks. These new opportunities complement the existing federal comment guidelines, and the state-level sunrise and sunset processes. Companies should take advantage of these avenues to educate policymakers, propose cost-effective and fair measures, and to voice opposition to unwise, overly restrictive and unduly burdensome proposals.
Forecasting: Companies regularly set a budget and develop strategies based upon their forecasts of the market. A comprehensive regulatory strategy should forecast the likelihood of regulatory changes and prepare for the change.
Several industries face obvious regulatory changes in the next several months. For example, Dodd-Frank will alter the financial industry landscape; and the Affordable Care Act will reset the rules for various medical professionals, insurance companies and hospitals. What is less predictable is how the pending federal and state regulatory review processes will restructure existing frameworks.
Regulations come in many forms; impacting everything from energy requirements to disclosure rules. Businesses that are not proactive in shaping their regulatory environment are at a distinct competitive disadvantage.
Rico Munn is a partner with Baker Hostetler, where he specializes in commercial litigation and governmental affairs. From 2007 to 2010 he served as Colorado's chief regulatory official, overseeing the Department of Regulatory Agencies.