Managing Your Regulatory Risk: Walking a Tightrope While Predicting the Future

Posted by Bray Dohrwardt | Apr 17, 2024 | 0 Comments

Regulatory risk affects many businesses, particularly those in highly regulated finance, healthcare, and energy industries. It refers to the possibility that changes in laws, regulations, or government policies could negatively impact a business's operations, profitability, or reputation. Contact the Dohrwardt Law Firm to discuss your regulatory risk management strategies.

One of the main challenges of regulatory risk is its unpredictability. Regulations can change rapidly and without warning, leaving businesses scrambling to comply or facing penalties and fines. This unpredictability can make it difficult for companies to plan and invest for the future, as they must constantly be prepared for new regulations or changes to existing ones. This can be especially true during election cycles, where leadership changes may occur.

Regulatory agencies' leadership can significantly impact businesses, particularly those in highly regulated industries. When new leaders take over regulatory agencies, they often bring new priorities, policies, and approaches to enforcement that can affect how businesses operate and comply with regulations.

These changes can create uncertainty and new challenges for businesses. For example, a new regulatory agency leader may prioritize different areas of enforcement than their predecessor, leading to increased scrutiny of certain business practices or industries. They may also take a more aggressive approach to enforcement, resulting in increased fines, penalties, or legal action against businesses. In addition to changes in priorities and enforcement, new agency leadership can also change the regulatory landscape. They may seek to roll back or revise existing regulations, which can alter businesses' compliance requirements. This can be particularly challenging for companies that have invested significant time and resources into complying with existing rules, as they may need to adapt quickly to new requirements or face penalties for noncompliance.

Staying informed about regulatory developments is crucial for businesses to mitigate regulatory risk. Compliance with applicable laws and regulations is not just about adapting quickly to changes. It necessitates a strong culture of compliance within the organization and a robust system for monitoring regulatory changes and adapting promptly when necessary.

Contracts play a significant role in mitigating regulatory risk. Businesses should draft contracts that allow organizations to respond to rule changes quickly. This strategic approach involves thinking through the contracts and drafting them in a way that enables regulatory changes to be appropriately managed. This may be through simple language that allows for renegotiation of specific terms, prices, shipping methods, and pre-contracted language changes to enable compliance. 

Engaging with regulatory agencies and policymakers is crucial to managing regulatory risk. It's not just about compliance but also about shaping regulations reasonably and practically for businesses. By building positive relationships with regulators and policymakers and working collaboratively with them, companies can help reduce the risk of sudden, unexpected regulatory changes that could negatively impact the business.

Ultimately, effective regulatory risk management requires a proactive and strategic approach. By staying informed, building solid relationships with regulators, and fostering a culture of compliance, businesses can mitigate their regulatory risk and position themselves for long-term success. Contact the Dohrwardt Law Firm to discuss your regulatory risk management needs.

The information provided is only for general information and is not meant to be legal advice. Information on this website, including third-party links, may be less up-to-date, so you should contact your attorney to discuss your situation. Third-party links are provided for convenience only and are not an endorsement by the Dohrwardt Law Firm.

About the Author

Bray Dohrwardt

As an accomplished attorney with over 22 years of experience, Bray Dohrwardt has built an impressive career, enabling business growth and commercial success for many companies from start-ups to large corporations and nonprofits. He focuses his practice on business law and energy law.


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Bray Dohrwardt is licensed to practice law in Minnesota and Texas. Please contact the Dohrwardt Law Firm to discuss how the firm can help you get business done.