Séminaire REPORTE ultérieurement KTO-GREDEG-OFCE - Bernard SINCLAIR-DESGAGNÉ (SKEMA)

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DURA LEX SED LEX – The economics of regulatory compliance

18-03-2020 - 14h00 à 15h30 - SKEMA Business School - Room 277

Bernard SINCLAIR-DESGAGNÉ (SKEMA)

Title: “DURA LEX SED LEX – The economics of regulatory compliance”

Abstract: Regulatory compliance refers to the human resources, technologies, organizational configurations, information systems and incentives put in place in corporations, in order to satisfy the requirements of existing laws and regulations.
The economics of regulatory compliance considers the methods for assessing compliance costs, the underlying drivers of those costs, and the strategic choices to achieve compliance.
Since the beginning of the present decade, corporations’ overall costs of complying with existing, updated or new laws and regulations (such as Sarbanes-Oxley, Basel II, European antitrust, China’s new fiscal system, carbon caps, food products traceability, and trade standards) have more than doubled. Some studies expect these costs to reach US$ 600 billion by 2020. According to PricewaterhouseCoopers’s Management Barometer, top executives would now spend on average more than six percent of their administrative and operations budget on external or internal compliance. The same report also reveals that 48 % of U.S. executives and 38 % of their European counterparts say their respective company lacks understanding of its total compliance spending. This indicates a need for better tools to assess compliance expenses and for organizational designs that would enhance regulatory compliance at lower cost.
This presentation will bring together some recent works on these matters. I will show how, for instance, new methods in mathematical finance could be applied to assessing certain compliance costs more accurately, and how compliance audits or some budgetary rules could be used to foster regulatory compliance while enhancing financial performance in the short run. I will also shed light on the behavior of ‘compliance-enabling’ industries, such as suppliers of pollution abatement goods and services or the so-called ‘gatekeepers’ (e.g., lawyers, auditors, rating agents, etc.), its key drivers and its impact on compliance costs. The presentation will conclude with some reflections on the pursuit of ‘smart’ regulation.

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