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20th July 2022

The importance of regulation in business

Regulations help maintain order in society. While an Act is a law, regulations are supplementary guidelines, helping you to apply the principles of the law. This is important for issues such as health and safety, but it can also help in business. The financial world is complex, and regulations are required to avoid disasters such […]

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The importance of regulation in business

Regulations help maintain order in society. While an Act is a law, regulations are supplementary guidelines, helping you to apply the principles of the law. This is important for issues such as health and safety, but it can also help in business. The financial world is complex, and regulations are required to avoid disasters such as the 2008 banking crisis. Below, we explore the importance of regulation in business.

Why regulations are created

Regulations are created to make it easier to interpret the laws of a state. This can make it easier to settle disputes and can create a better society. For instance, if business laws were left ambiguous, it would be easier for organisations to find loopholes and damage society for an ulterior motive. Alternatively, for smaller businesses, regulations are a useful way of sticking to the law and ensuring that they can grow and prosper.

Examples of different regulations

By seeing examples of different regulations, it’s easier to understand the purpose they serve. For instance, certain machinery has regulations dictating their noise output and environmental impact. If you buy yourself a self-propelled lawn mower, this could affect you. However, there are plenty of self-propelled lawn mowers which adhere to these regulations. Outdoor machinery has the following regulations: they require a standard label indicating its guaranteed sound power level, technical documentation showing this has been measured correctly and a Declaration of Conformity.

In business, there are plenty of regulations too. These are controlled by the Financial Conduct Authority with the intent of protecting consumers, keeping the industry stable and promoting beneficial competition between different providers. One of the regulations that was implemented since 2000 relates to the 2008 financial crisis. Since then, the UK has regulated the separation of certain investment banking activities from retail banking activities. The goal of this was to make banks less likely to fail in the future.

How these laws prevent a wide range of societal issues

One of the main benefits of regulation in business is that it prevents a wide range of societal issues. Mainly, they attempt to ensure that banks don’t fail. In this situation, a financial crisis can occur, leading to many people losing their jobs and the cost of living rising across the country. While it would be easier if banks looked after themselves, history has shown that the drive to make profit can sometimes lead to poor decisions that result in failures. By implementing regulations and laws, the state can try and prevent this from happening.

Regulations can help protect us in many aspects of society, from banking to health and safety. Regardless of your profession, it’s worth brushing up on regulations to ensure you’re sticking to the law.


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