Benefits
What are the benefits (and challenges) for you of principles-based regulation and what should you do?
You will benefit from increased flexibility to decide more often what business processes and controls you think are right for your business, while also helping you achieve the regulatory outcomes.
This should help you compete and innovate, and, by seeking regulatory outcomes as an integral part of your business decision-making, will mean more effective regulation.
However, making changes to implement a principles-based approach is not in itself going to be enough to make this approach work successfully. You must change your behaviour and grasp the opportunities for increased innovation and more flexibility, while at the same time managing in a more flexible regulatory environment with fewer legal certainties.
Working successfully in this more uncertain landscape means management will need to engage with the regulatory outcomes we want to achieve. This will present specific challenges for smaller firms but we believe this approach can work particularly well for smaller firms where management often engage directly with customers. With such short spans of control and a deep understanding of your business, it should be fairly straightforward for you to grasp the outcomes we are seeking to achieve and run your business accordingly.
For a principles-based approach to be effective we will need to make it very clear to you what exactly it is that we require you to produce as outcomes. Where there is uncertainty we need to provide easy access to clear information and straight answers on the outcomes we are looking for.