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Really responsive risk-based regulation

Author

Listed:
  • Black, Julia
  • Baldwin, Robert
Abstract
Regulators in a number of countries are increasingly developing "risk-based" strategies to manage their resources, and their reputations as "risk-based regulators" have become much lauded by regulatory reformers. This widespread endorsement of risk-based regulation, together with the experience of regulatory failure, prompts us to consider how risk-based regulators can attune the logics of risk analyses to the complex problems and the dynamics of regulation in practice. We argue, first, that regulators have to regulate in a way that is responsive to five elements: (1) regulated firms' behavior, attitude, and culture; (2) regulation's institutional environments; (3) interactions of regulatory controls; (4) regulatory performance; and (5) change. Secondly, we argue that the challenges of regulation to which regulators have to respond vary across the different regulatory tasks of detection, response development, enforcement, assessment, and modification. Using the "really responsive" framework, we highlight some of the strengths and limitations of using risk-based regulation to manage risk and uncertainty within the constraints that flow from practical circumstances and, indeed, from the framework of risk-based regulation itself. The need for a revised, more nuanced conception of risk-based regulation is stressed.

Suggested Citation

  • Black, Julia & Baldwin, Robert, 2010. "Really responsive risk-based regulation," LSE Research Online Documents on Economics 27632, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:27632
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    File URL: http://eprints.lse.ac.uk/27632/
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    Citations

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    Cited by:

    1. Julia Black & Robert Baldwin, 2012. "When risk‐based regulation aims low: Approaches and challenges," Regulation & Governance, John Wiley & Sons, vol. 6(1), pages 2-22, March.
    2. Riaz, Zahid & Ray, Pradeep & Ray, Sangeeta, 2022. "The impact of digitalisation on corporate governance in Australia," Journal of Business Research, Elsevier, vol. 152(C), pages 410-424.
    3. Everson, Michelle, 2012. "A technology of expertise: EU financial services agencies," LSE Research Online Documents on Economics 53203, London School of Economics and Political Science, LSE Library.
    4. Tracy D. Morse & Humphreys Masuku & Sarah Rippon & Hudson Kubwalo, 2018. "Achieving an Integrated Approach to Food Safety and Hygiene—Meeting the Sustainable Development Goals in Sub-Saharan Africa," Sustainability, MDPI, vol. 10(7), pages 1-20, July.
    5. Hood, Rick & Goldacre, Allie, 2021. "Exploring the impact of Ofsted inspections on performance in children’s social care," Children and Youth Services Review, Elsevier, vol. 129(C).
    6. Benedikt Frank, 2021. "The Financial Crisis in the 2000s: Further Effects Regarding Lending, Regulation and Efficiency," ACTA VSFS, University of Finance and Administration, vol. 15(2), pages 155-175.
    7. Julia Black & Robert Baldwin, 2012. "When risk‐based regulation aims low: A strategic framework," Regulation & Governance, John Wiley & Sons, vol. 6(2), pages 131-148, June.
    8. V. Balogh & K. Cseres, 2013. "Institutional Design in Hungary: A Case Study of the Unfair Commercial Practices Directive," Journal of Consumer Policy, Springer, vol. 36(3), pages 343-365, September.
    9. Michelle Everson, 2012. "A Technology of Expertise: EU Financial Services Agencies," LEQS – LSE 'Europe in Question' Discussion Paper Series 49, European Institute, LSE.
    10. Przemysław Brzuszczak, 2020. "Regulacja oparta na ryzyku jako refleksyjna strategia regulacyjna," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 3, pages 139-151.
    11. Lucia Dalla Pellegrina & Giorgio Di Maio & Donato Masciandaro & Margherita Saraceno, 2020. "Are Bankers "Crying Wolf"? The Risk-Based Approach to Money-Laundering Regulation and its Effects," Working Papers 444, University of Milano-Bicocca, Department of Economics, revised Feb 2021.
    12. Jeroen van der Heijden, 2021. "Risk as an Approach to Regulatory Governance: An Evidence Synthesis and Research Agenda," SAGE Open, , vol. 11(3), pages 21582440211, July.
    13. Fhloinn Deirdre Ní, 2018. "Regulation of housing quality in Ireland: What can be learned from food safety?," Administration, Sciendo, vol. 66(2), pages 83-108, May.
    14. Hanskamp-Sebregts, Mirelle & Robben, Paul B. & Wollersheim, Hub & Zegers, Marieke, 2020. "Transparency about internal audit results to reduce the supervisory burden: A qualitative study on the preconditions of sharing audit results," Health Policy, Elsevier, vol. 124(2), pages 216-223.
    15. Margaret J. Greenwood & Richard M. Baylis & Lei Tao, 2017. "Regulatory incentives and financial reporting quality in public healthcare organisations," Accounting and Business Research, Taylor & Francis Journals, vol. 47(7), pages 831-855, November.
    16. Katalin Mérő, 2021. "The ascent and descent of banks’ risk-based capital regulation," Journal of Banking Regulation, Palgrave Macmillan, vol. 22(4), pages 308-318, December.
    17. Petra Rùèková & Nicole Škuláòová, 2021. "How Selected Macroeconomic Factors Affect the Corporate Profitability of Transportation and Storage Companies in Selected European Economies," ACTA VSFS, University of Finance and Administration, vol. 15(2), pages 176-197.
    18. Ulbricht, Lena & von Grafenstein, Maximilian, 2016. "Editorial – Big data through the power lens: Marker for regulating innovation," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 5(1), pages 1-8.
    19. Irina Brass & Jesse H. Sowell, 2021. "Adaptive governance for the Internet of Things: Coping with emerging security risks," Regulation & Governance, John Wiley & Sons, vol. 15(4), pages 1092-1110, October.
    20. Lucia Pellegrina & Giorgio Maio & Donato Masciandaro & Margherita Saraceno, 2023. "Are Bankers “Crying Wolf”? Type I, Type II Errors and Deterrence in Anti-Money Laundering: The Italian Case," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 9(2), pages 587-615, July.
    21. Ulbricht, Lena & von Grafenstein, Maximilian, 2016. "Editorial – Big data through the power lens: Marker for regulating innovation," Internet Policy Review: Journal on Internet Regulation, Alexander von Humboldt Institute for Internet and Society (HIIG), Berlin, vol. 5(1), pages 1-8.
    22. Gracia, Louise & Oats, Lynne, 2012. "Boundary work and tax regulation: A Bourdieusian view," Accounting, Organizations and Society, Elsevier, vol. 37(5), pages 304-321.
    23. Nicholas Lord, 2023. "Prosecution Deferred, Prosecution Exempt: On the Interests of (In)Justice in the Non-Trial Resolution of Transnational Corporate Bribery," The British Journal of Criminology, Centre for Crime and Justice Studies, vol. 63(4), pages 848-866.

    More about this item

    JEL classification:

    • F3 - International Economics - - International Finance
    • G3 - Financial Economics - - Corporate Finance and Governance

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