regulation

As the world prepares for post-pandemic life, businesses must be ready to adapt to a very different market and regulatory space than the one they worked in little more than a year ago. While there is much to look forward to in the months ahead, established companies and new startups alike should take the time now to strategize on how to work with government regulations in a manner that helps—instead of hinders—their business. In this article, we’ll walk through how regulation can be one of three things for a company’s business: an opportunity; an obstacle; or a risk.

Regulation as Opportunity

By thinking strategically about how to approach shifting regulatory winds, businesses can grow and even succeed. Take, for instance, the early days of the ridesharing industry. By circumventing the traditionally high barriers to entry in the taxi industry, such as medallions and licensing, companies like Uber and Lyft were able to offer cheaper rides in the cities they started up in. When combined with the convenience factor of their app-based hailing system, the narrowly applied existing regulations in this space worked to their immense advantage. This outside-the-box approach to regulation can give businesses the opportunity to thrive and even grow.

Regulation as Obstacle

Most often companies think of regulation as a barrier to their success, as it surely can be if not managed appropriately from the outset. The rideshare industry, for example, continues to struggle in squaring its contractor-based driver system with local labor regulations. Perhaps thesecompanies should have taken steps earlier to provide the unique benefits to drivers—e.g., debit cards and access to IRA accounts—that they only initiated in 2019, and promoted these benefits to win favor with drivers, the public and regulators. Because Uber did not preemptively manage legal risks, those risks became significant obstacles to its viability in multiple economic markets.

Regulation as Risk

In order to prevent regulation from becoming an obstacle, and even turn it into an opportunity, it must be managed like any other business risk. When your company offers a novel approach to a problem, one which regulators may not have tested yet, it’s especially important to build a strongrapport with regulators and the public in tandem with building out operations. Regulators often take public sentiment into account when setting policy and enforcement priorities; by building a favorable public perception from the outset, companies can preempt potential risk even when theregulatory landscape for their business appears uncertain.

Ridesharing companies failed to provide any employment infrastructure for the gig workers on which they relied, resulting in public criticism and worker dissatisfaction. Such opposition helped motivate many of the regulatory challenges these companies have faced in multiple markets domestically and abroad.

Our Strategy

Regulation can create risks and obstacles for any business. Nonetheless, they are an inevitable part of the journey to getting your company off the ground and keeping it running smoothly. With that said, we offer a few key strategies to adopt as you navigate this brave new world:

  • Look for regulation as opportunity for growth. Consider possible synergies between regulatory requirements and your business model.
  • Think about your regulatory risk early on and get expert advice to address and preempt it.
  • Be suspicious if something seems too easy from a legal perspective. There may be more complex problems underneath the surface.
  • Work to build goodwill with regulators and the public from the outset. It’s always easier to start off on the right foot than try to rehabilitate your image later on.

Jasmin Sethi is a partner at Advantary and the CEO of Sethi Clarity Advisors. She is a trained lawyer-economist, entrepreneur, and thought leader with over a decade of experience in the financial industry. With demonstrated regulatory expertise in financial regulations, Jasmin advises companies on how to navigate regulations that impact their business. Learn more about Jasmin or contact her directly at jasmin@advantary.co.

Categories: General

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