#430 Is Regulation Important and Necessary?
Is Regulation Important and Necessary?
An Organisational Perspective by Niels Brabandt
"Regulation is annoying."
Many professionals have heard this statement – or even said it themselves. Regulation, compliance requirements, and new frameworks seem to increase constantly. It often feels like these rules hinder core business operations, limiting flexibility while targets remain the same or even rise.
But is this perception justified? Or is regulation – as leadership expert Niels Brabandt argues – a vital pillar for stability, safety, and responsible business practices?
Regulation Is Everywhere – Even If You Don't Notice It
Even in private life, most people are affected by regulation daily, especially in financial transactions. Whether through the Securities and Exchange Commission (SEC) in the U.S., BaFin (Bundesanstalt für Finanzdienstleistungsaufsicht - yes, that word exists) in Germany, or FINMA in Switzerland, regulation is ever-present.
In the corporate world, regulatory and compliance departments have become standard. The discussion is no longer about whether regulation is needed, but rather why it exists – and how it can be implemented effectively. These questions are examined in greater detail by Niels Brabandt in his weekly podcast and videocast (links below).
Why Regulation Matters – Key Arguments by Niels Brabandt
Regulatory institutions create stability. Rules are clearly defined and universally applied. This aspect ensures transparency, trust, and protection. Systemic risks are proactively identified and addressed. Furthermore, regulation prevents market access by actors with questionable backgrounds who have not agreed to play by the same rules.
One of the strongest arguments emphasised by Niels Brabandt is that regulation creates a level playing field. It limits abuse of power and promotes consistency across regional, national, and international markets.
That's why serious investors prefer regulated environments. If someone offered you an investment opportunity without disclosing the rules in advance, you'd likely hesitate – and rightly so. Excellent regulation builds excellent conditions and avoids unnecessary overregulation at the same time.
Practical Implementation in the Workplace
What matters is not just the existence of rules – but how those rules are communicated and enforced. Regulation imposed solely through mandates and top-down enforcement leads to pushback and inefficiency. Instead, Niels Brabandt advocates for high-quality education and training – either in-house or via external professionals.
A common mistake? Relying on low-cost compliance videos in the intranet to tick the box for "training session done". The consequences: frustration, resentment, and a corporate culture that views regulation as a nuisance.
Even more damaging is the situation where senior executives are not held to the same regulatory standards as others. Niels Brabandt highlights that credibility collapses if rules are applied inconsistently. Without role models at the top, organisations lose the moral authority to demand compliance from others.
Niels Brabandt's Conclusion
Effective regulation must be:
adaptive,
situational,
purposeful.
When appropriately implemented, employees understand its rationale – and even value it. For organisations, this means: invest in expert-level compliance education. Create leadership accountability. And most importantly: recognise that regulation is not the enemy of business – it is its structural foundation.
Niels Brabandt
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More on this topic in this week's videocast and podcast with Niels Brabandt: Videocast / Apple Podcasts / Spotify
For the videocast’s and podcast’s transcript, read below this article.
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Niels Brabandt is an expert in sustainable leadership with more than 20 years of experience in practice and science.
Niels Brabandt: Professional Training, Speaking, Coaching, Consulting, Mentoring, Project & Interim Management. Event host, MC, moderator.
Podcast Transcript
Niels Brabandt
Regulatory. And some of you might now say, not quite sure if that's your topic, Niels. Mr. Rabant, because I think that you are more on the liberal area, so you are against regulation. Very important here we distinguish between nonsensical regulation and reasonable regulation. The question today is, and I received quite a number of emails about that, do we actually need regulation? Is regulation something that is useful?
Is regulation something that we can actually use to gain any kind of advantage? Is regulation something where we say, when we look at that, this is better than it has been before. And the question now is when we talk, because anyone, anyone probably has a story where you say, I met this piece of regulation. It was really annoying. I called them, I spoke to people who were not really knowledgeable, who were only buried in paperwork or buried me in paperwork, and I didn't see any bit, not the tiniest bit of advantage in this. And now we have to talk about, is regulation something that we actually need? So let's get straight into the topic.
Are regulatory institutions important? And the question, of course is, do we really need them here? So first, some regulatory institutions you might have heard about. So we of course need to have some examples. And when you now say, yeah, I think finance is quite regulated, Correct. And the question now is, why is finance that regulated? When people often say, we need to have free markets, only free markets, work, etc.
You probably know the liberal libertarian approach. And let's not mix up. I'm a liberal, not a libertarian. When someone says, we abolish the state and let's just let anyone be whoever they are, that is something which by science does not work. But the question is, what are the regulatory bodies that we already know? Because some of you might now sit here and say, I don't know any. I haven't heard of them.
And I'm sure that some might ring a bell as soon as you hear their name. And the first, of course, is the SEC, the Securities and Exchange Commission.
That is the U.S. regulatory body for financials. And of course, when you now say, oh, there's this other German thing, isn't it? Yes, there is this other German thing, and it's the Bundes Anstalt fur Finance Dienstleisstungs Aufslicht.
I'm not making this up. This is the.
These are actual words. So when you now think, why are always the Germans the one with the longest word, I have no idea. I am hate German. I have no idea why we do that. But I can understand that people say learning that language is definitely not for me. I can absolutely understand that. But we also have other institutions which you might not have heard about.
So, for example, the finma. The FINMA is the Market Supervisory Authority. The, the Financial Market Supervisory Authority. When you now say, oh, we already had the us so probably that's with the Brits. No, no, the Brits have the fv, fca, the, the Financial Conduct Authority. FINMA is the Swiss one. And when you now say, why do, why do the Swiss people have an English term for that and the Germans have a German one, I can tell you this tells you quite something about international attitude.
The Swiss people simply know this is an international market and they just deal better with that than most of the German market does. The question now is all of these, and all of these bodies, probably when you work in construction, you say, we have this body. When you work in trade, you have that body. When you work in health, you have another body. There's always a regulatory body. And you wonder, is this, this actually reasonable? So let's get straight into the reasoning.
Why do you have a regulatory body? So, number one, is a regulatory body always gives you a certain level of stability and protection. And when you now say, we don't need that stability and protection, let's get into finance. Remember when markets were less stable and some people might say, oh, you mean this 2008 thing? Yeah, the almost global collapse of financial markets again, and we didn't have that for the very first time. Regulatory always helps you to have a certain stability and protection against systemic risk. When you now say, but there's so many things happening.
Yes, there are certain things that happen and when there is no regulation, they keep on going until something happens and collapses. And you can of course now say, well, then just let them happen. The most problematic moment of that is people will have harm who weren't invested on the matter. And that needs to be prevented. Systemic risks need to be discovered as early as possible. I give you a very simple moment of that which has nothing to do with finance. So back in the days, back, back, back in the days, maybe you heard of the story of, oh, Coca Cola had Coke back in the day.
So we could have simply have said, drink something when there's Coke in there. We had people who were really, really sick and when they suddenly drank a certain substance and there was Coke in there, suddenly they were awake again and could go to work.
Isn't that amazing? Well, if you have no regulatory body, but suddenly they found out that constantly consuming Coke isn't that healthy, who could have thought who could have thought? And in many areas, from health to finance to construction to any other entity, we have certain things that happen and then the regulation adapts to that. And by the way, for example, insurance works exactly that way. When I was in my civil service back in the days, instead of doing the military service, I decided to do civil service, because it was also recognised for my university work, because I wanted to become a teacher. And it saved me one term of just doing this civil service social service, instead of doing my military service. And suddenly it says, we have a new regulation when you bring food.
Because I worked for the Abbot of Wolfhard, which is a social institution in many different facets and ways. And from kindergartens to senior citizens homes, they have everything from care homes to kindergarten. The whole spectrum of life is covered by them. It's one of the big social charities we have. And I always during lunchtime brought food from one kindergarten to the other, because only one kindergarten had a kitchen to save money, because money was tight. And suddenly they said, you can't do this anymore, as you did it before, you have to take with this device. And they suddenly showed some sort of measuring machine which I had to stick into the food and then write down the temperature.
And when I arrived I had to do the same. And of course, especially as a young man, I said, why? Why is this happening now? I mean, that is pointless, isn't it? And they said, it's not, because when food goes below a certain temperature, there's a high risk of any kind of germs or diseases growing in there. And I then asked, did this ever happen? And there were hundreds of cases from, for example, kindergartens having two institutions or two locations.
One location had the kitchen, and then a 20 minute drive later the food arrives. However, during the 20 minutes, suddenly there was an accident and they had to take a detour. So suddenly the 20 minutes turned into an hour and a half of traffic jam and the food arrives way too cold and children got sick. Do you want to have children sick? Do you have systemic risk? I don't. And I don't even have children.
So probably you do not want to have that as well. Systemic risks will be seen by a regulatory institution sometimes after something happens, but also sometimes before something happens. So that is where the discussion and the cooperation then happens. Stability, protection and systemic risks. And of course you can now say, when it comes to finance, it's their personal risk. You can invest in whatever you want, so why not do that? That's one point of view.
However, there's a Significant issue with that. Let's say people invest money in non regulated schemes. I give you a very simple example. Where do you get 50% return on the investment? And you probably now casino. Exactly. You go to a roulette table and then you say yeah, I can do either red or black and then there's a 50% return.
So first wrong, factually wrong, factually wrong, completely wrong. When you know, say no, it's red or black, it's 50, 50. No it's not. Because on a usual roulette table, the French roulette, you have a zero where the whole money, when you didn't bet on zero, goes to the casino. So it's not 50, 50 anymore. And American Rut even has zero and double zero. So two of these outcomes might be casino tags.
Everything except when you bet on exactly that zero. And let's just assume I would tell you, why not invest in this other roulette table? I designed an alternative roulette table. And then you say oh, do they have more colours? And you say yeah, they have more colours. And you ask how many? And I said I don't know, I'm not going to tell you.
But many, you know, just put a bet on purple or maybe green and you say how about how many colours are there? I don't know, I'm not going to tell you. Or I tell you, just you, you can place a better number and you say how many numbers are there? And I said I'm not going to tell you. Many, many, you know, but higher, higher return, you get 100% return and then you find out there are 1,000 numbers on the table. So you see that when anyone goes into unregulated markets, why does someone does that? Either someone doesn't care where the money goes or someone has such a high, how to put that politely, has such a high wish for risk. And often.
Why do people do that? Why do people go into higher risk? Either because they don't care about the money or they know that the source of the money is maybe debatable at best. And when you do not have any kind of regulation behind that, then the problem begins. In the uk, people without having any checks could buy big houses, mansions, office towers and then the money was laundered. That's the money laundry. Because suddenly you have, as they call, concrete gold and then it's there and you can't say I'm going to make the money disappear from that piece of concrete.
That is very difficult to have a lawful transaction undone afterwards. And especially for example In Italy, you have to prove where you have the money from a certain level. And now of course, other countries have that recogn regulation as well, because you do not want that people who come from, let's say, debatable areas of where money was generated, potentially with illegal activities, or with parts of the world where taxation is more of a voluntary concept that is unfair against anyone else in the system. So you can be sure that something like laundry or unfair abuse of power, unfair gain of power, you always have a certain coherence when regulatory is done well. And when you now say, but I know moments where it's not coherent, and then of course, where is it not coherent? And the usual answer is travel guidelines. I can spend €150, dollars, pound, whatever currency you have on my travel.
However, when there is expo season, hotels double and I have to travel 200 miles to get into any kind of reasonable hotel which is still affordable according to our guideline. And that's not very convenient. That's correct, because good regulation adapts good regulation. My company has a travel guideline. You can spend up to €150 per night, no matter where you stay. And when we have expos fares, big moments, then you can spend double of that. And when you have no other chance, I always tell people, when you have double than that come to me.
And then we make a case by case decisions. And there were moments where we spent €500 on a hotel night because it was simply the reasonable thing to do. Regulation adapts to the situation. And that is where many people say regulation is something I don't like. Because often regulation does not adapt. And that is what regulation has to learn. Good corporate regulation, good corporate regulation, good corporate regulatory and compliance adapts to the situation.
And of course it still stays within reasonable boundaries tailored to that situation. Because what regulation and regulatory bodies do, they do abuse prevention. When you are a state and you have, for example, any kind of financial regulation, I can give you a very simple example. Why do more people invest into crypto from a reasonable background in Switzerland than they do, for example, in Germany? Well, quite simple, because we have crypto valley in Switzerland and it's a regulated entity. You have a regulated market, and that is what people like you know the rules and you know who has to stick to the rules and who are the other market participants, who is investing and what are the rules to what we do here? Excellent. Regulation attracts investors.
Unreasonable regulation, that is what chases people away. When you, for example, say yeah, for any dollar you invest, you have to pay $10 taxes, that is something, probably something where someone says that then I just go to another market where I have to pay less for that because I get the same thing with less payment. So there's also part of a competitive market, what especially liberals like and libertarians, in a way, far too much extreme way. It's also part of the competition. Regulatory ensures that investors show up, that the economy gets driven forward, that jobs are created in a reasonable manner. Because when you say you don't like regulatory, believe me, when someone says, yeah, your working contract is, you work as long as I want, right? There's no protection.
And when you're unsafe on the construction ground, that's your problem. Bring your own protective wear. I'm not going to buy that for you. How many hours you want to work? I tell you, you leave when the job's finished.
40 hours a week, 50, 70, 80, I don't care. You leave when work's finished. Maybe you can work and then sleep and then come back.
What about that? And you do not want to have that. Abuse prevention happens through regulation, reasonable regulation. Of course, as a liberal, we are a bit more in the direction of less regulation. Not too much. However, no one wants chaos and injustice. Trust is generated by reasonable regulation and a balance of power is gained by reasonable regulation.
And of course, now some people will say, how do you want to get that done in the world in which we are. And of course we have to talk about the implementation first. Of course, what you have to do is you have to get awareness. People have to know that this is a good thing. Some people had bad experiences. And then of course you immediately have the awareness where they say, oh, I lost my money in that kind of scheme. I don't want to have to live through that again.
And that's where regulation also happens. Of course, you often want to have that proactively before something happens. But quite often regulation happens after something happened. And what you need to deliver here is professional training. People need to know the rules. And very important here, good regulation always gives you reasoning. When someone says, niels, where do the €150 come from?
And we did market research. And when we did the market research, the average price for staying somewhere was depending on the region in which you are. We have. Certain countries have a higher level of spending, but let's stick to Germany.
Usually hotel nights roughly hover around €100. And then of course, you can still have breakfast or you want to have a nice dinner or anything. That is all within the Travel guideline of €150. Per day. So there you are, by the way, when you have client dinners, that has a completely different regulation. Of course, regulation behaviours around alcohol, what can be spent, what can you do with clients, etc. Etc. So the training is always an important aspect of what you do because people need to know the reasoning, never do that.
You say regulatory happens because I'm a leader here and I tell you these are the rules I say you obey. That is unreasonable regulation at every single time. So when you do all of that, then of course it's important that follow ups for regulatory has to happen. And the worst moment that can happen right here is that people say when you are a bit higher on the food chain, when you are higher in the hierarchy, the follow ups for offences are basically non existent. And when you are lower on the hierarchy, you basically get fired on the spot in that corporation. And that is of course regulatory, which does not work. When you have someone spending €10 more than the travel guideline allows.
And for board level you say no problem, and for the operational level you say you get fired, then of course people will practise very reasonable criticism against you and you lose again your social legitimation as a leader. Of course people know that board level members have more rights in an organisation than operational level members. Anyone is aware of that. And anyone knows that in any kind of organisation you need to have a certain power to get things done and decisions made. However, follow up means justice needs to be served. As soon as people say it's arbitrary, that is the moment where the problem begins. And that is why you need reasonable regulation and not unreasonable and not unreasonable regulation.
When you put everything in place, as we just talked about very briefly here, regulatory bodies, regulatory institution and even corporate regulatory and compliance will enrich your work and not prevent your work. It will bring things forward, not pull them backward. It will create more value in sustainable circumstances rather than less value in unregulated, non reasonable or unreasonable circumstances. And when you put it in place, as we just briefly talked about, things will get better from there and I wish you all the best doing so. And when you now say, hey, I'd like to talk about that a bit more, but not. I really have about 28 questions right now. Just feel free to contact me.
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