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Risk and Regulatory Policy

Improving the Governance of Risk

image of Risk and Regulatory Policy

We expect governments to protect citizens from the adverse consequences of hazardous events. At the same time it is not possible or necessarily in the best interest of citizens for all risks to be removed. A risk-based approach to the design and implementation of regulation can help to ensure that regulatory approaches are efficient, effective and account for risk/risk tradeoffs across policy objectives. Risk-based approaches to the design of regulation and compliance strategies can improve the welfare of citizens by providing better protection, more efficient government services and reduced costs for business. Across the OECD there is great potential to improve the operation of risk policy as few governments have taken steps to develop a coherent risk governance policy for managing regulation.  

This publication presents recent OECD research and analysis on risk and regulatory policy.  The chapters discuss core challenges today. They offer measures for developing, or improving, coherent risk governance policies. Topics include: challenges in designing regulatory policy frameworks to manage risks; different cultural and legal dimensions of risk regulatory concepts across OECD; analytical models and principles for decision making in uncertain situations; key elements of risk regulation and governance institutions; the use of management-based regulation to help firms make risk-related behavioural changes; an analysis of the risk-based frameworks of regulators in five OECD countries (Australia, Ireland, Netherlands, Portugal, United Kingdom) and across four sectors: environment, food safety, financial markets and health and safety; and the elements for designing formal guidelines for risk prioritisation, assessment, management and communication.

 

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Risk-based Regulation

Choices, Practices and Lessons Being Learnt

This chapter identifies key aspects of the risk-based frameworks of eleven regulators in four countries across four sectors: environment, food safety, financial markets and health and safety. Risk-based frameworks contain real choices as to the types and levels of risk the regulator is prepared to tolerate. Risk-based regulation therefore requires regulators to take risks. In practice the risk-based frameworks themselves have risks and a regulator’s risk tolerance is ultimately driven by the political context. The chapter explores how these are addressed. Section 6.1 of this chapter defines risk-based regulation, explores the motivations for its adoption, sets out the main elements of risk-based frameworks, and provides some examples. Section 6.2 explores key questions that arise in practice with respect to each of these elements. Section 6.3 examines some of the main issues and challenges which have arisen in implementation. Finally, Section 6.4 discusses the evaluation of risk-based frameworks and identifies lessons learned.

English

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