Risk and Regulatory Policy

Improving the Governance of Risk

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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.



Strategic Issues in Risk Regulation and Risk Management

Public officials are increasingly facing the need to make decisions about policies where future uncertainties are economically significant and unavoidable. Today the issue of risk looms so large that some observers speak of a “risk society”, where problems of “risk distribution” replace those of income distribution which characterised industrial society. The need of clear and consistent principles for dealing with uncertainty is as urgent in the public sector as it was in the private sector a few decades ago. This chapter presents concrete examples of the practical consequences of confused thinking about the principles of decision making under uncertainty, pointing out, for example, the shortcomings of the precautionary principle as a general decision rule. A key element of this chapter is that the theory of decision making under uncertainty provides the appropriate conceptual framework for thinking about uncertain events and their consequences, and thus also for thinking about risk. One limitation of this theory, however, is that it has been developed for structuring the choice problems of an individual decision maker and so does not provide unambiguous advice for group decisions when different stakeholders have different attitudes toward risk. But the methodology is nonetheless helpful without providing formal solutions.


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