I’ve never been convinced by the argument that businesses are attracted to well-regulated markets, even though most business professionals put regulation high up the list of priorities when they’re asked what makes one location better than another.
Regulation is certainly desirable. Nobody wants to do business in a “wild west” environment where there are no rules to govern corporate behaviour. The success of the Dubai International Financial Centre over the past 10 years can, in part, be attributed to the efficiency of the Dubai Financial Services Authority and the courts.
But I don’t believe there is a proportionate relationship between the strictness of the regulatory regime and the success of the business sector. For every financial professional that ticks the box marked “efficient regulatory regime” when considering Dubai as their hub, there must be many others who tick the boxes marked “good beaches”, “nice hotels” or “decent schools”.
The regulatory environment is simply one element, and often not the decisive one. Infrastructure, lifestyle and culture are bigger factors, I believe.
I was thinking along these lines already, but was glad to have my theory confirmed by Accelus, the part of the information group Thomson Reuters that gives advice on governance and regulation. In a recent paper entitled “Conduct risk – when compliance becomes a game”, the author reviews the increasingly heavy hand of regulatory regimes round the world.
Regulators have had a field day since the financial crisis of 2009. They now command big salary premiums in many markets and are growing significantly in numbers and in power.
But they do not see the world as others do, argues Accelus.
“The point is perhaps so obvious that it’s often overlooked: people who work as regulators are generally motivated by rather different things from people who work in regulated commercial sectors. One can prove this by a simple research probe, asking each of these two groups of employees ‘What is risk management for?’ and ‘What does the word ‘risk’ signify to you?’
Regulatory staff – and the public sector as a whole – tend to conceive risk primarily in terms of threat. They see risk analysis as a vital tool to help them contain and prevent hazards.
“Commercial people, by contrast, see risk as a structured way to pursue opportunities for profit. Although these two different cultures of risk may not be exact opposites, they show a contrast in emphasis which helps to explain why there are persistent gaps between regulatory design and the reality of compliance: why, in the real world, rules are broken,” says Accelus.
In other words, real business people will try to bend the rules to suit them in their search for profit, regardless of the level of regulation. That’s just human nature.
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It’s a bad time to be a member of the UAE official Tottenham Hotspur supporters’ club. Our cataclysmic decline in form has made each match a purgatory to attend. Some of us are beginning to believe that a recent change of venue is the source of all our problems.
As I may have mentioned before, we – 20 or so Spurs diehards – used to gather at the One and Only Royal Mirage hotel in Dubai for the games. It was certainly the poshest place I’ve ever watched football, but it lacked atmosphere, so we decided a change was needed.
Somebody came up with The Huddle, an establishment at the CityMax hotel at the back of Mall of the Emirates in Barsha. It certainly has a sporty atmosphere, but since the move the team has suffered one hiding after another at the hands of the top teams.
Sunday’s destruction by Liverpool was the final straw. Now the search is on for a new, luckier venue. Any readers’ suggestions?
fkane@thenational.ae
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