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  • Writer's pictureErika Andresen

Regulations are Irregular and Costly Thanks to Politics

When it comes to business continuity plans, the plans need to be updated when there is a significant change. Small business owners don’t think about it as they are on the lower end of the spectrum of influence (they aren’t big industry and do not make significant donations to or have lobbyists courting politicians), but one of those significant changes are administration changes after presidential elections.

 

There has always been a history of tweaking the prior administration’s rules when the new one enters. It had been a tightening or loosening of the rule. Since 2008, however, it has been whiplash. Rules are imposed, gutted, and restored with each election. This makes for an unstable business environment and one that is very difficult to plan for.

 

Compliance usually incurs a cost. When that regulation or rule is completely undone, that cost becomes a sunken cost. Then four years later, the regulations - and associated costs - may be switched back on.

 

Being aware of the political climate is important if you are in a regulated industry so you can prepare for such things. The whiplash impact is so great, it leads to a decrease in production, increase in unemployment, and an increase in both commodity and consumer prices (because producers are factoring in the risk of higher costs thanks to uncertainty and put them into their prices). Businesses are investing in something that they either could have spent less on or must spend even more on to re-tool to make their products compliant.

 

Production lead time is a thing, and if you must plan for 2028 now, assuming existing regulations, that gets factored into cost because the massive changes have become expected. By the time 2025 comes around, those extra costs would have been for nothing if the rules get gutted once again.

 

Of course, the instant pain is more palpable for the big industry, but those big industries are usually in the small business ecosystem and supply chain. Small businesses need to be paying attention to not just whether their direct businesses are impacted by the regulations (like in law, “I didn’t know” is not an acceptable excuse for non-compliance) but also what is happening in the wider world and how it will come down on them.


Prepare for things being unreliable with your suppliers. Prepare for the cost of risk being passed on down to you. If you plan for it, you can survive it.



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