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In no uncertain terms

02: Global investigations: reading the signals

Regulatory uncertainty rather than complexity is the biggest challenge facing general counsel of multinationals.

by Francois Garnier
Chief Counsel International Platform, Pfizer


Uncertainty can be the biggest regulatory challenge facing the general counsel of multinational companies. Give me enough certainty – clear rules and guidance – and I can structure my operations for success. But when regulations are unclear or unstable, it can be almost impossible to develop reliable compliance or business strategies.

Regulatory uncertainty not only makes it difficult for companies to do business, it reduces their ability to comply.

As the Chief Counsel International Platform at Pfizer, I'm familiar with the challenges posed by regulatory complexity. The pharmaceutical industry is highly regulated, and Pfizer has operations in every major trading country around the globe. Each of these countries has its own regulatory framework that can include complex and multi-layered systems of controls. Regions within countries may also be subject to different regulations. And antitrust and anticorruption laws – such as the US Foreign Corrupt Practices Act and the UK Bribery Act – have extraterritorial jurisdiction and thus apply to virtually every company trading internationally.

Estimate of regulatory costs imposed on US economy by the federal government in 2012
Source: American Action Forum

We have to ensure that we’re doing the right things at the regional, national and global levels. And we have to be as vigilant with partners as we are with ourselves – vendors and providers must undergo the same checks and controls that we apply internally, and they must understand that Pfizer has zero tolerance for non-compliance.

Estimate of cost to UK economy of top 100 EU laws
Source: Open Europe

It's possible to overdo it. Excessive controls can slow business down and stifle innovation. It is important to find the right balance. But uncertainty is a bigger problem still. As long as I know what is required of me, I can deal with even the most stringent requirements. It may be costly, introducing complex and excessive bureaucracy to the company, but these challenges are manageable – and they pale in comparison to uncertainty.

Emerging markets pose the greatest challenges. Regulations in these countries can be ambiguous, and guidance from rule makers can be vague or non-existent. Even worse, regulations may change frequently and unexpectedly in these countries, leaving companies unsure how long their compliance strategies will be effective or relevant.

Separation of powers and due process are critical in the regulatory context, as elsewhere. Authorities have the power to grant market access and regulate operations, but in many jurisdictions they also act as police and judge. I would like to see a better balance of power between the regulator and industry, but in many cases this will depend on the local judicial authority.

There's reason to believe that regulatory activity will increase across industries and countries in the foreseeable future. If that happens, regulations will play an increasing role in setting competitive conditions and determining opportunities for growth. In such an environment, the need for clarity and consistency is all the more important. Regulatory uncertainty not only makes it difficult for companies to do business, it reduces their ability to comply. That’s a loss for businesses, regulators and society in general.


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