Question

Is more regulation needed in order to reduce financial scandals? Explain

Answer 1

It is difficult to say more regulatons will reduce the financial scandals. Effective utilisation of existing policies and modification of these policies with latest develpments could reduce the scandals. At the same time new policies are inevitatable when new product types or new technology advancements happend in the financial or corporate market.

Scandals in business often start small and become progressively worse.They often begin with one or two bad decisions by a previously ethical person and then get out of control as the person committing the fraud takes more and more extreme measures to cover his tracks.

Regulations are there to protect customers from financial fraud. Effective monitoring prevents the increased risk on the companies. It doesn’t mean that increased regulations will reduce the financial scandals. Regulations protect social concerns. Without them, businesses will ignore damage to the environment. They will also ignore unprofitable areas such as rural counties.

At the same time increased regulations can dampen economic growth. Companies must use their capital to comply with federal rules instead of investing in plant, equipment, and people. Regulations are more effective when new types of products are launched in the market. Since the business will always look for opportunities to make profit, similartly regulators should modify their watch categories in order to observe the further developments on this product. It is also imporatnt that the regulators shouldn’t be influenced with industry leaders and their business motives to build new policies and regulations.

- A regulator/ body should be a watch dog for the financial market and products in order to manage the policies effectively. That says the existing policies needs to modify based on the requirements. One shouldn't be wait for an incident to occur, policies needs to be formulated as and when one should identify the different practice or anticipation of an occurrence or loop-hole of a policy. The regulator immediately get into it and modify the policies after identifying it before the incident occures.

- One of the most effective ways to prevent a scandal in your business is to reward honesty rather than merely to encourage it. Some companies have a values statement or code of ethics that emphasizes honesty, but they still pay and promote sales people based on the sales figures alone or give bonuses to supervisors based on short-term profits without any other consideration.