The global financial downturn has prompted governments around the globe to introduce a range of regulatory reforms, driven by market failures that demanded action, argued Nola Watson, head of the Chief Executive Office of Insurance Australia Group (IAG) on Monday.
Speaking at a luncheon series hosted by the Women Lawyers Association of NSW and sponsored by Tresscox Lawyers, Watson said there had been a shift in attitudes about the fundamental role of governments and the private sector in the new economy.
As a result of the global financial crisis, the community has entered a heightened state of anxiety, placing increased pressure on governments to identify and prevent risk, said Watson.
"There is greater emphasis on consumer protection issues with Australia fast tracking legislation ... Governments are leaning strongly to implement measures that ensure greater accountability and transparency," she said.
Watson said regulations surrounding executive pay practices, as well as the banking and finance industry, were examples of governments responding to genuine community concerns. She warned, however, that regulation could be costly and needed to be made on the basis of sound risk management solutions.
"Regulators don't manage business. Boards and company directors are responsible, ... so when regulating we must take care that we get the balance right," she said.
Governments approach any crisis, including the GFC, in three stages, according to Watson. The first phase is aimed at local and immediate action; next comes the recovery phase, to stop damage and ensure the situation is under control; and the third stage focuses on prevention and implementing remedial measures.
"I think we're moving into phase three and a focus on actions to build greater resilience, with the most attention on regulations and political action to ensure long term sustainability and economic growth," she said.
- Sarah Sharples