Self-Regulation - Term Overview

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Self-regulation is the ability of an entity, association, organization or institution to regulate itself. Thus, it designs its own monitoring system on a voluntary basis.

In other words, when an industry is self-regulated, it means that there is no supervisory body. Instead, it's the same companies that exercise control over their shares.

Self-regulation can take different forms such as industry codes of conduct, technical rules, professional practice manual, among others.

An example of self-regulation can be that of the press. This, when its contents aren't monitored by the government, but by an entity made up of the private companies themselves.

Advantages of self-regulation

The advantages of self-regulation include:

- Preventive work: Self-regulation allows to prevent, through education, code of conduct and others, that the company or organization falls into inappropriate or illegal behavior. It's an a priori response (before an event occurs) rather than a posteriori reaction (after an offense).
- Greater commitment: As there is a control that is born from the same organization, the people who make it up can have a higher level of commitment to its compliance.
- Better information: Companies can take advantage to detect the areas in which more or less control is required. External regulators, on the other hand, have less information and usually make the rules according to the average (of the companies in the sector) or to general assumptions.
- Greater flexibility: Allows the organization to adjust more quickly to changes in the environment.

Disadvantages of self-regulation

However, self-regulation also has its drawbacks:

- Lack of compliance: Because there is no external control, organizations can relax and stop meeting their obligations.
- Lack of homogeneity: Since control is voluntary, not all companies face the same rules. This can lead to disadvantages over those who apply greater discipline because perhaps they are incurring higher costs.
- Insufficiency: The rules and commitments adopted under self-regulation may not be sufficient to adequately comply with consumer rights or other aspects that a regulator would seek to protect.

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