Financial Terms Glossary

Regulatory Costs

Formal

Some industries, usually ones that have previously been in public ownership, have obligations to Government appointed regulatory bodies. These may control pricing, competition, fraud etc. The costs of reporting to these bodies and implementing their recommendations can be very onerous. It is a little ironic, but investment proposals that reduce these regulatory costs are just as valid as those more standard proposals that increase revenue or maximise profits.

Informal

Former public bodies are given their freedom to operate in the open market. These include Electricity, Gas, Telephony, Water, Sewerage and many more. In order to ease them into the market, Governments appoint regulators or watchdogs to police their initial business activities. Compliance with these regulations can be very expensive and traditionally would not appear inside a commercial enterprise. Investment proposals that reduce these costs are just as valid as any others.

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