Taleen Shamlian
19 Sept 2025
Regulatory frameworks often reflect the vulnerabilities of the system’s weakest link
This article appeared in The Australian on Friday 19 September 2025. Find a pdf version here.
Tighter regulation can be a two-edged sword
It is often said that government regulates for industries, and not for individual organisations. Yet last week, the entire airline and retail sectors are facing new regulatory scrutiny due to governance failures by individual organisations — namely Qantas, Woolworths and Coles.
Transport Minister Catherine King announced that airline passengers affected by cancellations or delays could soon receive greater protections, including minimum standards for assistance, refunds, access to food or accommodation. In hoping to ‘raise the game’ across the sector, the government is also considering the introduction of an ombudsman and dedicated regulator.
Meanwhile, Woolworths and Coles have been hit with a Federal Court judgment over underpayment of staff with preliminary estimates suggesting a total cost of at least $1.3 billion for the two major players.
While some of these initiatives may be warranted, the real challenge lies in how they are translated into prescriptive legislation and enforced—potentially adding significant complexity for businesses.
Take, for example, the definition of a ‘significant delay’. Currently set at two hours, the government is consulting on whether even a 20-minute delay could be considered significant for business travellers.
But do we really want regulations that attempt to prescribe definitions of a delay based on individual circumstances? That could amount to a different definition for every traveller in every situation.
Similarly, we must ask: what will it cost Woolworths and Coles to replace their existing timekeeping systems and retrain nearly 320,000 staff with the new system? If these standards are applied sector-wide, how will smaller retailers compete if they are forced to make similar investments to remain compliant, without the same balance sheet?
The reality is that regulations designed to protect consumers and workers come with significant costs. Management must consider product changes, while compliance, legal, IT and other teams devote significant time and resources to navigating regulatory requirements and their practical implications. These costs are substantial with estimates showing that Australian business spend up to 5 per cent of GDP in regulatory compliance.
Yet, governments and regulators are often responsive to public opinion, especially in sectors perceived to have prioritised shareholder over stakeholder interests. This was starkly evident during the Hayne Royal Commission, the aged care inquiries and other investigations where CEOs and boards were summoned before parliamentary and royal commissions.
These heightened regulatory interventions come at a time when governments are simultaneously attempting to reduce regulatory burdens across sectors.
On Friday last week, Treasurer Jim Chalmers Finance Minister Katy Gallagher released letters from 38 Commonwealth regulators with more than 400 ideas to improve regulation and reduce compliance burdens. Similarly, ASIC has announced they are looking to ‘slash red tape’ and make regulations simpler and clearer.
In practice, this creates a paradox: on the other hand, government is easing regulatory requirements for operational efficiency; on the other, they are introducing new industry-wide regulations in response to governance failures.
So how did we get here? Boards must exercise stronger oversight by incorporating and anticipating non-shareholder perspectives — employees, customers, suppliers — into decision-making. Organisations must proactively safeguard their reputations and mitigate the risk of crises before they escalate.
Boards and management need to set the tone and culture for stakeholder engagement — not simply ‘ticking the compliance box’ but valuing constructive, non-adversarial relationships that anticipate stakeholder perspectives. The experience of The Star Entertainment Group, where management failures and poor board oversight led to intense regulatory scrutiny, illustrates how a lack of genuine stakeholder engagement and cultural leadership can trigger lasting reputational and financial damage.
Understanding these developments is particularly important in a hyper-connected environment where AI, cyber risks and algorithms are reshaping industries and transforming business and society.
In the government sector, there is a persistent temptation to regulate, aptly captured by Ronald Reagan’s remark: “If it moves, tax it. If it keeps moving, regulate it.” Regulations are sometimes introduced swiftly, leaving organisations to embed new standards while simultaneously adapting to them — essentially learning to ‘build the plane while flying it’.
The government’s focus on red tape reduction without undue risk by regulators is a step in the right direction. Countries like Canada are also modernising outdated regulations and streamlining compliance, where they found the average business spends 92 days on regulation, one-third of which was spent on red tape.
As such measures are also being considered, it is equally important not to compromise consumer, employee, and other protections. Don’t throw the baby out with the bathwater.
More broadly, the broader public service should evaluate the impact of regulations — ideally every three years — to assess whether they are achieving their intended outcomes. This calls for deeper reflection on alternative approaches to regulation, such as outcomes-focussed risk proportionate regimes, or regulatory sandboxes, as a way of embracing the spirit of innovation in government.
Regulatory frameworks often reflect the vulnerabilities of the system’s weakest link—where standards are shaped not by the strongest performers, but by the most fragile. The cost of inaction or poor governance can lead to regulation — a cost far greater than that of prevention. As the adage goes, prevention is better than cure.
Taleen Shamlian is the Managing Director of Advisory Street. She was formerly Head of Government Relations at Visa and Commonwealth Bank, and an economist at Commonwealth Treasury.