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Standards versus flexibility

February 21, 2012

A trend that will be of increasing significance to those responsible for business commitments is the steady shift in regulatory requirements. In particular, regulatory authorities worldwide are pushing companies to be responsible for the quality and integrity of their supply chains.

This results in a variety of shifts in current practices. For example, it will force supplier selection criteria to be far more focused on the reliability of the supplier.But this raises the question of how customers will evaluate their supply alternatives. For example, will each independently evaluate the supply base, or will third parties step into this gap? And, given the reluctance of the regulatory authorities to be precise about their requirements, what standards will be used to determine compliance?

Suppliers must think about ways they will demonstrate their adherence to the regulatory standard. For established majors, they may claim that their reputational risk is an adequate guarantee of compliance. They will be reluctant to share details of their approaches to cyber-security or disaster recovery, citing both competitive advantage and the need for complete confidentiality. But will this be accepted? And does it mean that smaller companies or start-ups are squeezed out of the market?

And if more and more aspects of commercial capability are covered by regulation, where exactly does that leave flexibility? What terms will remain negotiable in an increasingly regulated and standardized world?

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