An Introduction to Regulatory Impact Analysis

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Regulatory Impact Analysis (RIA), also commonly known as Regulatory Impact Assessment (RIA), is a document that is created before the introduction of a new government regulation. These types of documents are widely used around the world; however, their content, scope, role and impact on policy making may differ.

Generally, RIAs have some common roles to play. They provide a systematic and detailed impact of the change the government wishes to bring through some change or introduction of new policy. However, quite often they may also be prepared to analyze the impact of an already implemented policy. This may be done to see if the policy should still be kept or some changes should be brought. This is done because the market conditions keep on changing due to which a decision may not be as useful as it was when it was taken.

RIAs highlight if the regulatory change wish to be brought or already brought may help the government achieve its objectives.

There is dire need for RIAs simply because decision making is not easy and involves several complex steps. Since government regulations have a huge impact on individuals and the nation as a whole, decisions cannot be taken in a hurry without proper care. A decision has several impacts that are not very easy to foresee before a decision is implemented. This is why this mythological approach is necessary.

The government measures the impact a change may bring and prepared RIAs so that in the light of them decisions may be taken. This assessment may be done in various ways. Generally, a systematic approach is used where everything is measured properly keeping in mind the present and future scenarios.

In a nutshell, the main purpose of RIAs is to make sure that regulations are welfare-enhancing. They are often conducted to compare two or more options that one may have so that it becomes easier to choose one path keeping in mind the advantages each has. The option that minimizes the costs and gives the highest benefits is normally chosen.

Conducting analysis and preparing RIAs is considered a best practice. When one looks at it RIAs are not only useful in government projects but every other project. It is an important tool of policy-based decision making.

It is important to run an analysis and see all the impacts that a decision may have – both positives and negatives. It is important to make sure that the positives overpower the negatives at the end of the day so that the decision proves to be beneficial.

If such a scenario is not achieved then it is better to not implement the change. Yet, if it is mandatory one can bring some changes to the policy and analyze the situation once again to see if the change will result in something better.

Looking at the scope of RIAs, many countries have adapted it in recent times. Generally, it consists of six parts (Canada). They are:

-   Description

-   Alternatives

-   Benefits and Costs

-   Consultation

-   Compliance and Enforcement

-   Contact

Each part highlights a specific section. First, the project is described and then alternatives are presented in which benefits and costs of each alternative are highlighted. All these points help decision makers compare the alternatives so that they can easily select the one that gives the maximum output within minimum input.

Further reading: Corporate Governance | Audit | Performance Improvement

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