Basel Institute Explores Whether Businesses Would Choose Good Governance without Regulatory Mandates

Key Takeaways

• The Basel Institute for Governance published a reflective piece examining whether businesses, particularly SMEs, would maintain strong governance and anti-corruption practices absent regulatory requirements.
• The article argues that governance, compliance, and culture are interdependent, and that proportionate, principles-based governance frameworks can strengthen organizational resilience and stakeholder trust even amid reduced regulatory pressure and ESG retrenchment.

Deep Dive

This publication is not a binding regulatory requirement but a thought-leadership piece that signals an important shift in the global governance conversation: the retreat from ESG mandates in some jurisdictions and growing geopolitical fragmentation are prompting renewed debate about whether governance and anti-corruption practices should be regulator-driven or value-driven. For compliance teams, this is a useful barometer of how international bodies and standard-setters (OECD, UN, ISO, World Bank) are reframing governance expectations in a deregulatory environment, and it suggests that voluntary adoption of governance principles will become an increasingly important differentiator for organizational resilience and stakeholder trust.

Key themes include the interconnection of governance (how power is exercised), compliance (the boundaries within which decisions are made), and culture (how people actually behave). The piece highlights a consensus across international frameworks around five recurring principles: tone from the top, risk-based controls, information flow, channels for raising concerns, and continuous monitoring/improvement. For SMEs in particular, the Basel Institute recommends a proportionate approach anchored in a Code of Ethics, supporting policies (conflicts of interest, anti-bribery, speak-up mechanisms), and practical tools like a Delegation of Authority matrix — rather than wholesale adoption of listed-company governance structures.

No specific deadlines or binding timelines are introduced, as this is an advisory/educational publication tied to a webinar delivered for the Malaysian Institute of Management's anti-corruption certification program. However, compliance professionals should treat this as a signal to proactively review and reinforce governance frameworks independent of regulatory minimums, particularly given warnings that reduced regulatory burden in some markets could weaken incentives for maintaining robust compliance programs.

Recommended actions include: (1) reassessing governance frameworks to ensure they are values-driven rather than purely compliance-driven, which supports resilience against regulatory rollback; (2) for SMEs, implementing lightweight but meaningful governance tools (Code of Ethics, Delegation of Authority matrices, speak-up channels); (3) evaluating organizational culture alongside formal policies to ensure controls are genuinely functional rather than symbolic; and (4) considering Collective Action initiatives where systemic integrity challenges (e.g., bribery in public procurement) cannot be solved unilaterally.

Risk implications center on governance erosion in deregulating markets, reputational and resilience risk from weakened internal controls, and collective action/bribery risk in markets where corruption is systemic. While this update carries no direct enforcement consequence, it is relevant for compliance teams benchmarking their governance maturity and anticipating stakeholder (investor, customer, regulator) expectations in an increasingly fragmented regulatory landscape.

Source: Basel Institute for Governance