Deregulation Doesn’t Mean Compliance Should Slip
Behavioral interventions offer a modern approach for sustaining an ethical culture Amid deregulation.
In our previous post, we explored how deregulation—often seen as an opportunity to relax compliance standards—actually underscores the need for robust internal compliance. In the midst of today's dynamic regulatory landscape, the question isn't whether compliance is worth the investment—it's whether companies can afford to take on the risks of letting their compliance functions slip, as doing so can have severe financial and reputational consequences.
Building on insights from behavioral science, we discussed how easing up on compliance can lead to moral hazard, where organizations take greater risks due to perceived fewer consequences. Overconfidence bias, for example, may come into play, further compounding risk.
With fewer external guardrails, the burden of ethical decision-making shifts inward. Internal culture, leadership modeling, and behavioral design are more than just risk mitigators; they become business imperatives.
wHY BEHAVIORAL SCIENCE MATTERS NOW
Compliance doesn’t fail because people are malicious. It fails because systems assume ideal behavior in imperfect conditions. Breakdowns happen when policies are too complex, incentives are misaligned, or people feel psychologically distant from consequences.
Behavioral science helps close that gap between intent and action. It equips leaders with tools that account for how people actually behave—under pressure, under ambiguity, and under influence.
In environments of deregulation, this becomes even more urgent. Moral hazard increases when oversight fades. Overconfidence bias causes leaders to believe their existing safeguards are enough. And when those biases go unchallenged, organizations can unintentionally drift into high-risk territory.
dESIGNING FOR BEHAVIOR: tHREE STRATEGIC FOCUS AREAS
1. Reduce Cognitive Load: Make Compliance Easier to Do Right
Overly complex policies create friction. When employees have to interpret dense documents filled with legalese, they’re more likely to make mistakes—or disengage entirely. Reducing cognitive load helps employees focus on action, not interpretation.
One global med-tech company replaced its 65-page compliance manuals with 5-page visual guides, including decision trees and checklists. Policy comprehension jumped from 37% to 89%, even as regulations continued to shift.
2. Reframe Compliance as Business Protection
How leaders talk about compliance affects how teams relate to it. If it's framed as a bureaucratic hurdle, it becomes something to sidestep. But when reframed as risk mitigation and brand protection, it gains strategic weight.
A global investment bank, facing deregulation pressure, repositioned its compliance unit as “Franchise Risk Management.” This framing aligned compliance with business continuity—and helped justify maintaining controls when competitors were cutting theirs.
3. Build Behavioral Ethics Into Training
Most compliance training is too abstract to influence behavior. Contextual training uses real-world scenarios and social context to increase what’s called ethical salience—the likelihood that someone considers the ethical dimension of a decision before acting.
A multinational healthcare company moved away from static policies and toward scenario-based simulations. Over three years, ethics violations dropped by 59%, without increasing oversight or headcount.
Culture as compliance Infrastructure
In the absence of strong external enforcement, internal culture becomes the operating system for ethical behavior. Behavioral science provides several high-impact tools to strengthen culture:
Model from the Middle: Social Proof in Action
When mid-level managers demonstrate ethical decision-making, it sends the message “this is how we operate here.” That’s social proof—the idea that people take cues from those around them, especially peers and immediate leaders.
After a bribery scandal, a Fortune 500 retailer launched a “tone from the middle” initiative. Managers were asked to document and share real ethical choices they made. This reinforced internal norms and helped rebuild trust—even as external pressure declined.
Make Accountability Visible
Accountability isn’t just about reporting—it’s about visibility. When compliance data is transparent, it creates social accountability and reinforces shared responsibility.
A pharmaceutical company implemented internal dashboards displaying real-time compliance metrics across teams. Violations dropped by 43%, even as external oversight of marketing practices loosened.
Use Priming at Decision Points
Priming involves placing subtle cues before key decisions to trigger ethical awareness. These cues don’t lecture—they nudge.
A global media company added ethics checkpoints to its content production workflow. Before greenlighting a project, producers had to confirm ethical considerations were reviewed. This lightweight intervention helped guide decisions in a fast-moving, high-pressure environment.
The Strategic imperative: From cost center to revenue protection center
When compliance is designed with behavior in mind, it shifts from being a reactive cost center to a proactive lever for culture, risk management, and strategic resilience.
Deregulation may reduce external pressure, but it also reveals what’s been holding organizations together all along. For those that rely solely on external rules, that’s a vulnerability. But for those that invest in internal culture, behavioral design, and leadership integrity, it’s a competitive advantage.
Now is the moment to decide: will compliance be something your organization performs, or something it becomes?