When regulatory pressure makes it necessary to upgrade

A change in regulations can make professional equipment obsolete and force a company to change it.

This kind of a risk falls under regulatory pressure. It is necessary to identify the signs of this phenomenon and to anticipate it, to not only be able to cope with the costs that it may involve, but also to take advantage of it to achieve productivity gains.

What is regulatory pressure?

There are many reasons for a company to change its equipment. It may be a voluntary choice, aimed at increasing efficiency or improving the wellbeing of employees. For example: upgrading medical equipment to obtain the newer model, equipped with the latest technologies or replacing desktop computers that have become obsolete.

But the renewal of business assets can also result from a decision of the authorities, independent of the will of the company. This is the case when a change in regulation makes products, previously used in companies, unusable.

Regulatory pressure must be taken seriously by any company, since it may involve equipment renewal fees.

All companies are concerned

Whatever be the sector of activity of the company, it can be affected by this phenomenon. This is because changes in standards and other measures that take place in the public sphere, may concern some of the most common equipment in the professional world.

For example: telecommunication equipment. The French authorities have decided to put an end to the operation of the traditional copper telephone network by 2020. This has the effect of forcing companies to get rid of their PABX internal telephone switchboard, which exploits the historic coppered communication channel. They have the possibility of replacing it with an IPBX standard (which uses the same network as the Internet and IP voice technologies), to transform their standard by an IPBX-type switch, or to outsource their telephony to computer servers (Centrex IP).

Regulatory changes may also affect sector-specific equipment. Like that of French shopkeepers. For instance, since 1 January 2018, they need to have certified and secure cash register software. This new obligation aims to combat the concealment of receipts and VAT fraud, through a software that secures and archives cash register data. For many shopkeepers, the acquisition of this software involved changing the old cash registers for new ones that were equipped with this software.

Regulatory pressure: a constraint … and an opportunity?

Regulatory pressure should not be perceived solely as a constraint. By forcing the company to change a particular material, a new regulation can be an opportunity to increase productivity, or reduce expenses. While changes in norms usually pursue security or anti-fraud goals, changes in standards may also have an ecological inclination, synonymous with reduced energy consumption for companies or greater durability for their equipment.

This is observed in the case of light bulbs. In 2013, incandescent bulbs were banned for sale; and by the fall of 2018, halogenated ones will in turn be prohibited. As a result, companies that use these types of energy-consuming bulbs need to change them to less energy-hungry equipment – in particular, LED bulbs. In other words, this regulatory change is pushing professionals who have not yet done so to equip themselves with a less archaic lighting system, and thus to save money on their electricity bill. This issue also concerns individuals and public authorities – EDF, moreover, encourages its customers to convert to LEDs to achieve energy savings.

Similarly, any change in regulations that requires the acquisition of modern computer equipment can improve business productivity. For example, the paperless (electronic) bill has become mandatory for large and medium-sized enterprises (250 to 5,000 employees), and will be required for small and medium-sized enterprises (ten to 250 employees) in 2019, and for very small companies (less than ten employees) in 2020.

SMEs and small businesses are thus encouraged to equip themselves with computer equipment that can – at least – produce electronic invoices – an equipment that can help with other tasks, and may not have probably been acquired without the regulatory pressure.

Anticipating the regulatory pressure

While equipment renewals due to regulatory changes may be beneficial to businesses, it is important to anticipate them, given the cost they represent. For this, there is no reason to worry: changes in standards and prohibitions are generally announced several years in advance by the authorities, before their implementation. To keep abreast of such changes, companies may consult from time to time government sites – from the Ministry of the Economy, for company standards, that of Ecology, for environmental standards … – as well as the specialised economic or corporate press. It could also be a good idea to recall each 1 January what new regulations will be coming into force.

Another practice to adopt in a “painless” way, financially speaking, the changes of regulation, is rental. Purchasing is not the only financing option available for equipment – be it computer and telecom equipment, security systems or specialised equipment (e.g. medical). They can also be rented. So, when it becomes necessary to change a product, it’s just easier to not renew the lease at the end, and rent another property. By buying a piece of equipment, on the other hand, the company spends a potentially heavy sum, even though it may have to change it a few years later because of a regulatory change.