To me this feels a bit too theoretical. The reason a real regulator has an implicit or explicit model of the relation between S and Z is time.
Z.t is influenced by S.[<t] and R.[<t], the curren state of Z is the result of the time series of S up to that point and the timeseries of R up to that point.
Think of each arrow as taking 1 time quantum. Even if you assume R itself takes 0 prossessing time, R can only affect Z after S already had it's affect.
So S.t affects Z.t+1 and is observed by R at t+1, and the regulatory signal from the resulting output of R will only affect at Z.t+2 at the same time that S.t+1 is already affecting it.
If R has no implicit or explicit model of the S-Z relation, meaning it can not sufficiently predict dZ from dS, it can not modulate dR, its own compensations, to avoid over or undercompensating.
In practice you see this in self reinforcing feedbackloops in naive regulators. An initial small perturbation gets overcompensated so the result is a slightly larger perturbation that gets overcompensated until the system is completely oscilating out of control.