Regulators can all too easily become stuck in their ways. Too often, regulators aren’t thinking about the bigger picture, and are inclined to stick to processes because ‘we’ve always done it like that’ – using the same ways of working they defined years ago, without thinking about whether they’re still the best option.
But the regulated industries are changing. Technology offers more opportunities for online interactions and processing, whilst conversely raising the risk of cyber fraud. Consumers are increasingly savvy and better informed, with higher demands and expectations. Social ethics morph over time, with a rise in desire for individual freedoms, generating a need to mitigate associated threats. There is growing diversity in the regulated industries and greater innovation.
If regulators are unwilling to change, it could be costly to the industry they regulate: in our recent research, we found that almost every business we spoke to (95 per cent) expects to lose some business activity or revenue to new and disruptive competitors in the next five years. If regulators don’t keep up, they risk being ineffective and irrelevant.
Re-thinking Regulators: from watchdogs of industry to champions of the public
What can regulators do if their processes are stagnant, or thinking is stale? We believe that listening, learning and responding is the best antidote. Here are three ways to make that happen.
When The Pensions Regulator spoke to their industry they were surprised by the results: organisations told them they should be clearer and tougher in how they regulated. The feedback was valuable because the process involved over 100 people. As a result The Pensions Regulator has completely re-designed how it operates and the approaches it takes, fundamentally rethinking how they do things.
Many regulators have consumer panels, or industry groups. It’s a good start, but it’s not enough. Not all engagement is equal, and inviting the same 100 people to a meeting once a year probably won’t offer much in the way of useful feedback. Regulators could be much more proactive: talking to a wider spread of people, asking more searching questions and focusing on the future.
If there was ever a time to think creatively, this is it. So don’t just look at what other people in your sector are doing: look to other jurisdictions, look to other sectors. Lots of regulators are inclined to think that their sector is unique. Of course, some elements are industry specific, but at the core there’s a lot of overlap between the way that regulators work.
Regulators don’t tend to have ideas or innovation units, but many would benefit from this kind of a team to look at problems across the organisations and how best to solve them. This could also help regulators find the common threads in the work they do, rather than working in silos. For example, many regulators collect vast amounts of data, and don’t do anything with it. Learning from organisations who handle data effectively could cut down the regulatory burden on business, and free up time and space for regulators to foster innovation instead.
It’s one thing to ask people what they think, it’s another to do something with the results. Seek out honest feedback, and be prepared to act on it. That might mean rethinking KPIs, measuring impact not just activity. And it might mean reinventing internal processes, or shifting the culture. It’s tempting to leave things as they are, but it’s not tenable for the future. Change isn’t simple, but when it’s based on clear evidence from the people you serve, it helps to create the case for new ways of working. And that should mean better regulation for everyone.