Regulators focus on changes to industry. But what happens when they need to get their own house in order?

Dan Cliffe

By Alexander McGill, Dan Cliffe


The UK’s regulatory landscape has never been so complex or subject to such frequent and significant change. In fact, it’s estimated that by 2020, more than 300 million pages of regulation will be in existence.

New regulations coming into force tend to require large scale transformation for regulated entities. But it can be easy to forget that regulators themselves must also deliver large scale change programmes to get themselves in a position to continue to supervise and regulate in the new world (watch our client The Pensions Regulator share views on their own journey to transform here).

The scale and pace of regulatory change, combined with usual budgetary constraints, means regulators find themselves under increasing pressure to ‘do more, quicker, with less’. Like many of the firms they supervise, regulators must address how they set up their change initiatives and structure their organisation to implement a growing pipeline.

This view is echoed by the industry. In our research, Rethinking Regulators, we found nine in ten businesses believe regulators need to focus on their processes, technology and resources to achieve the shifts they need over the next five years.

We think there are three ways regulators can shift their approach to delivering regulatory change to deliver more, quicker, but with less.

Adopt agile ways of working

From next year, systemically important banks will need to separate the retail and investment parts of their business. This regulatory change came about because of the financial crisis in 2008 – but only now is it coming into force. This kind of extreme time lag is not uncommon. Regulators tend to use a waterfall approach when delivering change, which makes for long delivery time frames.

Embracing agile principles could be part of the answer. Adopting this approach will allow regulators to consult on and publish new regulation, bring about change across industry, and achieve the aims of regulation much more quickly. By delivering the highest priority changes first, transformation would happen at a quicker pace and there wouldn’t be the ‘post-event’ time lag that’s often seen.

Re-thinking Regulators: from watchdogs of industry to champions of the public

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Think in themes, not just teams

Typically, regulators create a project team for any new piece of regulatory change. Although this helps to deliver the specific change, it fails to acknowledge that regulation is rarely delivered in isolation. It also fails to exploit the common themes that exist across most regulations. For example, they usually require some change to policy, IT systems, operating models and business and industry readiness activity.

When working in isolated, siloed project teams, we see a significant duplication of effort, complex and uncoordinated waves of change, and inefficient and overlapping regulatory oversight functions.

One way to address this problem would be to recognise the common themes that exist between different pieces of regulatory change and then structure delivery around these. For example, you might mobilise a Data Collection Programme to deliver future changes that would let you collect new data from the industry. This would be a better approach than mobilising specific projects to deliver the individual changes needed to collect, store and analyse new data stemming from a new piece of regulation. This approach would also make it easier to share expertise, allowing teams to work more quickly and cost-effectively.  

Challenge risk averse thinking

Most regulators have a very low appetite for risk. That’s particularly true for high profile change projects, which carry a reputational risk if they go wrong. We often see regulators aiming to mitigate change delivery risks at any cost. This makes projects longer and more expensive, but not always more effective. No one wants regulators to be reckless or rash. But sometimes fear of risk becomes disproportionate and regulators forget to factor in the impact of long delays.

For regulators, increasing their appetite for risk, and having more tolerance to accept and transfer risks that arise, would increase the pace and reduce the cost of delivering change. That means defining risk appetite and tolerance statements at an organisation, portfolio and project level. This change will give project and portfolio managers more control, letting them strike the right balance between quality, time and cost.

Establishing how to deliver ‘more, quicker, with less’ is key if regulators are to successfully implement their growing pipeline of regulatory change. We believe they can achieve this by creating thematic portfolios to deliver more, adopting agile principles to deliver quicker, and increasing their appetite for risk to deliver with less.

About the authors

Alexander McGill PA financial services expert Alex works with clients across the Nordics, Europe and UK to optimise their approach to non-financial risk management and financial crime prevention. He brings extensive experience working with global banking groups and financial services regulators across the region.
Dan Cliffe
Dan Cliffe PA implementation expert Dan enables clients to deliver their complex change programmes by quickly building trust, establishing programme control and focusing on delivering results.

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