Regulating complex environments needn’t be cumbersome or expensive. New technologies and methods can help regulators operate efficiently and effectively, reducing compliance costs and improving the business experience.
You can hardly blame regulators for feeling overwhelmed these days. Technological advances such as artificial intelligence (AI), machine learning, big data analytics, distributed ledger technology (blockchain), and the Internet of Things (IoT) are forcing them to reexamine the basic principles of their work. New technologies keep emerging and evolving, disrupting traditional business models and posing fundamental challenges for regulatory agencies striving to protect consumers while allowing for innovation.
The emergence of what the World Economic Forum (WEF) has dubbed the “Fourth Industrial Revolution” is leading to the convergence and fusion of these technologies, in turn blurring the lines between the physical and digital world. In the wake of this technological revolution, Klaus Schwab, WEF founder and executive chairman, calls for government leaders to adopt more agile governance approaches.
In this complex environment, regulators find themselves allocating increasing amounts of staff time and funding to understanding the business dynamics and regulatory implications of new markets and industries. At the same time, they still face a host of traditional challenges: identifying “bad actors,” monitoring compliance, and speeding up regulatory processes to better serve the public.
However the same technologies that challenge traditional regulation also offer many new opportunities to fundamentally reinvent rulemaking, oversight, inspections, and enforcement. Moreover, innovative problem-solving approaches that infuse design thinking and behavioral economics can help regulators find effective ways to address both old and new challenges.
This report explores some of the technologies and strategies that are opening up new avenues for regulatory modernization, as well as the challenges their adoption poses.