Building the case for smarter regulation

Building the case for smarter regulation


Regulators need to adapt to changing technologies and consumer expectations while avoiding getting caught in pendulum swings between the extremes of regulatory capture and robotic enforcement.

That was the key message from a recent Nous Group forum on the topic “The next steps in smart regulation”, which was held in Sydney on November 12 as part of Beyond 2020, a series of events on shaping Australia’s future to mark Nous’ 20th anniversary.

Featuring on the panel was Vanessa Beggs, the Chief Operating Officer of the Australian Banking Association, Rose Webb, the Deputy Secretary for the NSW Better Regulation Division, and Simon Smith, a Nous Principal and former Secretary of the NSW Department of Industry. As a Nous Principal and former director of Consumer Affairs Victoria, I was the panel’s moderator.

We wanted to reflect on challenges we have seen in a range of markets, where issues can be seen as failures of the regulatory system, failures of regulatory practice, failures of industry or failures to hold people to account.

Recent high-profile consumer concerns have shone a spotlight on regulators, including the Banking Royal Commission, misappropriated water allocations and unsafe cladding on apartment buildings.

Each has created a climate in which consumers and politicians sought a strong response from regulators, putting pressure on them to get tough while also creating heightened expectations on what regulation could achieve.

Ms Webb argued that regulators needed to resist the urge to rush to legal enforcement, using that tool where appropriate but also making strategic use of remedies such as enforceable undertakings.

“Regulation has got a lot more sophisticated and there’s a lot more thought about different approaches rather than one-size-fits-all,” she said.

A customer-centric approach can make a real difference

The panel heard about Nous Group’s Better Approvals work with state and local governments in Victoria, which is making it easier for people to start a business. Nous helped agencies to radically simplify their processes, to only ask for information once, and to make and keep time commitments. The changes have significantly reduced the time taken for people to establish a business.

Mr Smith argued that regulators would benefit from adopting a customer-centric approach, reducing complexity to build community support.

“A big reason politicians want to slash red tape is because they have a lot of people made very grumpy by the way regulation is administered,” he said. “It gets the back up of people who are subject to it, who then go in and say, ‘look at all the extra cost and delays that regulator has added to my project.’ ”

Ms Webb explained that her regulatory agency was part of the recently-retitled Department of Customer Service, prompting it to seek ways to create a positive experience for users.

“Notwithstanding that you’re regulating someone, you can still treat them with respect, make sure that they understand what you’re talking about, make it as painless as possible for them, make the process easy, so they can comply as best they can,” she said.

Ms Beggs explained that the recommendations of the recent Banking Royal Commission, led by Kenneth Hayne, pointed to the need for more diligent enforcement of existing regulations rather than additional regulations.

“Banks see this as an opportunity,” she said. “The challenge for us is how we do that in a constructive manner while putting the interests of customers first.”

Ms Beggs argued that good governance meant the board was instrumental in asking the right questions to know what is going on inside their organisations. She noted ongoing experiments with organisational psychologists considering whether that process could be improved, but said current thinking is that accountability lies with directors, where she thought it should be.

Harnessing the potential of technology

The panel agreed that easier access to data was a boon for regulators, but making the most of it required a willingness to share data between agencies and to access specialist analytics tools.

“There’s a long way to go in making the best use of data but absolutely there’s real opportunity there,” Ms Webb said.

In identifying ways to share best practice among regulators, Mr Smith cited his experience overseeing five regulators in his previous role. He said he had commissioned a review to assess how his regulators measured up against characteristics of a quality regulator. He found that each was good at something, but none was good at everything. He then brought the leaders of each together to share knowledge on their areas of strongest performance.

“Having left government I am now keen to share the lessons of this experience more widely,” Mr Smith said.

The full discussion can be heard on NousCast.