Opinion: 10 ways for government regulation to adapt with technological change
We need a more agile approach to regulation that supports and adapts to the change of the Fourth Industrial Revolution. Agile regulators can “lean into the latest technology trends and proactively shape them”. The UK, South Korea, Canada and other countries show how regulation can be used to foster innovation and improve technology governance.
It can take weeks to introduce a new idea or business model but years to pass a change in the law. Our rules can block innovations that can power productivity and solve our most pressing social and environmental challenges, and fail to protect our citizens as they struggle to adapt to a new era.
A more agile approach to regulation is needed to maximise the potential of the Fourth Industrial Revolution. Through the Global Future Council for Agile Governance, we have gathered the latest evidence from across the world on how our rule-making system needs to adapt to this new environment.
Here’s our 10-point pitch for how regulators need to adapt:
Recent history is littered with examples of regulators being caught short by disruptive innovation and reacting suboptimally. Agile regulators lean into the latest technology trends and proactively shape them, using foresight methods to identify possible futures and make preparations to adapt.
Singapore has embraced foresight thinking and set up a Centre for Strategic Futures in the Prime Minister’s Office to create a “strategically agile” public service. Other governments are now following suit.
Too many rules focus on process, not outcome, stifling businesses that find new ways of doing things.
Agile regulators are designing “tech-neutral”, outcome-focused regulatory regimes. Not only do these generally perform better in adapting to technological change, they can actually stimulate businesses to innovate to meet outcomes.
Japan is implementing a new governance model in areas such as health and safety. Instead of setting requirements around the design of factory facilities and processes, it looks at how well factory systems are able to monitor safety, reduce risks and intervene when issues are detected, giving businesses greater freedom in their operations.
Agile regulators are creating space for businesses to trial and test new approaches – and learning about how their rules need to adapt along the way.
Many administrations have emulated the UK Financial Conduct Authority’s “regulatory sandbox”, in which regulators permit businesses to test novel products and processes for a trial period.
The UK is driving a new wave of regulatory innovation through its Regulators’ Pioneer Fund. Established in 2018, it has invested in 15 novel experiments – from stimulating tech entry to the legal services market to supporting testing of AI-powered medical devices.
Agile regulators are harnessing the power of technology to monitor and evaluate the performance of these outcome-focused regimes more effectively – enabling them to intervene in more targeted ways to uphold performance.
The Dubai Financial Services Authority has developed its own “in-house regtech” to crunch through huge volumes of financial data and enable more sophisticated management of risk. As well as enabling better risk-based enforcement, regulators are increasingly using these techniques to monitor whether regulation is really working and, if not, to reform it.
Laws cannot – and should not – be frequently revisited. Agile regulators are using mechanisms such as regulatory guidance and industry standards to help fill the governance gap, especially in areas of rapid technological innovation.
The UK’s Centre for Connected and Autonomous Vehicles has created a role model of public-private collaboration. It has created a code of practice to help steer the testing of self-driving vehicles without the need for repeated changes to legislation as the technology evolves, alongside working with the British Standards Institution on standards for self-driving vehicles.
In the Fourth Industrial Revolution, innovation often cuts across sectoral and regulatory boundaries.
Agile regulators are working with their peers to ensure a joint response to new products and services so that innovators don’t suffer “death by a thousand paper cuts” and that bad actors can’t exploit gaps between institutions. The Danish Business Authority, for example, has established a “one-stop shop” for new business models to help businesses find their way through the regulatory landscape and bring their ideas to market quickly.
Agile regulators are also co-ordinating at the sub-national level, where innovators in areas such as mobility can find themselves navigating new rules and processes across different towns, states and regions. The 2017 Canada Free Trade Agreement seeks to create a more open and efficient internal market across the Canadian provinces, enhancing the diffusion of innovation.
Agile regulators are putting increased efforts into international cooperation and reducing barriers to trade and the scope for “rule-shopping” across administrations by internationally mobile businesses. For example, the Global Financial Innovation Network is developing a framework for cross-border testing of innovations, building on the development of regulatory sandboxes in more than 20 countries worldwide.
Innovative new entrants frequently have lower capacity than incumbent firms to shape and implement new rules.
Agile regulators are addressing this bias and finding new ways to make it easier for innovative firms to engage with regulation. For example, New Zealand’s Better for Business programme has created an AI-powered chatbot to answer firms’ regulatory queries, lowering the cost of understanding the rules.
We’ve saved the most important point till last. As governance evolves, it is crucial that it addresses the priorities of the citizens it is meant to serve and earns their trust in its processes and outcomes.
Agile regulators are finding creative ways to enhance citizen involvement in the design and implementation of rules for new technology. For example, Korea has integrated citizen democracy into the design of its latest smart city initiatives – ensuring that consideration of societal needs is underwritten into the testing and introduction of new technology. Elsewhere, the OECD is promoting enhanced citizen involvement in governance through its Open Government Initiative.