Regulation For The Future

Since the first regulatory agency was created in the United States in 1887 (for railroads), regulation has evolved and adapted to the needs of society and the economy. Today, we are once again at an inflection point, when many changes present themselves that could impact regulation in a variety of ways.

​

One of the most important is certainly the convergence of different technologies coupled with the speed of technological development and deployment in different economic and social contexts – the fourth industrial revolution.

​

With technological advancement, innovation and the adaptation of technologies, which often go hand in hand are becoming more important. Regulation can be a means to slow down or to drive innovation, depending on how forward looking and agile it is. One key aspect is the degree of risk taking embodied in regulation. Government processes and procedures are generally built to minimize negative financial outcomes, which can stifle innovation, which always entails a risk.

​

One example where this plays a role is the area of public procurement, which in many countries makes up for significant share of the market. On average, public procurement amounts to 12% of global GDP with some countries spending more than 20% of their GDP (including India, Brazil, Egypt, Turkey or the Netherlands). Many of the areas where public procurement is taking place are innovation intensive, such as for example the healthcare sector or defense. Regulation of public procurement processes for these sectors needs to evolve to allow for prototyping, testing of new processes and products and to factor in a higher risk of failure.

​

But technological progress is not the only trend. We also observe that many markets are impacted by the ongoing systemic change as societies, governments and consumers increasingly focus on addressing what has become known as the global challenges, e.g. climate change, biodiversity, ageing-related health challenges, or inequality.

​

For markets that are at the heart of systemic change (e.g. logistics and transportation, energy, utilities, food and agriculture, etc.), the level of complexity of regulation will likely increase exponentially. Not only in terms of outcomes, but also how regulatory institutions and processes are organized. Systems change needs new models of collaboration and engagement of a wider range of stakeholders. Regulation needs to take these into account and move towards a more dynamic and collaborative regulatory environment that brings together different stakeholders.

​

In the context of systemic innovation and change, reflexivity in policy and regulation is key, understood as the ability to correct course based on whether policies reach objectives. While regulation adapts on a continued basis to keep up with change, regular reviews of the impact of regulation are needed to ensure it is rethought as the situation evolves.

​

Forward looking, advanced regulation can help a country create competitive advantages, as other countries tend to build on the experience of the first mover and local businesses can adapt to regulatory requirements at their own pace and co-design them. Also, advanced regulation can help drive new approaches to systemic change that can be exported.

​

​