During an idea generation session for a telco client, a technician once said to me “walls are important – we are either going along them, round them or through them.” The regulatory ‘wall’ is a ubiquitous presence for leaders, constraining and determining the pace of business change. Indeed, this regulatory edifice presents a far greater challenge than even the largest of walls, as it is in a constant state of flux, guided by emergent societal and market harms and risks.
Yet businesses should not be intimidated. The process of adaptation to regulation needs to be reframed to be thought of not as a hindrance, but a major driver of innovation in an organisation.
UK regulation in 2021
2021 looks set to be a period of major shifts in regulation for UK businesses. The end of the Brexit transition period brought to an end decades’ old rules and requirements linking the UK to the EU, and set the country on a new path. Whilst the trade deal brought general certainty for organisations, matters such as financial services equivalence and data adequacy are still to be decided.
Patterns of regulatory divergence and convergence between the UK, EU and the rest of the world will play a key role as the UK seeks to optimise its competitive position. As such, the regulatory build-up comprises:
- The current, known backlog, which is itself challenging the change capacity of some organisations
- Likely/Known – the theme is clear but specific details are yet to emerge (e.g. data adequacy)
- Opportunity – future areas of change that through simplification, regulatory innovation and other factors will create new openings domestically and internationally
Regulatory Driven Change
How can businesses turn this complex regulatory picture into a driver for innovation? Rather than bristling at regulation, leaders need to familiarise themselves with a vital concept: Regulatory Driven Change. We believe it needs to be recognised as a topic in its own right, providing businesses with a roadmap to more effectively achieve compliance, capitalising on regulatory change to optimise business operations and elevate the service they deliver to clients. Together, these changes are key to help businesses successfully navigate the regulatory backlog and start viewing regulation as a catalyst for innovation.
This is, certainly, not always a straightforward process for enterprises. We have observed several common barriers to change. This often begins with a business struggling to move from regulatory principle to executable requirement, with resource allocation complicated by siloed business functions jockeying for attention and significant IT system or application complexity. A combination of the above factors reduces implementation time to meet fixed compliance deadlines, ultimately resulting in sub-optimal solutions – measuring and evidencing compliance is often then left as an afterthought.
Going forwards, organisations will, of course, continue to influence regulators with their practical knowledge of what works and what doesn’t. But this stance will be inadequate to help businesses achieve their goals over coming decade. How well Regulatory Driven Change is embraced is going to be a major determinant of post-Brexit market competitiveness and stability. It will also ensure enterprises can avoid the potentially crippling consequences of resilience and cyber-security non-compliance; the new Telecoms Security Bill, for example, carries penalties up to 10% of turnover.
As the first of two articles that consider how enterprises can embrace regulatory change, what follows focuses on compliance and general regulatory portfolio management. I will spend more time on how to exploit regulatory factors as a source of innovation and competitive advantage in the next article.
Challenges and Opportunities Posed by Regulatory Project, Programme and Portfolio Management
Regulatory Project, Programme and Portfolio Management is a critical areas to consider when embracing Regulatory Driven Change as a force for disruptive transformation in your business. Here I lay out some examples of challenges in this area and how to pivot to turn them into an opportunity for your organisation:
- Uncertainty and Ticking Clock
- A regulatory inventory is maintained; understand the regulatory picture.
- A method is developed for requirements elicitation.
- Meanwhile a project incubation function can ensure that addressable factors such as project definition are considered early; build a project incubation capability.
- Portfolio: employ a specific stage gate model, mapped to the overall lifecycle used in the organisation (this does not preclude Agile delivery approaches of course). This will make theentire Regulatory Life Cycle effectively ‘Projectisable;
- Early baselining of the situation is essential and can also be aligned with the incubation function
- Mindsets and Approaches:
- It is beneficial to consider Regulatory change as transformational – which is certainly the case for high impact requirements – but is also true for less impactful changes. The reason for this is because effective implementation is cross-functional and benefits from application of approaches used in true Transformational change.
- Regulatory Driven Change specific methodology is needed from roadmapping at the portfolio level through to task specific tools/templates at the project level.
- The volume change means that organisations will want to supplement their change specialists with resources who are tried and tested in this field; there is thus both the organisational capacity and experience element to consider
Don’t be afraid of regulation
These insights are as a result of the work that NTT DATA has carried out with clients across a wide range of regulated industries. Our Regulatory Driven Change approach improves business efficiency and stability, by supporting enterprises to embrace regulatory change. Regulatory Driven Change is not a zero-sum game – there are real advantages to be won. Stay tuned for a second blog for further detail on NTT DATA can support you through these times of unprecedented regulatory change.