Regulatory capability – reflecting on what makes a ‘good regulator’

Jarrod Cowley-Grimmond

For many people, the idea of ‘regulation’ suggests investigations and prosecutions, or what I like to think of as the ‘law enforcement’ approach to regulation. While the enforcement end is undoubtedly necessary, it is more helpful to start with the overarching objective of regulation: changing the behaviour of the regulated community. That broad task needs a larger and more diverse tool kit beyond investigations and prosecutions, including:

effective communication,
licensing and audits,
understanding the regulated sector,
data and intelligence to drive and focus compliance effort,
understanding incentives, and
ultimately, being an effective enforcer when rules are broken.

It follows that when thinking about regulatory capability, we need to consider more than just knowledge and skills in detection, investigation and enforcement. Some recent NRCoP webinars considering these issues include:

Learning to be better regulators
Why do people comply?
and Regulatory capability: what does it mean and how do we acquire it?

At a system level, we need to think how regulatory capability can be built in much the same way as we manage the development and progression of other public servants: by providing pathways for career development, rotating staff through other parts of the organisation, staff exchanges with other regulators, and providing effective executive leadership.

Other key aspects of regulatory capability include:

Technical excellence

Regulators must have a detailed technical understanding of the regulatory environment in which they operate, the tools available to them, and the skills necessary to be effective (for a discussion of ‘stellar competence’ as one of the three contributors to regulatory excellence, check out RegX: Achieving Regulatory Excellence and Listening, learning, and leading: a framework for regulatory excellence).

Knowledge of the sector

Understanding the operations, competitive pressures, drivers and incentives of the industries we regulate is key to ensure that we are using the right regulatory tools to encourage compliant behaviour or effect behavioural change. For example, see Three steps for regulators to embrace behavioural science and how the Dutch apply behavioural insights to understand the drivers of conduct in financial services in Applying behavioural insights to improve the effectiveness of regulation.

Pragmatism

To achieve outcomes– there are many tools available to regulators and we need to use what works and what is likely to be effective depending on the subject matter. Our strategies might include education campaigns, regulatory audits, comparative reports or license conditions, all of which can be effective tools that lead to behaviour changes. Investigations and prosecutions are always there but because of their costs and risks, should only be deployed when needed.

Skills set capability

When recruiting and building regulatory teams, it is important to think about the range of skills and experience needed to support the organisation to be innovative, proactive and effective. For a perspective on the ‘entrepreneurial regulator’, check out Entrepreneur | G-Reg.

Effective communication

Regulators communicate to a wide variety of audiences. Firstly, the regulated community, but also to the general public, key stakeholder groups and elected officials. Each audience has different interests and objectives but regulators should communicate what they are doing, why they are doing it, and how they are being effective to encourage and/or change the behaviour of the regulated community. One of the NRCoP’s most popular webinars in 2020 was Telling our story to the community: why good Comms matter.

As the Australian and New Zealand economies recover from the COVID-19 pandemic, governments are very focused on measures to support that recovery, create jobs, and support our critical industries recover from the significant shocks of the last twelve months. For some thoughts on how to adapt regulation for the post-COVID environment, you may be interested in NSW’s the Productivity Commission green paper: continuing the productivity conversation.

Regulators have an important role to play in supporting the economic recovery, not by lowering standards, but by taking a pragmatic approach and using all the tools available to us, ensuring:

our markets function fairly,
consumers can have confidence in the products and services that they purchase or use, and
market participants know that the rules by which they operate are important and will be enforced fairly, transparently, and effectively.

To learn more about how regulators have been adapting regulatory practice during the pandemic and what might be taken forward into recovery, have a look at:

ANZSOG/ National Regulators Community of Practice: Windows of opportunity in a crisis
Compliance in a crisis: challenges and opportunities for regulators during COVID-19
and Regulatory Laggards – has COVID-19 led to a rise in burden shirking?

The ANZSOG/National Regulators Community of Practice has an important role to play in building regulatory capability across our respective jurisdictions. Sharing information, exchanging ideas, and learning from each other, will allow us to grow our regulatory capability regardless of the specific industries that we regulate.

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Jarrod is a senior executive with the Queensland Government with expertise in leadership, regulation, policy, project management, and corporate administration. He has been involved in advising governments on regulation of financial services, corporations, taxation, environment, markets, public health and major infrastructure. Jarrod trained as a lawyer and an economist, and practised law in Australia and the UK for around 12 years before moving into leadership roles in Government in Australia and the United Kingdom.