Reseting the Landscape, the Future of Regulation in Australia

Over the past 12 months, the SpencerMaurice team has supported a number of National and State-based regulatory and integrity agencies with reviewing and resetting their strategic priorities.

Through these engagements, we’ve gained valuable insight into the unique challenges and opportunities across the regulatory landscape.

Here’s what we’ve learned and our key observations.

Obervation 1: Regulatory Frameworks

Regulatory activities are generally those in which the government seeks to control or influence behaviour, manage risk, and/or protect the community.

The regulatory framework and the enacting legislation set out a regulator’s key functions and critically shape, influence and inform the approach regulators take to interacting and engaging with key stakeholders and undertaking regulation activities. There are various regulatory forms, ranging from self-regulation to the most common, direct government regulation.

We have observed that the regulatory framework and the interpretation of legislation that enables regulatory activities are at times misunderstood, or at the least, there is often no shared understanding across stakeholder groups. This, coupled with slow reform, can impact the effectiveness of regulation as a tool for enhanced public value.

Key Observations:

Alignment: Are regulators, regulated parties, and other stakeholders aligned in their understanding of the regulatory framework in place and share a common purpose of driving public value for consumers or citizens?
Beyond Compliance: Does the regulatory framework actively enhance quality, safety, or consumer interests beyond mere compliance?
Evolving Frameworks: Are there safeguards to allow regulatory frameworks to evolve over time and respond to changing circumstances?

Observation 2: Transition to Outcomes and Risk-based Regulation

Governments use regulation to control risks that affect the economy, consumers, society, and the environment. Effective regulation and controls can yield significant economic, social, and environmental benefits.

However, implementing and enforcing regulation also incurs costs. Regulators need a process to prioritise resources towards the greatest potential risks to regulatory outcomes. This necessity has driven a collective shift towards outcomes and risk-based regulation.

This transition aims to reduce unnecessary regulatory burdens on regulated entities, enhance the productivity of both regulators and the regulated, and generate broader economic and social benefits. While we have observed enthusiasm and steps toward risk-based regulation, we also recognise the challenges inherent in transitioning from compliance-based to true risk-based regulation.

Key Observations

Regulator maturity: How well-prepared are regulators to adopt and implement outcomes and risk-based approaches? What stages of maturity do different regulators exhibit in this transition? What are the key success factors and barriers for regulators in achieving full maturity in risk-based regulation?
Industry readiness: Are industry players prepared to engage with and respond to outcomes and risk-based regulation? How do different sectors vary in their readiness and ability to adapt to risk-based regulation? What impact could risk-based regulation have on industry performance?
Mindset shift to outcomes and continual improvement: How significant is the shift in mindset required for both regulators and regulated entities to focus on outcomes rather than compliance? How can regulators and industries collaboratively foster a focus on outcomes that drive public value?

Observation 3: Industry & Stakeholder Relations

The relationship between regulators and its regulated industry is inherently complex. Regulators are tasked with ensuring that industries comply with established rules and maintain sufficient and reliable safeguards. However, this fundamental role doesn’t have to dictate how the relationship works in practice.

While maintaining independence is crucial to ensure integrity of regulatory decision making; fostering strong, trusted, and appropriately collaborative relationships with regulated parties, and other key stakeholders, is becoming increasingly important, particularly through the lens of outcomes based regulation.

Key Observations:

Engagement Mechanisms: Are there robust channels for regulators to engage with regulated parties and other key stakeholders while preserving the regulator’s independence and integrity?
Constructive Collaboration: Do mechanisms exist for industry bodies to work constructively with regulators to identify and address common challenges and systemic risks proactively?
Sector-wide Commitment: How might regulators go beyond effectively assisting compliance, and influence sector-wide maturity or improvement in the regulated area?

Observation 4: Data-Informed Insights

Regulators often collect critical data and information from the sectors they oversee. This positions them uniquely to identify emerging patterns, trends and risks. By leveraging these insights, regulators can shift from reactive to proactive practice, and support regulated industries to lift performance and ultimately improve public value.

Key Observations:

Data to Intelligence: Are regulators collecting and analysing the right, quality information to understand risks? Are regulators continually maturing their intelligence base and analytics capabilities to support both preventative and reactive regulatory activities?
Evidence based decisions: Are regulators continually measuring and validating the impact of their activities to mature their risk decision frameworks and support evidence-based decisions?
Cross-Agency Insights: Are regulators capitalising on the opportunity to work with other regulatory or integrity agencies to build insights that could influence improved practices beyond the immediate regulatory footprint?

Observation 5: Access to Industry Talent & Knowhow

Regulators and integrity agencies face challenges in attracting and retaining high-quality talent, compounded by an aging workforce. The skills and capability profile for tomorrow’s regulator must evolve from a historical reliance on deep industry or regulatory expertise.

Key Observations:

Broadening the Talent Pool: Are regulators being creative and courageous in identifying opportunities to expand the talent pool beyond historical skills profiles?
Talent Development: Could regulators address demand for career development and growth through job rotation programs within and across integrity agencies?
Diversity Through Partnerships: Could regulators broaden workforce diversity through partnerships with operators and industry stakeholders?

Observation 6: Education Over Enforcement

Education (the overarching descriptor for sharing advice, information, research and insights) is increasingly important in the regulatory landscape. While compliance and enforcement remain essential functions, education plays a key role in influencing the attitudes and behaviours of regulated parties, making it crucial to effective regulation.

Key Observations:

Education Programs: Are there opportunities to leverage intelligence and insights to develop sector-wide education and awareness programs aimed at securing compliance?
Partnership Opportunities: Could cross-Industry partnerships provide untapped pathways to share better practices and motivate enhanced performance on targeted issues or behaviours?
Strengthening Relationships: Have regulators explored opportunities to engage with the community, the ultimate beneficiary of public value, through awareness, education, and campaign sponsorships?

By addressing these key areas, regulatory and integrity agencies can better navigate the complexities of their unique environments, ensuring that their approaches evolve to meet the demands of a changing world.