The world is rapidly changing. Governments must draft, change, and enforce legislation rapidly as emerging technologies drive new business and service models. The most pressing challenge is how to safeguard citizens and promote fair markets while allowing innovation and businesses to thrive. Regulators are grappling with how to strike a balance between supporting innovation, safeguarding consumers, and addressing the potential unintended consequences of disruption as a result of technology advancements.
Four fundamental problems must be addressed by government officials and regulators as they struggle with the challenges posed by digital technologies:
- What’s the current state of regulation in the area?
- What’s the right time to regulate?
- What’s the right approach to regulation?
- What has changed since regulations were first enacted?
Here. we suggest a variety of alternative tools and techniques for a future focused regulation to stimulate greater innovation and lower compliance costs to differing degrees. The concepts below can assist answer the problems of “when to regulate” and “how to regulate,” as well as lay the groundwork for reconsidering regulation in an era of rapid technological change:
- Performance or outcome-based regulation: Specific measurable outcomes (performance metrics, risk thresholds, and so on) that allow organizations to innovate more freely, as long as the desired performance can be demonstrated easily. Firms and consumers can choose the method by which they will comply now that the outcomes have been established, allowing them to choose more efficient and cost-effective ways to comply
- Regulatory experiments: This consists of various regulatory techniques that give businesses more flexibility through temporary regulations. This covers everything from sunset clauses that establish goals and allow for adjustments over time to “regulatory sandboxes” that allow businesses to experiment with new ideas without being bound by the applicable set of rules and regulations.
- Management-based regulations: They aim to shift decisions to businesses with the most information, as these businesses have the best understanding of the risks and benefits in a given sector. They are also known as “enforced self-regulation.” Such regulations typically require firms to maintain a variety of procedures, systems, and internal management practices in order to meet the regulations’ goals, which may be outcome-based.
- International regulatory co-operation (IRC) : In some cases, such as developing technology, a company’s products may cross numerous industries and jurisdictions, necessitating a coordinated regulatory strategy. IRC can assume many different forms and types, and its geographical reach can range from bilateral to multilateral.
- Self-regulation and co-regulation: These are instruments with no government involvement. Typically, self-regulation entails a group of regulated entities creating voluntary norms or codes of conduct to govern or guide the behavior, actions, and standards of those inside the group. In general, co-regulation entails governments providing explicit legislative support in some manner for industry-developed regulatory frameworks.
To encourage innovation, authorities are developing outcome-based regulations and experimenting with novel models in sandboxes. The principles discussed in this article can assist regulators in striking a good balance between consumer protection and innovation.