Regulation in Practice Why is it so hard? Why is it so hard? And - PowerPoint PPT Presentation

Regulation in Practice Why is it so hard? Why is it so hard? And what can we do to improve? Hanzo van Beusekom Hanzo van Beusekom hanzo@clearconduct.nl Wellington, March 2nd 2014

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St. Peters ‘mountain’ in NL (108 m.) St P t ‘ t i ’ i NL (108 ) A Aoraki / Mt. Cook (3724 m.) ki / Mt C k (3724 ) 3

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What do regulators aim for? aim for? 6

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Why do regulators fail? 8

Hypothesis A Hypothesis A Regulators are: Regulators are: • Lazy • • Incompetent Incompetent Corrupt • (or a combination) 9

Hypothesis B Hypothesis B Disasters incidents & scandals are a Disasters, incidents & scandals are a normal outcome: Society has many built in conflicts • • • Regulators have limited influence Regulators have limited influence • Zero ‐ failure is a dangerous fiction 10

Hypothesis C Hypothesis C Regulation in practice is Regulation in practice is difficult, it requires: managing trade ‐ offs • • • wide range of skills wide range of skills • practice and perseverance 11

Did you Did you see it? understand? Harm Harm Did you act upon it? p 12

Did you Did you see it? understand? % ? % ? Did you act upon it? p 13

Context Detection Detection Analysis Analysis Mitigation Mitigation Outcome / Eff Effect t Trade ‐ offs, choices and learning 14

• What classes of risks are within scope? • Is it clear what we value most as an organization? Is it clear what we value most as an organization? Context C t t • What are the expectations of our stakeholders? • What does success look like? What is the nature of the harms we identify? • Detection What kind of information do we need? • What are our biases and blind spots? What are our biases and blind spots? • • • Have we formulated multiple hypotheses? p yp • Do we understand the dynamics / root causes / drivers? Analysis • Do we have an estimate of the size and importance? • What is our strategy to deal with this risk? Detection Mitigation • Are we addressing the root causes or drivers of the risk? • Which tools do we use? 15

Quick example: hidden cost of banking Quick example: hidden cost of banking • Dutch financial conduct of business regulator C Context t t • We want to make sure costumers are treated fairly k d f i l • Banks should not profit from superior information position • Any information to disclose hidden costs and fees • Insiders, product information, complaints Detection • • Bias: consumers are weak and need help Bias: consumers are weak and need help Segmentation by product, costumers, institution Seg e tat o by p oduct, costu e s, st tut o • Analysis Saving products are big source of excess profit • Regulatory race to the bottom, no feedback loop • • Raise awareness among consumers Detection Mitigation • Use pressure and turning point strategy • Strong on transparency, not too much enforcement 16

What can we do to improve regulation in practice? p 17

Tell stories Tell stories Increase focus Increase focus I Improve detection d t ti E Expand toolset d l Practice & learn 18

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Difficult trade offs in clean air regulation Difficult trade ‐ offs in clean air regulation Start ‐ up coffee roaster The neighborhood “The public’s “God given right to right to earn a breathe clean buck” air” Woodstove as the single Woodstove as the single Burn ban on cold winter day Burn ban on cold winter day point of heat to lower smog “We need to “We need to “The public’s “The public’s Private Private Public Public keep keep right to right to ourselves ourselves breathe clean breathe clean warm” warm” air” air”