Perhaps it is time to change the way we look at regulations in context to Knowledge Management.
The primary benefit of regulations is to protect the interests of individuals, organisations, society and the economy. Let’s start from the perspective that imperfection is the norm and at least 80% of regulations are aligned to generate benefits for many.
For example, traditionally, Health and Safety regulations meets with groans from many. Yet, those moans have dramatically depleted since the 2017 Grenfell Tower Fire disaster in London, where so many lives were lost or injured. The emotional intensity that
followed centered around ‘procedural’ deficiencies to protect the residents, including during and after the event. Health and Safety is truly in the spotlight.
The 2008 financial crises that continues today through austerity is another protection deficiency. Those financial sales people that sold sub-prime mortgages, followed by banks packaging sub-prime mortgages into assets eventually negatively impacted individuals,
organisations, society and the economy at a scale, where the few hurt the many. In 2007, systemic weaknesses in banking procedures were reported, but ignored because it fundamentally challenged the status quo. These systemic procedural weaknesses have yet
to be adequately addressed, even after the banking industry has paid over $300bn in regulatory fines.
Regulations are not easy to understand. However, the idea is that regulations are supposed to be interpreted into something that is understandable. The most common documented form of regulatory interpretation is the procedure.
It is these procedural documents that are the biggest KM challenge today and the greatest opportunity for RegTech Chatbots.
So, what are procedures?
Documented procedures are the established or official way of doing something as a series of rules and steps conducted in a certain order or manner, as the embodiment of regulations, policies and practices. Procedures impact every government, industry and
practice. Procedures are knowledge assets though their true value has been suppressed for so long.
During the 1990s, when KM reached mainstream, it became a catalyst for lots of tech firms. The most dominant tech influence came from what was subsequently called Enterprise Content Management (ECM), which eventually overshadowed the KM thought leadership
of notables such as Peter Drucker, Peter Senge, Ikujiro Nonaka and Hirotaka Takeuchi, Tom Davenport, Tom Stewart and Leif Edvinnson to name but a few. KM with its ECM bias, attracted a diverse range of people such as librarians and specialists in subjects
ranging from taxonomies and ontologies to cultural change experts. Eventually, the essence of KM was so contaminated it fell from grace.
Today, for large organisations, ECM (KM has been dropped) has survived and embraces the governance and controls around procedural documents, including the workflows for sign-off. This has created the perception in sectors like Financial Services that they
have strong procedural controls. The notion that 20+ signatures to approve a procedure means the procedure is good is little more than a belief system that is often out of sync with reality.
KM and ECM amongst other reasons have unintentionally contributed to systemic weaknesses within procedures across all governments, industries and practices. The massive gap between perception and reality has been compounded, because the ‘checks and balances’
have been compromised, especially by internal auditors and the Big 4 Auditing firms.
Audit Reviews signoff the procedures, but they do not have any transparency of the user decision journeys through these procedural documents to determine risk let alone their efficiency and effectiveness. Of course, there are some exceptions, but this should
not distract from the big picture.
The causality of these systemic weaknesses is attributable to the document. This single medium supports the author, the consumers (users) and the algorithms.
A procedural document reflects regulations, where the rules are black and white, and where they are grey is the fertile ground for policies. The associated choices, pathways and outcomes is underpinned by an algorithmic structure, akin to a decision-tree.
The problem is the single medium of a document is not suited for the author to ensure the narrative is underpinned by a strong algorithm. The document is also a poor medium for the user decision journey. Procedural documents are further compounded because
in most cases they are not subjected to usability tests nor measurable when deployed in practice.
In other words, the procedure remaining as one medium is no longer a sustainable instrument for control and usability. The resistance to this conclusion is palpable because it impacts so much and there are a lot of vested interests for not wanting transparency.
Whilst the gap remains between the perception of strong procedural control versus the reality of systemic weaknesses, governments, industries and practices will continued to be surprised by unexpected crises emerging from the depths of reality.
Procedures represent billions of documents that are supposed to contain the ‘practical’ knowledge for the way of doing something. They are the largest concentration of captured knowledge worldwide, but have been treated as the poor relation by KM practitioners,
technologists and professional services.
To understand procedures better means applying a combination of logic and narrative for smarter efficiency and effectiveness. The highest form of knowledge is for decisions. Procedures are designed for highly granular decisions that’s why they contain choices,
pathways and outcomes. Though procedures are an old instrument going back over 4,000 years ago when they were first carved in stone, it makes you wonder why they have been the poor relation for advancement.
Treating procedures as a transparent measurable knowledge asset is a game changer, at a scale for most it is unimaginable, for the moment.
The good news is RegTech is bringing a new wave of innovation and technology. This means the issues around procedures are now being actively tackled. Naturally, RegTech Chatbots will become the dominant means for the reinvention of procedures.
Chatbots is a shift away from the constraints of one medium to three mediums:
1. logic and narrative for the Author to publish Chatbots
2. conversation with the Chatbots for smarter interactions
3. real-time capture of dialogue data for audit, compliance, metrics and patterns
The reinvention of procedures has started and could accelerate at a pace that is truly transformative.