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The emerging market to digitalise regulation is an USD 1,000 billion opportunity

Regulatory distribution is systemically broken

The conventional way governments distribute rules for use by citizens, businesses, other private actors and for the institutions of government is through documents and other forms of content. As highlighted in an earlier paper “The Dangerous Risk of Interactions with Regulation”[i], the use of documents as the authoritative version of regulatory rules is systemically broken when applied in practice.

Regulation countermines productivity

It is generally accepted that workforce productivity has stagnated in many sectors around the world. There is little doubt that regulatory diversity, volume, complexity and rate of change and the way it is inefficiently deployed is counterproductive.

Regulatory economics is misunderstood and underdeveloped

One Australian in-depth study (Unleashing Productivity[ii]), by Deloitte, estimated that it costs AUD 94 billion to administer and comply with Australian federal, state, and local government rules. This equated to circa 6% of Australia’s GDP (Gross Domestic Product). Using this formulaic approach, the cost of regulation to the UK economy is circa GDP 170 billion and to the world economy the costs are circa USD 5,236 billion every year.

Emerging market to digitalise regulatory rules

In times of global stress, such as the Covid-19 pandemic, government changes to rules are increasing pressures upon already burdensome regulatory costs. This has created a growing momentum by governments to digitalise regulatory rules. One group, Digital Nations are collaborating in an initiative called Rules-as-Code, which involves 10 countries: UK, Estonia, Israel, New Zealand, Republic of Korea, Canada, Uruguay, Mexico, Portugal and more recently Denmark. New Zealand has undertaken the Rules-as-Code lead, but believe they are still at the embryonic stage of experimentation.

The OECD’s[iii] Observatory of Public Sector Innovation (OPSI) has produced a paper on this subject called Cracking the Code[iv], which outlines the business case for Rules-as-Code and references other countries efforts including France, Jersey, Australia, Germany, and Hong Kong.

Rules-as-Code: the need to think differently

The digitalisation of regulatory rules is a knowledge problem that needs to cope with the 1) diversity of subject matter ranging from the identification of possible child abuse to the selling of a financial product; 2) volume of rules and narrative; 3) complexity of logical permutations resulting with numerus pathways and outcomes; 4) and the rate of change such as experienced during the Covid-19 pandemic whereby the rules were altered or clarified sometimes on a daily basis.  

When looking strategically at the way forward regarding Rules-as-Code, it is worth remembering Albert Einstein’s quotes: “We cannot solve our problems with the same thinking we used when we created them” and by “doing the same thing over and over again and expecting different results".

A new way of thinking and practice is required

Rules-as-Code: a new kind of digitalisation 

Regulation is a vast, ever-changing, and growing landscape.

Meeting this challenge requires new thinking and new tools for encoding, interacting, and measuring regulatory rules, whilst maintaining a single source of truth that is easy to change to keep pace with ever changing circumstances. 

Imagine representing this landscape as an ecosystem of simple, independent programs each containing codified reguation representing nonlinear logic and narrative, and delivered as a measurable service for human interaction.

The power of simple programs is not new as it was pioneered by Stephen Wolfram in his world-renowned publication called “A New Kind of Science”[v] as a more natural solution to handle complexity.    

The benefits of digitalising regulation

The benefits can be wide ranging and include:

      i.     Safeguard people and organisations

     ii.     Reduce operational costs in both the public and private sector

   iii.      Reduce non-compliance risks

    iv.     Protect the balance sheet from excess provisions

     v.     Improve productivity

    vi.     Continuous intelligence for new forms of benchmarks

  vii.      Free subject matters experts to focus on learnings at the edge    

 viii.      Shorter cycles of improvements 

    ix.     Manage knowledge as a tangible, measurable asset  

The market value for the digitalisation of regulation

This emerging market is gaining a momentum across many countries. The shift towards treating regulation as a service is ideally suited to deliver cloud-based Annual Recurring Revenues (ARR), which can be a shared income between governments and enterprises operating the managed services. The value of this market has the potential to be in circa of USD 1,000 billion (+/- 20%) every year.

The most innovative leadership within this emergent market will be those that find a way to digitalise regulations at scale along with leveraging the value from new benchmarks. The gold rush has begun!   





[iii] OECD Organisation for Economic Cooperation and Development





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Freddie McMahon

Freddie McMahon

Director Strategy and Innovation

DF2020 Ltd

Member since

04 Aug 2017



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