What might be blocking the RegTech revolution?

What is RegTech?

Regulatory Technologies (RegTech) –  according to Harvard Kennedy School

“the application of new technology to regulation-related activities in order to shift them from analog-era to digital and computational models and, thereby, gain dramatic increases in effectiveness, efficiency and scalability”

It’s not surprising that amid an increasingly regulated global business landscape, many financial institutions are turning to RegTech to help them cope with greater scrutiny and the potential for hefty fines for non-compliance.

RegTech, however, is still a relatively new phenomenon but its growth has been rapid.

  • But has it been too rapid?
  • Has it left us focused on the goal while the fundamentals have been forgotten?

Whenever the term RegTech is mentioned there’s also the immediate thought of Policies and Procedures. In many organisations the proliferation of these controlling documents just means more qualified regulation officers and employees need to go on refresher courses. This is a huge cost and commonly lost in a training budget held by HR that is rarely measured as to the effectiveness of the training.

Now if it works well, your organisation would have well-trained teams and you’re making RegTech work for you – a real competitive advantage.

But the evidence suggests organisations are struggling. And they’re caught in at least one known gap called the ‘Knowing-Doing Gap’. But most likely they’re stuck in other gaps and traps that are collectively referred to as Behavioural Waste™.

‘You cannot change your future, you can change your habits. And surely your habits will change your future”  Dr. Abdul Kalam

In late 2017 Philip Creed, director and head of RegTech at fscom said “The main barrier for RegTech firms is a lack of compliance expertise on integration. Most RegTech firms are heavy in technology expertise but light on the compliance knowledge. When it comes to solving the financial institution’s actual problem, there can be a skills gap. To overcome this, RegTechs will need to bring in talent to shore up the gaps or outsource that element to experienced consultants.”

Skills gaps are interesting as it’s obvious that they need to be identified and filled by all organisations before they enter any innovation, disruption or change. But the real gap, the real elephant in the room – organisational culture – rarely gets addressed because it’s assumed it’s too difficult. Ignoring culture and the cultural change needed just adds to more Behavioural Waste™.

Philip Creed’s statement might almost come straight out of the book “How to make Lean Management Work”, which, had the book been written in the 1970s perhaps such change management programmes would have had more than a 20% success rate!


RegTech is a Change Programme

This may sound simple but RegTech is not only change, but a massive change. So why don’t we listen and learn from what the experts have researched time and time again, that demonstrate the characteristics of successful change programmes?  Once such in-depth research is the published work of Rao, H. and Sutton, R.I, “Bad to great: The Path to Scaling up Excellence”

“Before leaders attempt to adopt good practices, it is necessary to remove the bad, by identifying and reducing destructive and negative attitudes and behaviours to necessary change” in McKinsey Quarterly February 2014.

This sounds obvious too, doesn’t it? Yet, we still make assumptions that this RegTech project will alter these behaviours automatically. The facts show that it rarely if ever happens.


RegTech officers, employees and training

As Policies and Procedures grow, RegTech officers need to know a lot more which again is obvious.  That includes employees too although to a much lesser extent. The traditional route to increasing knowledge is Training. But there is a flaw in most training programmes and Rao and Sutton and others have highlighted it.

If someone hasn’t the right mindset and ready to move, then any training intervention will have much less of an effect – and “..no better than random chance” according to the CIPD.

The aim of any training programme is also to ultimately change behaviours to improve results. Initially, this change is a conscious action and when we regularly practice these behaviour changes we will convert the conscious actions to automatically happen. This is commonly known as unconscious competence and in some cases can be called common sense.

Consider the analogy of learning to drive a car. Initially, it can be clunky and quite erratic. With focused practice, in a relatively short time, we become proficient enough to pass a driving test. Then after more practice, we can experience travelling to our destination with very few conscious thoughts towards our driving. When there’s a traffic build up or incident, our awareness will then automatically engage conscious behaviours to navigate the problem. We also have an advantage in this state-of-mind and that’s having a clear purpose – safely arriving at our destination.

Isn’t that what we’re aiming at within the RegTech space?

Perhaps the issue is you don’t have a clearly defined purpose that your team are completely engaged with?

Changing organisational culture, personal attitudes and behaviours can be difficult. But if you assume they’ll change because RegTech is the saviour, then we wish you luck, because you’ll need it!

Next steps

There is a free to join global group emerging in the RegTech and FinTech arena called Disruption Disciples and our CEO is head of the London Chapter. Here are a few links to demonstrate you’re not alone YouTube LinkedIn Company  Website

If you’re in the risk business, ignoring this advice is taking a risk – can you afford to ignore it?

As ever you have a choice – what’s yours?

How can we think outside the box today?

How can we think outside the box today?

Edward de Bono

It’s generally accepted that Edward de Bono is one of the pioneers of “Brain Training” and in 1967 he invented the world famous Lateral Thinking technique. It revolutionised the concept of thinking as a separate skill.

Indeed Forbes Magazine said

If you haven’t heard of Edward de Bono or of Lateral Thinking, perhaps you have been too busy thinking in conventional ways.

If however, you’ve always questioned the status quo, never taken no or can’t do for answer it’s likely you’ve never been restricted by comfort zones or boxed thinking. But as the vast majority of people are we need to understand what they see and why they’re locked.

Lateral Thinking – what is it?

With logic, you start out with certain ingredients just as in playing chess you start out with given pieces. Each piece has a clearly defined role and a value. But unlike on chess, in most real-life situations the pieces are not given, we just assume they are there. Most people assume certain perceptions, certain concepts, and certain boundaries. Lateral thinking is concerned not with playing with the existing pieces but with seeking to change those very pieces. Lateral thinking is concerned with the perception part of thinking. This is where we organise the external world into the pieces we can then ‘process’.

Comfort zone

Layered onto this we also need to appreciate that for most there is a quite clearly defined Comfort Zone which is a psychological state in which things feel familiar. A place where we like to stay and perform with little or no anxiety or stress.  A comfort zone to a person is where they are at ease and in control of their environment.

Dr Brene Brown describes it as

“Where our uncertainty, scarcity and vulnerability are minimized—where we believe we’ll have access to enough love, food, talent, time, admiration. Where we feel we have some control.”

In essence, it’s where people feel safe. But it’s an imaginary place as it only exists in our mind, although it might be similar to many others that are around us.

The following may help further although all may not be common in everyone:


How to break outside the box?

You can try training but regular readers will now be aware of the problems of knowledge training and that results are small and rarely sustainable.

Change the culture and encourage people to come out of their comfort zone is an obvious answer but as most HR leaders will know this elephant in the room is hard to budge. It’s also assumed to be expensive and will take time.

But there is a way that’s guaranteed to budge it once and for all and may not take as long as you expect.

Develop Reality-Driven Leaders and focus on reducing Behavioural Waste™ will always work – https://www.mindfitltd.com/has-your-industry-a-reality-driven-leadership/

If that’s too much to take in you can always look at another sector. One we all frequent and will revisit based solely on our memories or recommendation of a friend. I’m talking about restaurants, where every meal delivered to each guest is of a standard or the quality of the house. It’s why you go back, you perceive value for money.  And the good news here is that there are reality TV programmes about it.

Ramsey’s Kitchen nightmares highlight the problems on what is a simple business – good food and good service at a price we will buy.

Here’s a 5-minute insight https://youtu.be/TI5Mj37yi48

And the full 45 minutes https://youtu.be/AnNmEx7MWz8

I wonder if like me you laughed at the obvious that a professional consultant points out? They are classics of manufactured comfort zones and boxes that are killing what is a simple to understand business.

Next steps

If this resonates with you the good news is you can fix it. So you can choose:

  1. Do nothing and hope it fixes itself
  2. Take the examples and run with them
  3. Have a discussion on Reality-Driven Leadership

As ever, the choice is yours.