RegTech is changing the rules of the game

Game-changing software technology promises to bring clarity and simplicity to what can be a minefield of regulatory compliance rules.

There can be little debate about the need for leadership across the energy sector to address dangerous climate change. There is perhaps more debate over how this should manifest itself. One thing is clear, modernised governance and regulation, fit for the 21st century, will have an essential role in achieving net zero. Gone are the days of large regulatory and compliance teams poring over mountains of requirements. It’s not that market rules are no longer needed – though certainly more can be done to reduce current complexity, volume and approach – it’s the way that rules are curated, modified and accessed by those who abide by them that must also change.

It’s happening already, yet largely led by other sectors. Most notably in financial services with a proliferation of RegTech companies bringing order to regulatory complexity using modern technology. A key driver is cost reduction. Up to 30 per cent savings have been achieved through reduction in regulatory teams and other compliance costs. Companies have also benefited from a reduced risk of non-compliance because the technology has kept abreast of ever-changing regulatory requirements and how these are implemented through an organisation’s corporate policies.

In its simplest form, RegTech can digitise the vast number of regulations, standards, codes of practice and other rules, making them searchable by keyword and other criteria. That’s all pretty basic document management, I hear you say, but add to this the curation of rules into “use cases” which return only the requirements needed for a company’s circumstances or activity and you begin to unlock the real value.

Likewise, the ability to administer modifications to the rules via the RegTech platform. This enables a more inclusive approach because it is possible to reach all market participants online, tailoring engagement to their interests, collating their views, and running voting and administration in a transparent way.

Modifications to rules in one part of the market will often have a consequential impact on rules in another – no problem – the technology will track this, making sure that it is not missed. Build in a link to corporate policies – the internal practices and procedures necessary for implementation and compliance – and you have an efficient, end-to-end service.

One challenge that all industries face is the loss of insight from key staff retiring or leaving. In policy, compliance and governance functions, these insights can underpin a competitive advantage or unique selling point. RegTech platforms help address this challenge, crystallising corporate knowledge and experience into the document management environment so new starters can be impactful sooner.

Gemserv has long advocated the vision of a single energy market portal to help reduce barriers to entry and the compliance burden faced by market participants. Under this vision, the myriad of regulation, licensing requirements and codes, together with their associated delivery bodies, would be largely hidden from view. Instead, market participants and other interested parties would have a single site from which to understand the rules of the market, the modification process, helpdesk and so on, and it was encouraging to see this idea discussed in the government’s code review consultation published last summer.

Gemserv is now turning this vision into practice. We launched CodeWorks in September 2019 to bring RegTech into the energy industry so that we could quickly and collaboratively help unpick some of the regulatory challenges in moving to net zero. We have digitised the Smart Energy Code (SEC) along with how modifications, reviews and authorisations are managed for this code. The SEC governs the UK’s smart meter rollout and CodeWorks has proven popular with users. This is being further developed as part of a bigger push to make available through the site all of the main energy market rules, including Ofgem’s licensing requirements and other codes – creating a one-stop shop for the market, and a step closer to our vision for a single market portal.

CodeWorks is but one example of many where Gemserv is transforming its business model. In this case we are combining our established governance capabilities with technology to deliver better client and market outcomes. Like all businesses, we need to continuously evolve in the face of unprecedented market disruption and the climate emergency.