If printed out, the ‘handbook’ of regulations for companies in the energy industry would be higher than many of its members, yet even the smallest market participants have to work through it all. Making changes is a long and cumbersome process where industry has to check through and test for clashes and unforeseen consequences.
Is there an easier way? Gemserv is among several companies looking at a ‘satnav’ approach that will not only offer easier routes but also ensure a simpler and cost-effective transition to our net zero journey. It is known as ‘RegTech’ and is already used in other sectors.
Gemserv has put forward new proposals for its use. In this sponsored post, New Power challenged the company to talk first-time traveller through the RegTech journey, Shaz Shamim, Senior Strategy Consultant, responded for Gemserv:
NP: What is RegTech?
It is software to help comply with regulations, standards and codes of practice. It uses automation to help improve market governance, reduce risk and ease the compliance burden.
NP: How is the job done now?
It varies by sector. The financial services industry is well ahead on the use of digital technology. Energy is catching up, but market governance and compliance is often managed through analogue processes and the sector has yet to scratch the surface of digitalisation.
NP: What digital technologies would be used?
RegTech uses automation technologies such as artificial intelligence, big data, cloud computing and machine learning to help minimise human error and speed up processes. The application areas include policy, workflow, reporting and document management.
NP Can you give us examples of how it would work?
Gemserv has introduced CodeWorks, which digitised the Smart Energy Code (SEC). It enables code parties to search across many code documents at the same time and has functions like filtering, which allows specific types of organisations (‘party type’) to see only those obligations that apply to them. This is more efficient – saving time and money.
NP: What’s in it for a company?
As well as saving time and money, RegTech reduces the risk of mistakes in regulatory compliance. This also builds trust for investors. The COVID-19 pandemic has shown that businesses tend to be less vulnerable in times of crisis if they have started to invest in digital environments. RegTech is one such application.
In the longer-term companies also benefit from unlocking the profit-making data hidden in customer interactions.
NP: What’s in it for customers?
Customers should be the final beneficiaries of lower costs and less risk, whether that is via savings in the cost of operating market governance arrangements (like the energy codes) or savings in their compliance costs. Gemserv’s work on digitalisation of the new Retail Energy Code, for example, should drive savings in managing that code and complying with it.
NP: In the UK energy sector, will all the Codes use the same RegTech and be interoperable?
Market participants have to comply with rules that are administered by different organisations in different ways. A single industry platform with all the rules available in one place could help reduce the regulatory burden. Such a platform would have to be developed on the principles of standardisation and interoperability.
NP: Will it be the same as that used in other industries – can we copy over?
Every firm and industry has unique needs and drivers to embrace RegTech. Broadly speaking, it brings four key characteristics: agility; speed; integration; and analytics. These characteristics are all connected through one resource: data. As new use cases are developed, learning from pioneering sectors is useful, but customisation is the key implementing it successfully.
NP: What are the barriers to adopting RegTech?
RegTech adoption is slowed by lack of awareness, weak use cases and lack of preparedness to integrate with a firm’s existing IT environment. A collaborative approach with RegTech providers is essential to ensure that these barriers are addressed.
NP: Is RegTech cyber-secure?
Cybersecurity is intrinsic to RegTech. In fact, it helps companies maintain cyber security as it means continuous monitoring of security compliance. It is due to its frequent security logs and technical audits of the organisation’s software and systems; dividing customer processes from corporate ones and transitioning to cloud-based software and servers, among other characteristics.
To find out more download The RegTech Advantage