After spending months collaboratively developing the forthcoming Ascend Institute Regulatory Effectiveness (AIRE) Index to help regulators assess and improve their effectiveness, I have been reflecting on the meaning of regulatory transformation and how it is put into practice daily. I am inspired by the people around me who work towards supporting and empowering regulators across different jurisdictions in their digital and regulatory transformation. By that we mean, encouraging a process of change to become more efficient, more effective, and more focused on public protection. We often talk about three key enablers necessary to achieve that outcome: people, processes, and technology. In this article, I will share insights on the first enabler – people – and some elements I believe could help in the context of digital and regulatory transformation.

First of all, employees having the right skills and competencies to do their jobs well is an important foundation. Alongside that – and perhaps more importantly when dealing with emerging, dynamic, and rapidly changing technology – is the ability to continually learn new skills and adapt at pace to changing circumstances and environments.

The Financial Services Skills Commission in the U.K. has created the ‘Future Skills Framework’ to enable organizations to identify their future skills needs and prioritize investment in these areas for the long term. According to the Commission, this Framework identifies those skills where there are acute shortages or where there is rapid and growing demand, including (among others) digital literacy, software development, machine learning and artificial intelligence, cybersecurity, data analytics and insights, and user experience.

Another relevant competence area is employees’ ability to identify risks. In my last article I discussed how regulators are tackling operational resilience in financial services to mitigate the impact of outages on customers and markets. Creating a culture of risk awareness within an organization is also part of these regulatory requirements. Employees should be equipped to identify, understand, quantify, and mitigate risks in their area of work and/or to escalate appropriately when necessary. Boards should also have the skills, knowledge, and expertise to reasonably oversee operational risks and hold senior management to account.

Accountability is an essential characteristic in any process of transformation. Clear roles and responsibilities alongside well-defined decision-making powers and reporting lines will ensure that employees understand the governance of a project or program of change and can escalate risks, issues, and concerns. Dealing with issues before they become major problems could improve resilience, efficiency, and reduce costs. If something goes wrong, it is expected that senior management takes responsibility, acts swiftly to fix it, and encourages a culture of learning and improvement. The Senior Managers and Certification Regime in the U.K. provides an example of how the responsibilities and accountabilities of senior roles such as Chief Information and Technology Officer and Chief Operations Officer could be defined.

The ability to raise concerns, issues, and risks without fearing consequences requires a work environment where people feel safe to speak up and feel that they are listened to when they do so. Different academics and experts in this matter will use terms such as psychological safety, voice climate, or courageous conversations. These terms have different definitions but essentially, they have similar underlying principles.

To put it simply, it is about people having the belief that if they take risks, make mistakes, report bad news or problems to their manager, challenge a manager’s decision, or share feedback and suggestions, there will not be negative repercussions for them, their career progression, or for their colleagues. It is more than whistleblowing and its regulatory requirements. It also includes people’s perception of how they will be heard and how what they said will be acted upon. If someone raises a concern and does not have a response, they will think it is futile to do so. Fear and futility were reported to be the main reasons people in banking did not speak up. The social norms or the experience of others around us might also influence our willingness to speak up in the workplace, therefore, creating an inclusive, open, and safe environment for employees requires a collective leadership and management effort.

Leaders should role model the values and behaviors they would like to see. I wrote a short blog a few years ago about leaders ‘walking the talk’ i.e., it is not only about what they say, but also – and perhaps even more importantly – what they do. Meaning what you say, communicating regularly, consistently, and with authenticity as well as demonstrating a genuine desire to listen and respond to feedback can go a long way to make people feel engaged in any change process or transformation.

People need to believe and observe that their organization responds effectively to staff and customer feedback, encourages innovation in the best interest of customers, removes internal barriers to continuous improvements, and improves what they do based on lessons learned. However, nothing will change if what the organization said it would do does not get done or people cannot rely on others to do what they said they would. Reliability goes hand-in-hand with responsiveness.

Managing change or a regulatory transformation program could put pressure on people or cause stress, so staff wellbeing should be another (or the most important) element to be prioritized and managed. Work should not have an impact on the health and wellbeing of employees and leaders have access to different tools to ensure that people are supported during a transformation project. For example, the What Works Centre of Wellbeing has a wealth of resources available to employers. In the same way, the elements described above are based on the Financial Services Culture Board’s framework to assess and manage organizational culture. Leaders and managers have a variety of publicly available tools and resources at their disposal.

Regulatory and digital transformation requires organizations to openly reflect about their processes and technology, changing what is needed to become more efficient, effective, and focused on public protection. But it is not only about changing technology and processes; it is also about empowering and engaging people throughout this journey. Focusing on the ‘people piece’ will ensure a successful delivery and better outcomes for customers and the public.

Rick Borges writes on regulation and related topics in financial services. With his extensive experience spanning the financial services and health care sectors, he acted as an advisor on professional standards and regulation to organizations in the U.K. and internationally.