The National Reconstruction Fund (NRF) commits $15 billion for the diversification and transformation of Australia’s industry and economy. The government has also promised a multi-million investment in responsible AI via the federal Budget and, like many countries across the globe, is considering whether regulation of AI is required or even feasible.
These are just two of the many initiatives proposed by the Department of Industry, Science and Resources to promote sustainable economic growth and future prosperity. The ultimate success of the initiatives will be determined by the quality of information available to decision-makers, and the ability to balance continuous innovation and risk mitigation.
The greatest challenge to our regulatory framework is private sector innovation. Innovation that changes the ground rules. The legislative and regulatory frameworks that are there to support and embed these initiatives are not agile.
In this environment, advances in technology can end up promoting regulatory inflexibility, rather than solving it. This compounds the existing challenges of regulations which are not fit for purpose and escalate the cost of compliance for industry. These are all barriers to innovation.
How can we tackle emerging risks and issues even before they are apparent? How can government steer policy and regulatory design when we have limited visibility over which laws are ineffectual, or contradictory, or even obsolete?
A Regulatory Digital Twin
A scalable and interoperable Regulatory Digital Twin (RDT) for Australia’s regulatory system would provide a set of new and essential digital tools for Australia’s innovation agenda, providing real-time information and a powerful platform for ‘what if’ analysis.
For example, the RDT could be used to test congruency between taxation and corporation laws with incentives offered through the NRF, and map all existing laws impacted or relating to artificial intelligence and suggest options for reform. Existing Australian laws can also be mapped against international standards and international laws to propose options for law reform.
‘What if’ analysis can be conducted throughout the regulatory lifecycle from policy formulation, ensuring key stakeholders have real time access to valuable ‘regulatory performance’ information at any time.
With technology supporting us we can stop focusing on how we implement regulatory change and instead look at how regulation can drive innovation. Simply put, a RDT would provide government and industry with a set of new digital tools for a new innovation agenda.
An RDT, like other forms of digital twin technology, is a digital replica of real-world entities, systems and processes.
Using the analogy of a digital twin of a manufacturing plant, an RDT would enable government to rapidly identify process failures (for example, incongruency between laws) and improve on product design (like incentive schemes) before it goes into production (or introduced to the market).
As the digital twin does not replace the existing infrastructure, and is virtual representation only, adoption can be seamless and rapid, allowing the benefits to be realised within a short timeframe.
An RDT would have the ability to fully harness the efficiency gains of digitising analogue/text systems and instantaneously navigating exceptionally large volumes and networks of data, regulatory information and cross references.
In relation to the NRF and similar funds, this would include the mapping of “tax policy, the thousands of statutes and regulations that shape business options across almost all facets of the economy, trade and competition policy, skill formation settings, immigration and foreign investment policy” as identified by the Productivity Commission 2023, 5-year Productivity Inquiry: Innovation for the 98 per cent, Vol. 5, Inquiry Report no. 100, Canberra
Similarly, the volumes of interconnect regulations, codes, standards, and ethical principles that relate to the deployment of technologies such as AI, including, (but certainly not limited to) those regulating crimes, cybersecurity, critical infrastructure, export controls, intellectual property and privacy could also be mapped within the RDT to allow for direct what-if analysis.
In a nutshell, the staggering complexity of Australia’s policy and regulatory infrastructure can only be solved by innovative approaches to regulatory design and deployment of best practice within the digital twin space.
Australia is well positioned to be a global leader in policy design and innovation through deployment of an RDT.
There are already examples of regulatory digital twins in the market. For example, Realta Logic has built and deployed an RDT for the finance sector and meat exports, with other is in the pipeline. Its solution is built on work performed by the CSIRO’s Data61 and has helped to resolve the cost of regulatory complexity, giving government officials expert information for decision-making.
Regulation as data
Rapid improvement to Australia’s regulatory eco-system can be achieved within a short horizon, through reframing regulation (from statutes, codes to policy statements) as data.
Realta Logic says that by applying legal informatics, data analytics and machine learning to the regulatory eco-system, significant efficiency and productivity gains can be achieved, while still providing public safeguards.
RDT can effectively ‘map’ all rules, conditions and interconnections at play, and is therefore not limited to Commonwealth, State and Territory statute books, but to all legislative instruments, standards, policies, procedures, and terms and conditions.
Complexity – the source of risk and cost
RDT employs a multidisciplinary approach to solving one of the root causes of risk and cost – complexity.
The Australian Law Reform Commission (ALRC) DataHub provides empirical evidence of the vast, complex and every expanding “Universe of Law”.
As of December 2022, the ALRC reports more 282,000 pages containing 21 million words, across more than 1,220 Acts and 17,600 pieces of delegated legislation currently in force at the Commonwealth-level alone. Between 2016 and 2019, the number of pages of new legislation increased by 2,000 to 111,000.
The ALRC provides a map of the 5,400 Acts (yellow) and legislative instruments (blue) that related to corporations and financial services sector alone.
The lines represent the complex web of interconnections between legislation, which are constantly changing due to amendments, modifications and authorisation, let alone the passage of new legislative instruments: (https://www.alrc.gov.au/news/universe-of-law-alrc-datahub/)
Similar maps can be generated for any other sector, including manufacturing and those being targeted by the NRF. All sectors are already subject to significant regulatory complexity.
In 2020, NSW Treasury’s Report ‘Regulating for NSW’s Future’ estimates that ‘unfit-for-purpose’ regulations translate to a compliance cost for the state of between $11 billion to $87 billion every year (approximately 14 per cent of the state’s gross product).
Multiply this figure by the number of states and territories and across the Commonwealth Statute Book, with a co-efficient for ever increasing list of new regulations introduced every year.
RDT would promote the success of the NRF and any proposed policy or legislation in this complex environment by powering real-time scenario-based analysis and the alignment of policy, regulation and incentives, reducing friction and the associated costs.
How it works?
At its core, a Regulatory Digital Twin is a sophisticated predictive analytics model able to map existing laws within minutes and generate options for redesigning the status quo to meet specific criteria. For example, this could be about optimising for efficiency and productivity while maintaining required social safety nets.
With its ability to reason ‘what if’ scenarios, it is able to identify roadblocks, unintended consequences and opportunities for efficiency gains.
In effect, the RDT will act as an information superhighway, a type of nervous system for the regulatory eco-system, enabling rapid communication, and stimulus-response programming, deployed at any time with the greatest advantage before ‘market release’.
Leading the way
The success of Australia’s innovation agenda will depend on our ability to manage complexity within a resource constrained environment.
RDT provides the ability to accurately represent, monitor and adjust every element, touchpoint and connection within the eco-system, from policy statements, to interactions between new and existing regulation across multiple domains, including financial incentives, tax, employment, export controls, international trade and even contract terms.
The Australian government would be investing in its own innovation and rapid digital transformation through adoption of RDT practices, taking a step toward ensuring future prosperity and driving sustainable economic growth by design.
Síobháine Slevin is an award-winning innovative product development leader with over 25 years international experience in applying emerging technology to finance, insurance, compliance regulatory design, and implementation. Siobhaine is CEO and Co-founder of Realta Logic, leaders in digital infrastructure and Regulatory Digital Twins. Her global leadership includes representing Insurance Ireland at the EU, actively engaging with policy makers on PRIIPS, GDPR, MiFiD II, Brexit and other pivotal legislation, and designing world leading solutions, including introducing Luxembourg Life platform into Ireland via the EU passport rules and the first Bank of Ireland Private Banking Portfolio platform. Siobhaine is an active member of the AUSCL Future Law Network Steering Committee and Irish Australian Chamber of Commerce.
Marina Yastreboff is President of the Australasian Society for Computers & Law, a multidisciplinary intergenerational think-tank at the intersection of law, technology, and society. Marina has held senior inhouse roles, including as a senior technology lawyer at two leading Australian universities, specialising in tech transfer, information technology and digital law. Marina was named the Australasian Law Awards’ Inhouse Leader (2022), Academia, Training and Education, Lawyer of the Year at the Australian Corporate Counsel Awards (2022), and ACC Australian NFP Lawyer of the Year (2021). She is a passionate champion of Australian research and innovation across multiple disciplines.
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