The business world is constantly developing new products and services to support its customers.
For example, in the technology world, there have been developments around Cloud Computing, Big Data, Machine Learning, etc over the past few years. Likewise, there are been organisational changes around offshore and outsourcing to improve organisational effectiveness and efficiency. Finally, there have been a host of new products and services being developed to improve customers’ lives.
There are a number of reasons that organisations develop these improvements (such as improving customer offerings, reducing operating costs, increasing revenue, etc) but these new improvements do create a holistic issue because new technologies, ways of work, etc are often untested which means they could contain problems that could impact society in a wider sense.
A prime example of this is the 2008-2009 credit crisis where banks struggled with cash due to the use of complex derivatives called Credit Default Swaps (CDSs) and selling subprime mortgages. These products were relatively new but more worryingly lightly regulated which meant (a) there were insufficient controls around them and (b) wider society did not understand the size and scope of risks that these would have caused. Once the problems started then they instantly contaminated the wider society which resulted in very large governance financial bailouts which will take decades to repay.
While financial services regulation has increased dramatically since then, there are still many industries where regulation is very light. For example, the use of and controls around Artificial Intelligence, how data is protected if it is shared across the world on the Cloud plus many others.
Therefore regulators must start to look at these new market and technology developments to ensure (a) they fully understand them (b) they fully understand their risks and what could happen if these risks are ignored and (c) they can then implement robust regulation to control them and in turn protect wider society.
But the challenge is for regulators to have sufficient staff, skills, time and knowledge to do this. Strong Government support and steering will be required to put this in place (because it will cost money and will cause inconvenience for everyone).
This needs to be tackled urgently because we are currently sleepwalking into the new disaster and we may not be as lucky this time to escape.
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