Survival strategies for a hyper-regulated economy

Software automation and mobile communication can ease the pain of regulatory compliance.

Federal regulations increase the cost of doing business, and can be a disincentive for anyone thinking about starting a business.

Fortunately, there are technology solutions that can take some of the sting out of regulatory compliance and even turn it to advantage. Many regulations involve collecting information and informing consumers — tasks that can be largely automated using software and mobile devices. The data gathered can often be used to fine-tune operations and better serve customers.

During his campaign, President-elect Donald Trump promised to eliminate the most daunting rules and scale back regulations. Specifically, Trump called for a government-wide review and, more recently, suggested that two existing regulations be eliminated for each new regulation enacted.

Good luck with reducing regulations. Any such attempt is likely to encounter fierce opposition from the federal bureaucracy and special interests. The new administration would be wiser to focus on overturning the most prohibitive regulations, and let technology ease compliance with comparatively innocuous regulations.

An era of steady regulatory expansion

Nearly all U.S. regulations were created after 1900 — most in just the last half-century. The Code of Federal Regulations has grown from 22,877 pages in 1960 to 178,277 pages in 2015. Growth has been relatively steady regardless of whether there was a Democrat or a Republican in the White House. Market-leading companies are rarely opposed to regulations: They are more interested in shaping than eliminating them, because regulations can be a bulwark against new competitors.

Even when both political parties agree to deregulate an industry, the result is often more pages of rules — not fewer. For instance, the Telecommunications Act of 1996 was conceived to open the communications business to competition. However, new carriers had to be guaranteed the right to interconnect with incumbent carriers’ networks at reasonable prices. That required a slew of new technical and business rules.

Generic business and industry-specific regulations

Many federal regulations cut across multiple industries. They include tax withholding, Occupational Safety and Health Administration (OSHA), Affordable Care Act (ACA), nondiscrimination and consumer credit rules. These regulations are typically handled by HR departments, though many only apply to businesses above a certain size.

Other federal regulations are industry-specific. Financial institutions are subject to know your customer (KYC) rules designed to thwart money laundering, terrorist financing and identity theft. KYC rules require confirming the customer’s identity, checking the customer against lists of persons being watched and comparing actual behavior to expected behavior.

According to a study commissioned by Pegasystems, a developer of strategic business applications, care must be taken by financial institutions when onboarding new customers and upselling existing customers. KYC compliance can be baked into client life-cycle management software to smooth the information gathering process and use the data to improve business performance.

Regulations have become so extensive, complex and subject to change that companies often find it difficult to keep up. Some consultants expect financial institutions to turn to artificial intelligence for help in the future. Natural language processing can be used to scan new regulations, identify rules relevant to specific business areas and determine precisely how the rules apply.

There are also regulations specific to the life sciences industry. Medical products (drugs and devices) must pass rigorous clinical trials before they can be marketed. Clinical trials are expensive and time-consuming, and it’s a problem when patients drop out. In the future, expect companies that provide clinical trial management software to offer mobile apps for communicating with participants.

Safety regulations often require on-site inspections. Traditionally, inspections were conducted using paper and clipboard. That required transcribing the handwritten data — an extra step that was frequently a source of errors. With mobile devices, many fields can be filled in using drop-down menus, and images can be attached or linked to each report. On-site inspections are required in industries such as construction, oil and gas, and manufacturing. Mobile apps may support bar codes, RFID and NFC for identifying assets, and GPS, Bluetooth beacons and Wi-Fi positioning for recording their current locations.

Easing compliance: Opportunities for startups

Safety compliance can be automated by integrating smart devices and apps with the work environment. For instance, the Food Safety Modernization Act (FSMA) — passed in 2011 and put into effect in 2016 — requires retail outlets that produce ground beef to record the source of meat for each package and label it accordingly. This makes it easy to trace contaminated beef back to its source so it can be immediately taken off the market and all affected shipments can be recalled.

However, compliance is a challenge for butcher shops and meat departments within supermarkets, because they are less-than-ideal places for working with paper. Meat is stored in refrigerated rooms. Workers wearing gloves spend most of the day handling fresh meat and keeping work surfaces clean.

St. Louis-based startup SaniTrace has developed a solution for logging and labeling the origin of each package of ground beef, as well as logging the daily sanitization of meat-grinding equipment. The solution consists of a tablet computer, label printer, bar-code scanner and the SaniTrace software. The label placed on a package of ground beef confirms that the source has been recorded and gives the consumer the option of receiving a text message in the event that the package becomes part of a recall. The consumer simply texts the product ID to the phone number on the label. Being notified directly is much faster and surer than hearing about a recall through the news media.

Though complying with the new regulations is extra work for meat departments, the use of a touchscreen computer makes it relatively quick and easy, and promises to get contaminated meat off the market faster while giving consumers a little extra protection.

Even most critics of the current federal code accept the need for basic regulations to ensure safety, prevent fraud and fight terrorism. Safety and security can be baked into software for managing critical business processes, and mobile devices can be used both for gathering data in the field and communicating directly with consumers.

This post is based on commentary by Ira Brodsky that first appeared at Computerworld. Brodsky is a Senior Analyst with Datacomm Research and is the author of five books about technology. Brodsky focuses on mobile solutions for payments, retail automation, and health care.