Policy and regulatory decision-making under uncertainty

Policy and regulatory decision-making under uncertainty

Policy and regulatory decisions involve more uncertainty than we would care to admit. In terms of prominent ‘macro’ events, in the past two decades alone we have witnessed the global financial crisis, Covid-19, and the Russian invasion of Ukraine, with its associated disruption of energy markets.

The complexity of many regulated industries is also rising, in part due to interventions that have encouraged market entry by a host of players. It is important to note that technological changes brought about by the internet are also a factor.

Uncertainty and complexity both make forecasting more difficult. However, virtually every regulatory decision involves comparing anticipated futures and choosing the action that leads to the best-predicted outcome. Uncertainty, if not adequately considered, may also impact regulatory stability and potentially regulatory independence.

This white paper considers five broad ways of improving decision-making under uncertainty:

  • Delegation;
  • Experiments;
  • Forecasting;
  • Waiting, and;
  • Contingency planning and error correction.

Policy and regulatory decisions depend on a view of the future – what do we expect to happen and how will it change if policy is changed? How should we make decisions under uncertainty, and how can we do better? There are many things we can do, some with parallels in the private sector, others that differ.

To find out more about how policy and regulatory decision-making may be improved during times of uncertainty, download our report:


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