A switch to standardized, open federal data formats could save U.S. companies roughly $10 billion in annual compliance costs, according to new research.
The practice of replacing document-based reporting with standardized and open data formats, or standard business reporting (SBR), would reduce compliance costs and allow for the implementation of software that could remove much of the current complexity and overlap in the regulatory process, Hudson Hollister, interim president of the Data Foundation, told FedScoop this week.
“Standardizing data saves so much time and money,” Hollister said. “If policymakers make changes to the way they interact with the private sector, it will probably eliminate most manual compliance tasks. There will be more investment in what companies do and help lift people out of poverty.”
According to a 2014 study by the National Association of Manufacturers, current federal regulations cost private companies roughly $2.03 trillion per year.
Hollister said the $10 billion figure reflects the early-stage estimated savings of an SBR program, although it would depend on varying factors of implementation, he said.
Hollister’s comments Monday to FedScoop coincided with the release of a report by the Data Foundation and PricewaterhouseCoopers that found a switch to SBR in the U.S. would not only significantly trim regulatory costs but also reduce or eliminate repetitive reporting systems.
The report, “Standard Business Reporting: Open Data to Cut Compliance Costs,” analyzed the governments of both Australia and the Netherlands, both of switched to SBR in the past 15 years.
SBR saved Australia’s government and private sector a combined $832 million in 2015-16, a figure the report’s authors predicted will continue to rise as the nation’s SBR efforts expand.
Australia’s GDP in 2013 was $1.5 trillion, roughly 10 times less than that of the U.S.’s $16 trillion. The Netherlands, which has an SBR program dating back to 2002, has reduced its unique data elements to roughly 4,500 from hundreds of thousands and automated many financial statements and tax declarations, among other regulatory filings.
The report’s authors admitted that a U.S. SBR program would face more challenges than that of the Netherlands and Australia simply because of the exponentially larger economy and compliance costs.
The U.S. has been slower out of the gate in switching to such a practice due in part to a relative unwillingness by agencies to accept change and additional oversight, the report’s authors said. Hollister agreed the U.S. not only has the world’s largest economy but also what he called the “most complicated regulatory landscape” among current governments.
“We have dozens of regulatory agencies,” Hollister said. “That’s just not efficient. It would be one thing to try to create a single combined reporting form to meet every agency’s needs. The laws and economy are so complicated that I don’t think that can happen.”
However, a consolidation is more realistic on a technological level, Hollister said. The first step would be to create a shared dictionary, or taxonomy, accessible to federal agencies.
The most recent attempt to implement open data taxonomies came in June of last year, when State Street Bank ran a pilot test of the Financial Industry Business Ontology, which standardizes financial industry terms.
Because no federal entity can currently create an SBR taxonomy, it would take an act of Congress to establish one. Momentum is gaining within the federal spectrum, Hollister said, which could make legislation more of a realistic possibility. Still, he said it was too early to predict a timeframe when an SBR could arrive.
“We’re seeing an increasing willingness in U.S. government for technological solutions across a number of agencies,” said Hollister, who previously worked for the Securities and Exchange Commission. “Members of Congress who have worked on standardized data will understand the same principle in regulatory affairs.”
Monday’s report echoed Hollister’s feelings.
“To realize savings for regulated companies and the regulators themselves, and to enable new growth in financial technology and market data, Congress and the executive branch must act,” the report’s authors wrote.
The report also stressed that private companies would be able to automate compilation and submission of regulatory reports, while regulatory agencies would benefit from standardized data that could quickly highlight errors and fraud.
“The central point of this report is that it doesn’t make any sense for regulatory agencies to operate in a vacuum,” Hollister said. “Regulatory agencies assume they are the only entity interacting with the companies they regulate.”