Regulatory recharge: Four practical pathways for fiscal sustainability
Introduction
Canada faces a level of geopolitical and economic uncertainty not seen in decades. While regulators remain focused on their core mission of protecting health, safety, rights, and the environment, they’re also increasingly asked to enable economic resilience, innovation, and growth.
To date, much attention has been centred on reducing regulatory burden, and rightly so. While this is still an important focus area, the next frontier will be demonstrating proactive leadership through fiscal responsibility: managing budgets wisely and driving operational efficiency.
The challenge: Rising regulatory demands with tighter budgets
Regulators typically draw funding from one of three sources:
Self-funding through licensing, compliance and oversight fees, service charges, administrative monetary penalties (AMPs), or other direct charges to regulated entities.
Government funding via appropriations from general revenues (e.g., Consolidated Revenue Funds).
Blended funding, combining both self-funding and government-funding approaches.
Economic pressures are intensifying across all models. Self-funded regulators may be overseeing industries striving to cut costs, protect margins, and invest in productivity and innovation. At a minimum, they expect understanding from their regulators, if not a commitment to do the same. As a result, fee increases may be difficult to justify, with some organizations even seeking reductions.
Government-funded regulators are equally exposed. As governments grapple with stagnant revenues, rising health and social demands, and calls for transformative nation building investments, they’ll expect regulators to prove their efficiency and value.
At the same time, expectations of regulators are growing. They’re responsible for simplifying rules, collaborating across jurisdictions, eliminating duplication, exploring amalgamations, and investing in digital tools and artificial intelligence (AI) for risk-based oversight. With these expectations, cost pressures are rising. While many regulators are well-equipped for the challenge, others will be hard-pressed to respond. Fortunately, there are pathways forward.
Four pathways to fiscal sustainability
Canadian and global regulators are successfully advancing fiscal sustainability through four interconnected levers:
Expenditure management: Conducting regular reviews of spending to ensure resources are being used efficiently and are aligned with core priorities. Examples include improving the efficiency of enabling functions, using technology to reduce or eliminate higher-volume, manual work, and enhancing risk-based approaches to focus efforts on the regulated entities that pose the greatest risk.
Cost avoidance: A close cousin to expenditure management, regulators frequently try to minimize regulatory oversight costs through education, prevention, and early complaint resolution. For example, many regulators are using data validation and AI screening approaches to identify incomplete or inaccurate license and permit applications before submission. This reduces the time spent by staff to review incomplete submissions, while helping improve overall response times. In addition, ongoing compliance promotion through targeted site visits, corrective action plans, and proactive outreach can prevent costs associated with investigations or hearings.
Value-driven investment: Beyond internal cost-containment, regulators can build a business case to secure government investment for transformation efforts centered on new value creation. Business cases can justify new investment by demonstrating how modernizing the regulatory environment can help the government achieve its broader economic and fiscal objectives.
Revenue generation: Regulators who are wholly or partially self-funded frequently have leeway to look at the revenue side of the equation. One common approach is to adopt or expand the application of risk-based fees, with higher-risk entities bearing a greater proportion of the fee burden. Other levers include adopting dynamic fee models aligned with volumes (e.g., filing size or complexity), revisiting approaches to AMPs where legislative authorities permit, or exploring data monetization opportunities. That said, revenue generation should reflect the value the regulator is providing in creating a healthier, more efficient industry or system.
Together with sustained executive commitment, these levers transform fiscal sustainability from a periodic exercise into a strategic priority, strengthening trust with governments and regulated entities alike.
A way forward for fiscal responsibility
Fiscal sustainability is a strategic imperative that requires a deliberate approach. While the starting point and journey to action will be specific to the circumstances of a given regulator, they can begin in one of three focused ways, each designed to build momentum and deliver early value:
Expenditure review: A deep-dive analysis to map spending against core strategic priorities and identify concrete opportunities for efficiency.
Business case development: The development of a data-driven case to secure investment for cost avoidance or to unlock broader economic gains.
Operating and costing model review: A strategic assessment of funding and service delivery models to enhance the organization’s value proposition and revenue diversification.
Regulators play a critical role in building resilient, efficient, and trusted regulatory systems that support Canada’s long‑term economic and social outcomes.
When designed and delivered well, the efforts listed above help advance long-term fiscal resilience without compromising regulatory effectiveness, service delivery, or public trust. This is particularly critical at a time when expectations for regulatory excellence have never been higher.
This article was co-authored by Leo Xu and Michelle Zou.
Key Links:
New South Wales Productivity and Equality Commission. (2020). Regulating for NSW’s future. NSW Government.
Deloitte. (n.d.). Regulatory intelligence solution.
Brandon Touchie
