Recognising, Responding, Readying: Building Uncertainty-Based Regulatory Capability

Guest Editorial for ANZSOG National Regulators Community of Practice
Rob Warner, Chief Advisor Strategy, Maritime New Zealand

Malcolm Sparrow gave us permission to pick important problems and fix them.¹ Two decades on, his insight that regulators deliver obligations rather than services remains foundational. But there’s a catch: Sparrow’s risk-based craft assumes we can identify problems through analysis of past patterns. What happens when the future stops correlating with the past?

The answer isn’t abandoning risk-based regulation. It’s recognising its bounded applicability² – that tools designed for one context may be ineffective when applied to another – and extending our better practice into territory where genuine uncertainty dominates.

Why Risk-Based Regulation Has Limits

Frank Knight highlighted this distinction over a century ago.³ Risk exists when we can enumerate outcomes and assign probabilities. Uncertainty emerges when the system itself is in flux – novel technologies, social & economic dynamics, and environmental factors interacting in unprecedented ways, feedback loops amplifying rather than dampening, categories becoming unstable.

The distinction matters because applying risk tools to uncertain situations doesn’t just fail often – it can actively obscure what needs attention. As Vaughn Tan usefully demonstrates, a risk mindset in uncertain conditions makes risk-like aspects more noticeable while rendering uncertain-but-not-risky aspects invisible.⁴

Understanding Where Your Problems Live

Most regulatory problems don’t exist in just one type of space. Some are ordered – predictable, with clear cause-and-effect relationships we can manage with rules. Others are genuinely complex – where relationships only become clear in hindsight, where small changes trigger system-wide shifts.⁵

Picture a bell curve (Gaussian distribution) where most events cluster around the middle – average vessel incidents, routine compliance issues. Risk-based rules work brilliantly here because the pattern repeats reliably.

Now picture a very different curve (Pareto distribution) with a long, fat tail. Here, most impact comes from rare, extreme events – unexpected system failures, novel threat actors, intersecting disruptions. Rules designed for the predictable centre fail catastrophically in these tails, often making things worse.⁶

Dave Snowden’s research demonstrated this dramatically: Blue Light workers experienced mental health crises not despite safety rules but because of them. The rules were designed for the predictable centre of a Gaussian distribution, but most of their work happened in the unpredictable tail of a Pareto distribution.⁷

Diagnosing Our UN-VICE World

Roger Spitz’s UN-VICE framing captures today’s regulatory reality well:⁸ UNknown (not just unknown but unknowable), Volatile (change compounds at escalating rates), Intersecting (boundaries blur between regulatory domains), Complex (inputs don’t map predictably to outputs), Exponential (change accelerates non-linearly). Recent work on systemic disruption reinforces this: traditional risk frameworks struggle when facing deep uncertainty driven by complexity and interdependent variables.⁹

What to do? Recognising, Responding, Readying

Recognising: Diagnosing Context

The first step is usually diagnostic: What kind of problem are you facing?¹⁰

In ordered spaces – established vessel safety standards, crew certification, pollution protocols – risk-based methods remain essential. Rules codify good practice. This is where NESTA’s anticipatory regulation model starts: with clear rules and responsive adjustment.¹¹

But in complex spaces – intersecting disruptions with emergent properties, unreliable patterns, unpredictable cascades – you’ve crossed into uncertainty territory. NESTA recognises regulators need to engage innovators earlier, become more proactive, work iteratively, and build new capabilities around horizon scanning and foresight.¹²

Occasionally, you’ll face truly chaotic situations as a regulator demanding immediate action, or aporetic situations revealing genuine paradoxes where traditional problem-solving doesn’t apply.¹³

Responding: Some Tools for Uncertainty

Navigating uncertainty demands different interventions:

• Constraint mapping rather than prescriptive rules: Shape the possibility space for emerging technologies rather than detailed ex-ante rules that rapidly become obsolete.
• Safe-to-fail probes rather than single interventions: Run multiple parallel experiments deliberately designed to fail safely and surface insight regardless. The patterns across probes provide intelligence no individual pilot could generate.
• Requisite diversity rather than standardisation: Complex systems require variety in response across the spectrum of engage, educate and enforce options. Distributed decision-making matched to the uncertainty faced. This may mean training people to exercise judgment in context within principles, not apply one-size-fits-all processes blindly.¹⁴
• Alternative histories and future backwards: Explore counterfactuals to build capacity for holding multiple interpretations.

These methods and practices align well with NESTA’s anticipatory regulation principles: engaging early, being proactive and strategic, operating iteratively, working collaboratively, building new capacity, and increasing transparency.¹⁵

Readying: Building Systemic Capability

Building uncertainty capability means integrating the AAA posture:¹⁶

• Adaptive foundations: Not merely robust systems resisting shocks, but structures that extract learning from surprises and improve through exposure to change.
• Anticipatory capability: Active scanning for weak signals, maintaining sensor networks across jurisdictions, recognising patterns before they fully emerge. Our HIFO framework (Hindsight, Insight, Foresight, Oversight) provides temporal sensitivity suited to this work.¹⁷
• Agile response mechanisms: Modular regulatory tools that can be recombined for novel contexts, loose coupling preventing brittleness, distributed decision authority appropriate to the uncertainty faced.

This connects to our earlier work on regulatory posture and diplomacy. Networks across jurisdictions extend our capacity to detect rippling signals early.¹⁸

What This Looks Like in Practice

Uncertainty-based regulation doesn’t displace risk practice – it complements it. AAA regulators maintain both capabilities:

• Ask the diagnostic question first: ordered or complex?
• Apply risk methods where correlation between past and future holds
• Switch to uncertainty tools when dealing with emergent, intersecting, exponential change
• Build organisational awareness and expertise for recognising which is which
• Accept that some situations demand immediate action (chaotic) or reveal genuine paradoxes (aporetic)

The goal isn’t perfect foresight. It’s adaptive resilience – not elimination of surprise, but cultivation of capacity to respond creatively when surprise arrives.

The Path Forward

As regulators, we can build uncertainty capability proactively – while we still have runway – or reactively, forced by the next crisis that exposes the limits of over-reliance on risk-thinking.

For those committed to effective regulatory stewardship, the path involves:

• Recognising bounded applicability: knowing when risk tools apply and when they don’t
• Responding with appropriate tools: constraints not rules, probes not pilots, diversity not just standardisation
• Readying organisational capability: building AAA postures and HIFO sensemaking muscle

The question isn’t whether uncertainty in regulatory operating environments will grow. This seems clear. Instead, regulators may need to reflect on how they must reconfigure their operating models and system capabilities to better navigate it.

Rob Warner is Chief Advisor Strategy at Maritime New Zealand and delivers Strategic Foresight/HIFO masterclasses through ANZSOG’s Public Sector Futures series. As a certified strategic foresight and applied complexity (Cynefin) practitioner, and experience strategist and governance advisor, Rob is part of a growing international network of government foresight professionals looking at the now, near and next horizons of regulatory | policy practice.

1. Sparrow, M.K. (2000). The Regulatory Craft: Controlling Risks, Solving Problems, and Managing Compliance. Washington, DC: Brookings Institution Press, p. 2.

2. Snowden, D.J. (2025). ‘The limits of rules…’, The Cynefin Co. Available at: https://thecynefin.co/the-limits-of-rules/

3. Knight, F.H. (1921). Risk, Uncertainty and Profit. Boston, MA: Hart, Schaffner and Marx; Houghton Mifflin.

4. Tan, V. (2023). ‘A mindset for not-knowing’. Available at: https://vaughntan.org/nkmindset. See also Tan, V. (2020). The Uncertainty Mindset: Innovation Insights from the Frontiers of Food. New York: Columbia University Press. Tan’s work has been featured in New Zealand through the McGuinness Institute’s ForesightNZ initiative exploring how organisations can thrive in uncertain times by embracing the uncertainty mindset.

5. Snowden, D.J. and Boone, M.E. (2007). ‘A Leader’s Framework for Decision Making’, Harvard Business Review, 85(11), pp. 68-76.

6. Snowden, D.J. (2025). ‘The limits of rules…’, The Cynefin Co.

7. Ibid. Snowden reports that “the leading cause of mental breakdown in Blue Light workers (Ambulance drivers, Fire Officers, Police firearms squads) was the safety rules. The rules had been developed for the centre of a Gaussian distribution, but most of their lives were lived in the tails of a Pareto distribution.”

8. Spitz, R. (2024). Disrupt With Impact: Achieve Business Success in an Unpredictable World. London: Kogan Page.

9. Spitz, R. (2025). ‘The future of risk and insurability in the era of systemic disruption, unpredictability and artificial intelligence’, Journal of Operational Risk. Available at: https://www.risk.net/node/7961666

10. The Cynefin framework, developed by Dave Snowden, provides a sensemaking framework distinguishing between ordered domains (clear cause-effect relationships), complex domains (patterns emerge only in retrospect), chaotic domains (no patterns exist), and aporetic domains (genuine paradoxes exist). A future ANZSOG editorial may explore this framework in more detail for regulatory practitioners.

11. Armstrong, H., Gorst, C., and Rae, J. (2019). Renewing regulation – ‘Anticipatory regulation’ in an age of disruption. London: NESTA. Available at: https://media.nesta.org.uk/documents/Renewing_regulation_v3.pdf

12. Ibid. The NESTA model identifies six principles of anticipatory regulation: engage innovators early, be proactive and strategic, operate iteratively, work collaboratively, build new capacity, and increase transparency.

13. See note 10 above.

14. Snowden, D.J. (2025). ‘The limits of rules…’, The Cynefin Co.

15. Armstrong, H., Gorst, C., and Rae, J. (2019). Renewing regulation – ‘Anticipatory regulation’ in an age of disruption. London: NESTA, p. 5.

16. Spitz, R. and Zuin, L. (2022). The Definitive Guide to Thriving on Disruption, Volume II: Essential Frameworks for Disruption and Uncertainty. San Francisco: Disruptive Futures Institute.

17. Warner, R. and Pink, G. (2023). ‘Navigating Regulatory Landscapes: Four Sights to advance regulatory practice and governance’, ANZSOG NRCoP Guest Editorial. Available at: https://anzsog.edu.au/news/navigating-regulatory-landscapes-four-sights-to-advance-regulatory-practice-and-governance/

18. Warner, R. and Pink, G. (2024). ‘Regulatory Diplomacy: The Practitioner’s Path to Agility and Foresight’, ANZSOG NRCoP Guest Editorial. Available at: https://anzsog.edu.au/news/regulatory-diplomacy-the-practitioners-path-to-agility-and-foresight/