How banking’s playbook is reshaping energy: The race to real time

Is regulatory pressure a roadblock or a catalyst for innovation? In this episode, host Peter Warren is joined by CGI's Charley Wark and Andy Schmidt to explore how the energy and utilities sector is turning compliance into a competitive advantage. Drawing insightful parallels with the banking industry, they discuss how a data-driven approach is laying the groundwork for the emerging "citizen supply chain." Tune in to discover how this cross-industry collaboration is reshaping our energy systems for a more resilient, efficient, and connected future.

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Transcript

From F1 To Regulated Innovation

Charley Wark 0:00

Hello everybody out there. My name is Charlie Wook and I am the head of our global commercial industries at CGI. And if there was a list of the 10 most exciting jobs out there, I'm pretty sure that my job would actually rank on that top 10 list. Why? Well, because every day, at least every week, I get to learn something new. I'm in a team full of industry experts that are dispersed across geographies in multiple continents. So every day I get to hear new perspective and learn new things. But even though I have the most exciting job in the world, I still fill my weekends of even more interesting things. And in my case, it's Formula One. I'm a diehard Formula One fan. And I'm the type of fan that follow the development closely. I watch every race, I watch every qualifying, I watch every testing, even the in-season between in-between season speculations, and all the new regulations they pull up every year. And of course, also I followed the silly season. Why? Well, because one of the most fascinating things about the Formula One Circus is this constant push to be on the edge. Not just when it comes to driving, but actually also building the car, being on the edge of what's allowed from a regulatory perspective, but staying so close so that you will have the competitive advantage. And anybody who's been watching Formula One, you might remember the double diffuser, or you might have seen the between CES and testing this year when Ferrari pulled out a completely new wing that opens up in the middle and separates in more than 200 degrees angle. And it's allowed because it's not regulated against. So why am I talking about Formula One? Well, because I believe that all other industries have something that they can learn from Formula One, or especially the highly regulated industries. Because today, leaders often see kind of the cost of regulation being the cost of doing business for whatever industry that might be. They might even see it as an inhibitor. And this is very evident in two industries that we are going to deep dive into today. And that is why I have with me today our global industry leader for banking, Andy Schmidt. Hi, Andy.

Andy Schmidt 2:48

Hi, Charlie.

Charley Wark 2:50

And of course, we have our global industry leader for energy and utility, Peter Warren. Hi, Peter.

Peter Warren 2:55

Hey, Charlie. Good to see you.

Banking Treats Rules As Strategy

Charley Wark 2:58

So let's start by turning to you. Andy, how do you think industry can turn such a highly regulated industry like banking, for example? How can they turn the constraint of regular regulations into an opportunity, using regulation to unlock uh business opportunities?

Andy Schmidt 3:24

Yeah, I mean it's a great question. And I and I'd start my answer with not only can they uh can they turn regulation into opportunity, they have to. Uh they must, uh, given how competitive uh banking in general and financial services in specific is these days. And so, you know, instead of uh and or unlike many industries that are adapting to increasing oversight, you know, banking has as long looked at regulatory intensity as a as a design constraint, much like what we're talking about with that new wing for Ferrari. And but increasingly they're looking at it as a strategic asset. So, you know, when we're looking at at what banking really offers, which is trust, um, you know, and and along with that, data stewardship, financial resilience, um, you know, these are all things that in a citizen supply chain ecosystem are increasingly important. And when we when we look at uh when we will look at regulation through this lens, it's it really should be looked at as a funded mandate for innovation. So we've looked at and had to adapt to, had to absorb things like Dora, things like Basel, things like open banking. Um what these things do is they drive modernization, they unlock board-level funding, um, and they they become uh they become you know innovative offerings for say a platform strategy around open banking or or authentication for AML and KYC. And you know, and so we as an industry have to have more of a more of a um uh a can a um regulatory uh regulatory as innovation mindset if we're going to be competitive in an increasingly data-oriented and increasingly digital world.

Energy’s Balancing Act With Compliance

Charley Wark 5:10

Interesting. Peter, how do you think is is there anything that energy and utility have in common with banking when it comes to this fight of always being innovative to seize the opportunity?

Peter Warren 5:25

They do. And I remember a quote from one of the uh CEOs I was talking to one day, he said, Peter, we always walk the line between complying to these regulations and missing those regulations. Because in some cases they conflict. If they comply 100% to one set, they automatically violate another set or part of them. And so they're constantly in a situation where they're trying to move forward, and I think there's a bit of a shift going on in the world, and Andy talked about this too, is that regulations can be an opportunity. Uh, not necessarily always trying to do the uh uh Ferrari kind of can we get away with it, but a little bit of that. Um, and you see people moving from regulated industries, starting up companies that are deregulated uh as part of the overall entity. Uh one client uh is a regulated utility on one side of his business card, and on the other side, there's seven or eight other companies that are deregulated on the other side. And so what they're doing is finding ways of moving forward. And I think that learning from these types of things, what do you have to do to be, what can you do, is a shift. And not always looking at regulations as punitive. Um, I remember an oil executive saying ESG is going to kill us. And the reality is, now that they've re-looked at it and they may not be doing ESG in every geography for uh compliance state, ESG drives out inefficiencies. It makes things better. If I had a wasteful process, uh so we see now that innovation that is being was originally adopted for ESG regulation and get a gold checkbox is now accelerating because it's just newer, better technology. And uh as we know from CD and music, and F1 isn't a good example, there's not too many 1970s cars on the circuit at the moment. And uh so technology, new technology always consumes old.

Charley Wark 7:16

And and speaking of ESG and Formula One, I think that Formula One, by changing regulations to be more sustainable, they're actually driving innovation also for the private car industry or for for the car industry, manufacturing cars for our personal use. So um, Andy, uh, do you think that um conflicting regulations can be managed even in an industry as regulated as banking, so that you can focus on the outcomes uh rather than kind of ticking boxes?

Shaping Smarter Regulation With Regulators

Andy Schmidt 7:56

But I think 100%, especially when you have uh when you have uh financial institutions that span you know not just countries but entire geographic regions. Um and so and so it's essential to talk to your regulators about what you're doing to adhere to the spirit of the regulation and identify clearly where you might have challenges adhering to the letter. Um because the, you know, when you're talking about protecting the client, when you're talking about protecting the data, when you're talking about protecting the infrastructure, there's certain trade-offs that you're naturally gonna have to make these days. Um and so being clear on on, you know, being clear to your stakeholders on the regulatory side what trade-offs you're making and why, and asking them for advice is gonna be an essential part of the conversation. Um, you know, regulation, uh regulation that evolves in a vacuum is painful for everyone. Uh regulation that evolves with market needs and with market input is something that you can actually implement, actually leverage. And so again, these types of conversations are gonna be essential uh for uh for global institutions, for regional institutions that are looking to do the right thing by the client and by the regulatory authorities.

Peter Warren 9:07

I agree with Andy on that because we see companies that are being passive in the marketplace and just saying, okay, this is being done to me, uh don't have a lot of success. Where we've been engaged in several uh countries to actually help the regulator understand the needs of the industry. It's interesting to see our own words come back to us in legislation. Uh one of our people, Diane Gushu, is actually the advisor for AI to the country of Canada where I happen to live. And uh now we're seeing her words come back to us in things because we've been influencing it, but it was brought with the idea of making legislation more empowering, still keeping the guardrails on, because we, you know, like a racetrack, you can't go off the track too far. Um and uh keeping this moving forward is is a key structure. And we've seen that in the UK, we've seen that in the United States and throughout Europe.

Trust As The Core Banking Product

Charley Wark 10:04

So um speaking speaking of this, um uh helping also to change regulations in the countries that you operate, um we have to also talk about data and how the how high the need of regulating the data from a data privacy perspective to protect the citizen and to protect, of course, the the cities and the countries that we live in. Um this is uh an area that I think the banking financial services industry is probably maybe best in class at globally with all the heavy regulation. And and I know, Andy, you are often quoted to say that the banks, they're in the business of trust. You know, if there's something you can make into a product, you can make trust into a product and actually sell that to other industries. Um I I I hope I didn't misquote you uh too badly, but could you explain a little bit what it is that you mean with how this industry is built on the product of trust?

Andy Schmidt 11:11

Sure. I mean the the when you look at when you look at banking, um, you know, most of the products are commodities, checking accounts, um home loans, car loans, uh, and even you know, investment accounts. And so, and so what you're what you're really focusing on is trust in terms of being able to protect my protect my assets, protect my information, and give me good advice. Um and increasingly, uh, you know, in our corporate and transaction banking survey that just came out, the advice piece of it is where, you know, it's where there's some opportunity for the banks, uh, but the but the but the trust, the protection piece of it is is still there and is still still highly regarded and is often um often um more highly regarded for the banks than they are for say third parties because they have this framework, because they have the experience behind it. And so, and so if if trust is compromised um because these accounts are so homogenous, so easy to transport, especially with open banking, um, you run the risk of having the customer just move to another provider and never come back again. Um so, you know, so that that uh that that element of trust, that element of confidence is is woven into the fabric of banking, uh woven into the fabric of financial services and has been has been for generations.

Real-Time Data And Legacy Limits

Peter Warren 12:33

And in my industry, I would say trust is part of it, but reliability is probably the main thing of think of it. Trust that your lights are gonna come on in the morning, you you expect them to be reliably on there. You ex you you trust that there's gonna be fuel at the service centers, that your water is going to come on and your waste is gonna go down the toilet. It's not a sexy part of our industry, but it's there, and that things aren't going to be uh contaminated. And the data uh for our industry now, uh, many of our clients say data's uh value to the organization rivals many of the physical assets uh data, uh or value rather, sorry. And to that point, uh taking from the Formula One industry, uh, one of the databases we actually now use in our industry started in retail banking, was actually used by uh with a particular company in uh racing to uh do the real-time vector analysis of cars on the track. And the reason why it's important to the energy industry now is we're much more like a retail bank doing that kind of high-volume transactions and trading in the retail parts of our industry, but also through the transmission and the customer side than we are in the legacy history of ourselves. If uh and most of the modern companies that we're dealing with now are not modeling themselves, and in fact, many of the executives aren't coming up through the ranks anymore. They're people coming from other industries like banking, like um uh the cell phone industry or other very competitive industries, they're bringing that level of thinking and they're expecting those levels of tools uh here. And quite frankly, in this AI generation of worlds, we cannot have tools that are batch processing anymore. So there's a real shift here, and Andy, I you said I think you see that in yours too.

Cross-Industry Lessons And Resilience

Andy Schmidt 14:20

100%. I mean, we're and so we have um we have real-time payments um and we are moving towards real-time information. Um, but one of the challenges we do have still on the core banking side is batch processing. So, you know, so we're getting there. We're getting there. But uh, but there are you know, there are inefficiencies. And so it's like upgrading the wing, but not but not doing anything to your steering. Uh it makes it harder to navigate your financial position when uh when you have some of these challenges uh in terms of just driving your, you know, driving your car, driving your your uh your or running your organization. And you know, at the at the same time, uh the you know the banking industry has learned a lot from energy and utilities. Um so you know, when when we're uh when we're looking at uh when we're looking at keeping real-time infrastructures up and running, uh, when we're looking at protecting uh client information, protecting critical infrastructure, um we've learned resilience planning from from gridder operations, we've learned um better uh incident management discipline and and are increasingly increasingly using AI to predict outages, um just like the just like the ENU industry and even the manufacturing industry does. And you know, and of course, focusing on on redundancy and failover um and having being able to do that at a national scale, even international scale, uh, depending on the operations of the bank.

Peter Warren 15:46

Yeah, and just going back to that point, and when we were prepping this call, we got into the talk about how fraud in is an increasing thing across all industries. Energy and utilities, uh, knowing uh the banking term, I think you referred to it as know the customer or knowing the customer, that type of functionality is something that uh utilities need to know now, uh whether they're gas, electric, or water, or it doesn't matter. Uh, people are being fraudulent here. And it may be something that uh if regulations allow, uh the banking industry could provide as a service to my industry. If you do it at pace and scale over there and are truly the trust folks, uh perhaps there's something for somebody in the banking industry to team up with one of the people in the energy industry to provide a service over here because we definitely see that as a need.

Fighting Fraud With KYC Beyond Banking

Andy Schmidt 16:34

Absolutely. And it's and it goes back to the the foundation of trust. And so um, so trust, uh the being able to validate who you're working with, who you're sending a payment to, who you're receiving a payment from, um, that you know, that that identification, that authentication is something that we can certainly extend to to the the ENU industry and beyond to help you understand, again, it's an extension of KYC. Who are you doing business with? Uh, who is your customer? Are they who they say they are? Um, and you know, and how do you how do you manage those funds flows? How do you manage those delivery flows, those uh, those, those service flows back and forth between you and your client?

Closing And Tease For Part Two

Charley Wark 17:14

That is a very good point for us to stop this conversation here today and uh sum up in a second part of this podcast because we're getting very close to talking about the citizen supply chain and uh how all industries need to collaborate to be able to pull together in the societies where we operate. So, by that, I'd like to thank you, Andy Schmidt, head of banking, and Peter Warren, head of energy and utility at CGI. And uh we'll speak to you again in part two of this podcast.

Peter Warren 17:47

Thank you, Charlie.