This chapter refines and deepens the analytical lens developed in the previous chapters by focusing on the conceptual underpinnings of regulatory failureRegulatory failure and its connection to institutional design, institutional capacity and transaction costsTransaction costs. It particularly provides a scaffolding to respond to the questions posed in Chapter 2 and Chapter 4. Rather than offering an evaluative account of regulatory performance, it provides a further diagnostic framework that informs the analysis of sectoral case studies in subsequent chapters. The discussion draws on the traditions of NIENew Institutional Economics (NIE) and NI to explain how institutional configurations, resource constraints, and governance complexity result in failure. Key concepts related to understanding the risk of failure such as the principal-agent problem, regulatory arbitrage and regulatory forbearance among others are explored as part of attempts to recommend interventions that are risk based. As part of this reflection, the Chapter also delves into thoughts around the challenges of regulatory reforms, where much needed interventions to improve behaviour and performance are limited by lack of understanding of causality and the tendency to introduce interventions that merely result in layering thereby failing to resolve the root cause of problems. In this regard, key concepts such as post hoc reasoning and bricolage are explored in some detail.