Research reveals major headwinds in compliance functions

With multiple changes occurring at lightning speed, compliance executives face huge challenges. We call this “compressed transformation” and we see five-year plans becoming one-year plans. This is because companies are trying to manage change within the company while also trying to grow value and create value. It’s not surprising that compliance resources, both financial and human, are becoming increasingly stretched.

The compliance risk assessment reveals that these issues are centered around three main themes: privacy, cybersecurity, and environmental, social and governance concerns (ESG). These are the “most dangerous risks” cited by executives more than any other. The importance of corporate behavior has been magnified by the complex global regulatory and enforcement landscape. Authorities have adopted new technologies to monitor and enforce compliance.

Each risk poses its own set issues.

  • Cybersecurity – The work environment has changed from being entirely onsite to being a hybrid onsite/offsite environment. Third-party vendors and employees can access company systems from remote locations. This makes it a constant concern for Chief Compliance Officers, as well as Chief Information Security officers (CISOs), who must monitor and update the company’s data.
  • ESGThis broad risk category covers everything, including climate change, greenhouse gas emissions and workplace safety. Global regulations are increasing. Both the US and Europe have set new standards and mandated new disclosures. Compliance functions must be able to adapt and change regulatory policies and risk management programs in order to stay relevant and current in the ESG space.
  • Privacy – The Compliance Risk Study reveals that data privacy has been the biggest challenge for companies over the past two years. In addition to the US’s federal and state regulatory changes regarding data privacy and consumer protection there are also new global policies like China’s Personal Information Protection Law or Europe’s Digital Services Act. We expect more changes in 2022, as there were few areas of compliance that saw so many developments like privacy and consumer protection.

These and other risks are significant obstacles for corporate compliance functions. Effective response requires participation from the C-suite and across the enterprise to ensure that the organization can grow through a proactive regulatory management program.

Three areas are in urgent need of attention:

  1. Collaboration. Collaboration. Compliance departments are becoming more involved in company-wide risk management activities. Nearly half of respondents intend to train their compliance staff in order to foster a culture that promotes compliance throughout the enterprise.
  2. Data-driven insights. Companies operate at a rapid pace, which means compliance functions must have complete and accurate visibility into risks and mitigation controls. These insights can be used to improve efficiency, establish consistent processes and identify compliance gaps.
  3. The latest technologies. Machine learning, artificial intelligence, cloud, and other technologies can be used to accelerate and deepen insight, map compliance, and manage regulatory changes. Automating repetitive tasks should be the main focus, while enhancing analytics capabilities should be.

The new risk environment is complex and dynamic. The new risk environment is both dynamic and difficult. Compliance functions need to address cost issues, align compliance and business strategy, as well as make the necessary investments in technology and skills. There are indications that things will get more challenging than they used to be. It may be time to take swift action to build a more responsive, agile compliance function.

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