Regulatory compliance is a critical aspect of any business. It ensures that companies follow laws, regulations, and standards that govern their industries. However, with the ever-changing regulatory landscape, compliance can be a challenge. Companies must stay current with the latest trends in regulatory compliance to avoid penalties, legal issues, and reputational damage.
Today, regulatory compliance is becoming more complex. New regulations and compliance requirements are emerging as new technologies like artificial intelligence take hold. Additionally, the COVID-19 pandemic has created new challenges for regulatory compliance, with many companies having difficulty adapting to remote work and changing regulations.
In this article, we’ll explore the latest trends in regulatory compliance. We will discuss how companies can stay updated with new regulations, use technology to streamline compliance processes, and navigate the challenges of the COVID-19 pandemic.
Integrated Solutions for Compliance Management
The latest e-book by GAN Integrity, entitled “Integrated Compliance Management: The Future Of Compliance Programs,” offers detailed advice to compliance officers on the importance of an integrated system for successful compliance programs.
Here is an excerpt from the book that is particularly helpful.
“Integrated compliance management consolidates information in an accurate, useful way enabling compliance officers to contextualize that information into broader trends of compliance activity, which in turn will allow for a more methodological and analytical approach to managing compliance.”
The main responsibility of compliance officers is to ensure their organizations fully comply with regulations. And the effectiveness of their mission relies on completing tasks accurately and on time. However, inefficient processes can make compliance tasks challenging to manage. Furthermore, with the ever-increasing amount of regulations and compliance requirements, it’s essential to have a system that can efficiently manage and track compliance activities.
Integrated modern compliance software can alleviate these issues.
These platforms are a game-changer for companies looking to stay on top of regulatory trends. It can help streamline compliance management by automating repetitive routines, providing real-time monitoring, and generating reports to demonstrate compliance. It can also help companies stay up-to-date with the latest regulatory changes by providing alerts and notifications when new regulations are introduced. The use of Excel sheets and manual labor is no longer efficient. They’re liabilities to your business.
Integrating Risk Management with Digital Transformation
Having an integrated governance model in an organization’s Enterprise Risk Management (ERM) digital transformation plans can help coordinate the risk management processes and reduce duplication of efforts. It also helps eliminate silos of information, improve compliance assurance, and drive proactive risk management strategies.
For this reason, IT plays a crucial role in Integrated Governance, Risk, and Compliance (IGRC) as a driver and enabler. CIOs and IT leaders should collaborate with other management teams to identify risks and build a digital roadmap to align the organization’s ERM strategies with its governance, risk, and compliance objectives. The growing adoption of IGRC platforms among organizations for better decision-making and simplifying risk management offers a positive market outlook.
In 2022, the IGRC market size was US 39.4 billion, and it’s projected to reach US 76.4 billion by 2028, with a Compound Annual Growth Rate (CAGR) of 11.6 percent. The changing landscape of government policies, different industry regulations, and various industry compliance requirements are the primary drivers contributing to market growth.
Increased Focus on Data Privacy
Maintaining data privacy compliance is straightforward if your data sits in an on-premises database throughout its lifecycle. However, these are no longer relevant. In today’s world, data sharing and analytics are essential elements of every business used to create market differentiation. As a result, data movement makes complying with data privacy laws more challenging. And with the rise of cyber-attacks and data breaches, it still and will remain a top concern for organizations and government agencies to follow the latest regulations and best practices to protect their customers’ data and avoid costly penalties.
Many regulating bodies exist to protect customer data, such as Europe’s General Data Protection Regulation (GDPR), that have strict consequences for companies that violate regulations, including fines for unlawfully processing and disclosing personal data.
In 2021, Amazon received the largest GDPR fine of USD 887 million due to a 2018 collective complaint filed by French privacy rights group La Quadrature du Net.
In the United States, several states have considered regulating data privacy. Still, the California Privacy Rights Act (CPRA) stands out as the most significant state-level law regarding privacy and security. CPRA took effect on January 1, 2023, and is an amendment to the California Consumer Protection Act (CCPA). In 2022, giant beauty retailer Sephora had to pay a USD 1.2 million fine for not complying with CCPA.
Other countries with comprehensive data protection laws include Australia’s Privacy Act, Argentina’s Personal Data Protection Law, and Canada’s Personal Information Protection and Electronic Documents Act (PIPEDA).
In the coming years, we can expect to see an increase in the number of countries implementing similar laws and a heightened emphasis on organizations’ ability to demonstrate compliance with these regulations. Additionally, the pandemic had an unintended compliance-related consequence for many companies: under-protected cloud data. During the shift to remote work, some companies prioritized speed over security, which resulted in possible data breaches and non-compliance with privacy policies. Most organizations today are still catching up on ensuring that their cloud processes comply with data privacy regulations.
Here is the summary of emerging regulations in a simple format. The table outlines the benefits and challenges of the emerging regulations mentioned above.
|Integrated Compliance Management||1. Consolidates information in an accurate and useful way. 2. Enables a more methodological and analytical approach to managing compliance. 3. Streamlines compliance management by automating repetitive routines. 4. Provides real-time monitoring and generates reports to demonstrate compliance.||1. Inefficient processes make compliance tasks challenging to manage. |
2. Increasing amount of regulations and compliance requirements necessitate an efficient system for managing and tracking compliance activities.
3. Traditional methods such as using Excel sheets and manual labor are no longer efficient.
|Integrated Risk Management||1. Coordinates risk management processes and reduces duplication of efforts in an organization’s ERM digital transformation plans. |
2. Improves compliance assurance and drives proactive risk management strategies.
|1. Silos of information need to be eliminated to improve compliance assurance and drive proactive risk management strategies. |
2. IT plays a crucial role as a driver and enabler in IGRC. Collaboration with other management teams is necessary to identify risks and build a digital roadmap for aligning ERM strategies with governance, risk, and compliance objectives.
|Increased Focus on Data Privacy||1. Maintaining data privacy compliance becomes straightforward with on-premises databases, but modern businesses rely on data sharing and analytics, making compliance more challenging. |
2. Data breaches and cyber-attacks increase the need to follow regulations and protect customer data.
3. Rise in the number of countries implementing comprehensive data protection laws.
|1. Data movement and sharing pose challenges in complying with data privacy laws. |
2. Strict consequences, including fines, exist for companies violating data privacy regulations, such as Europe’s GDPR and the California Privacy Rights Act (CPRA).
Adapting to the Emerging Regulations
Navigating the ever-changing landscape of regulatory compliance is a constant challenge for organizations. The emerging regulations require them to stay updated and ensure adherence to legal and industry requirements. These regulations span various areas, such as compliance management, integrated governance, risk, and compliance (IGRC), as well as data privacy.
To effectively address this challenge, compliance officers and organizations must actively keep pace with the evolving regulatory landscape and implement strategies that guarantee compliance. In this dynamic environment, the ability to comprehend and adapt to emerging regulations becomes paramount for organizations to minimize risks, enhance operational efficiency, and safeguard sensitive data.
Greater focus on ESG in Compliance Training Programs
ESG, or Environmental, Social, and Governance, has become a primary focus in regulatory compliance in recent years. There’s an increasing emphasis on ESG factors among investors, stakeholders, and regulators because they can significantly impact a company’s reputation, financial performance, and long-term sustainability. Hence, the need to integrate these considerations into their business practices.
Companies that included ESG considerations in their training programs have seen tremendous returns from training professionals and suppliers on anti-bribery, anti-money laundering, antitrust and sanctions compliance.
The Rise of RegTech in the Financial Industry
Due to growing financial criminal activities, financial institutions must deal with complex products and services. And because financial services struggle to manage the growing volume of regulatory filings and digital threats, Regulatory Tech, or RegTech, will gain dominance in the coming years.
RegTech refers to using technology to help financial institutions comply with regulatory requirements. The technology includes software, algorithms, and other tools for automating compliance processes, monitoring transactions, and analyzing data.
Juniper Research forecasts USD 115 billion in RegTech investment this year, a substantial increase from 18 billion US dollars in 2018. Additionally, according to Thomson Reuters, the pandemic resulted in an increased use of technological compliance tools. The rise in demand and financial allocation for RegTech tackles the issues surrounding effective governance, integration of compliance systems, and efficiency.
RegTech can assist financial institutions in streamlining Know Your Customer (KYC) and Customer Due Diligence (CDD) procedures, reducing human error, and adapting to new regulatory changes.
Reducing Third-Party Risk
Many companies today rely on third-party vendors and suppliers to provide critical services and products. However, these vendors and suppliers can also pose a significant risk to a company’s compliance efforts if they fail to meet regulatory requirements or engage in unethical or illegal practices.
The involvement of third parties in business transactions has significantly risen in recent years, often leading to dozens of third parties in a single transaction, posing a challenge for businesses in fulfilling their risk management obligations.
Here are some key compliance factors to consider this year.
- Risk Assessment – Organizations must analyze their supply chain to detect risks and safeguard against cyberattacks or negative publicity events.
- Contractual Compliance – Contracts with third parties must adhere to legal and regulatory requirements, such as GDPR, and include provisions addressing compliance risks such as bribery, corruption, and cybersecurity.
- Third-Party Risk Management (TPRM) program – Third-party risk management is a process that involves monitoring supplier performance, managing their access to sensitive data, and integrating with existing business processes and technologies. A successful TPRM program requires security measures and integration with enterprise technology, such as HR systems and data analytics tools, to ensure effective control over an organization’s vendor ecosystem.
Combating Money Laundering and Proliferation Financing
Money laundering disguises the proceeds of illegal activity as legitimate funds to avoid detection. Proliferation financing, on the other hand, refers to financing weapons of mass destruction or their delivery systems.
Governments and regulators worldwide prioritize fighting these illegal acts. However, the effectiveness of Anti-money Laundering and Counter-Terrorist Financing (AML/CFT) measures decreased globally in 2022, according to the Basel AML Index.
Criminals still found ways to launder their money, with cryptocurrencies and digital currencies being their favorite. In 2022, crypto hackers took USD 3 billion from victims, as per a report by Chainalysis.
International cooperation in combating money laundering and proliferation financing has grown significantly recently. With the signing of the executive order, President Biden signaled that the United States would create a stronger regulatory framework for cryptocurrencies. The order advises agencies to evaluate the potential of utilizing regulation to mitigate risks related to digital assets.
Leveraging AI and Automation Tools
Artificial Intelligence (AI) is slowly gaining traction in the compliance and regulatory space. AI-driven automation tools can help organizations streamline compliance processes, identify suspicious transactions, and reduce manual labor costs. AI is also becoming increasingly more reliable for fraud detection, with some institutions using machine learning algorithms to analyze past activity, user behavior patterns, network traffic patterns, and more to identify fraud patterns and mitigate unauthorized access in real-time.
According to a report by IBM, “Breaches at organizations leveraging AI and automation tools cost USD 3.05 million less than at organizations without those tools.”
Increasing Executive Leadership Involvement in Compliance Risk Management
The risk and compliance function has evolved from being a reactive, control-based function to becoming an integrated part of the enterprise. It’s no longer the responsibility of the compliance officer to identify risks and report them to management. Today, executives at all levels are expected to set the tone at the top and cultivate a compliance culture permeating the entire organization. Moreover, they must understand how compliance fits into a larger strategy and how to support other business functions like HR and IT in managing risk. However, many senior executives face the challenge of lacking the time and expertise to handle all aspects of risk management. As a result, numerous businesses have resorted to outsourcing their risk functions, including compliance, to third-party entities. One great example of this is the compliance case study of Carnival Cruise lines that we discussed earlier in 2023.
Staying On Top of Regulatory Compliance Trends Is Easy With Nimonik
In today’s ever-changing regulatory landscape, keeping up with compliance trends can be daunting for any organization. Thankfully, compliance software like Nimonik makes it easy to stay on top of new requirements and regulations. With Nimonik, organizations can track environmental, health, and safety compliance regulation changes. Our robust platform uses AI-driven technology to anticipate and alert users of new obligations, giving organizations visibility into compliance requirements that may affect their operations.
Nimonik also provides various compliance templates for documentation and tracking compliance obligations in multiple areas: quality, environmental standards, cyber-security, privacy, public safety, product safety, human resources, occupational health and safety, product compliance, and more. Contact Nimonik and see how much you can save!
FAQs About the latest trends in regulatory compliance
How can organizations stay compliant with evolving regulations?
Organizations can stay compliant with evolving regulations by establishing a robust compliance management system, regularly monitoring regulatory changes, conducting periodic risk assessments, maintaining open lines of communication with regulators, and investing in ongoing employee training and education.
What are some best practices for effective compliance management?
Some best practices for effective compliance management include having strong leadership support, conducting regular risk assessments, establishing comprehensive policies, providing ongoing training, creating compliance cultures, conducting internal audits, and establishing a system for compliance reporting and addressing compliance concerns.
What is risk management and how does it relate to compliance?
Risk management includes identifying and evaluating risks that affect an organization. It also involves ensuring compliance with laws, regulations, and internal policies, which reduces the likelihood of non-compliance and its consequences.
What are the latest data privacy regulations and how can organizations ensure compliance?
The General Data Protection Regulation (GDPR) and California Consumer Privacy Act (CCPA) mandate organizations to obtain consent, make data protection policies, provide privacy notices, deal with data breaches, and appoint a data protection officer if necessary.
How can organizations anticipate and adapt to emerging regulations?
Organizations should closely monitor legislative and regulatory developments, engage in industry associations and networks, collaborate with legal and compliance professionals, conduct regular risk assessments, and maintain flexibility in policies and processes to accommodate future changes and emerging regulations.
What is the role of compliance software in compliance management?
An effective Compliance Management System (CMS) facilitates the management of documents, policies, risk assessments, training, and compliance reporting for regulatory compliance efforts. Through it, organizations can manage compliance obligations, track progress, and demonstrate compliance to regulators with greater efficiency, accuracy, and visibility.