Compliance Functions Face Pressure to Transform in Escalating Global Risk Landscape

PR Newswire
Tuesday, November 29, 2022 at 5:01am UTC

Compliance Functions Face Pressure to Transform in Escalating Global Risk Landscape

PR Newswire

  • New BCG Research Assesses the Topics Most Relevant to Compliance Arms in the Face of Ever-Evolving Risks
  • Cybersecurity Ranks as the Top Key Topic for Compliance Organizations, Followed by Business Ethics, Digitization and Data Analytics, ESG, and Sanctions/Trade Compliance

BOSTON, Nov. 29, 2022 /PRNewswire/ -- The global regulatory environment has intensified, with sanctions and enforcement measures tightening amid rising geopolitical and economic uncertainty. Compliance organizations must undergo significant transformations to keep pace with diverse and evolving compliance risks, according to a new report from Boston Consulting Group (BCG).

Based on a survey of 250 compliance professionals from around the world, BCG's second annual Global ESG, Compliance, and Risk Report found that cybersecurity was deemed the most relevant key topic for today's compliance organizations, followed by business ethics; digitization and data analytics; environmental, social, and governance (ESG) adherence; and sanctions/trade compliance.

"In this increasingly complex world, simply writing policy guidelines and instructing employees to follow the rules will not be enough to stay ahead of the game," said Katharina Hefter, a BCG managing director and partner and coauthor of the report. "Companies that effectively overhaul their compliance operations now will create maximum value for their respective organizations in the face of future shocks."

Seven Key Topics for Compliance Strategy

The report revealed the following trends:

  1. Cybersecurity takes precedence: When asked which key topic was most relevant for their compliance organizations, 62% of respondents cited cybersecurity—10 percentage points more than business ethics, the next most cited topic. Over 70% of respondents (73%) said they are already well- or very well-positioned to improve performance in this area.
  2. Geopolitics rises on the agenda: As the sanctions landscape becomes more complex and dynamic, this year's survey revealed sanctions and trade compliance now ranks among the top five key topics for compliance organizations—a jump of 15 places since 2021. Survey participants also ranked geopolitical tensions as a key topic for the first time, ranking 11th out of 19 topics overall.
  3. Digitization hits a roadblock: Although survey respondents cited digitization and data analytics as the third most relevant key topic for compliance arms, 52% said their organization has not advanced very far in its digital journey. Nearly a quarter (24%) admitted they're dealing with the development of digital compliance strategy either poorly or very poorly.
  4. Regulations push ESG to the forefront: Authorities worldwide have issued more than 170 new or amended ESG regulations since 2018. Among the survey respondents, 43% ranked ESG as a top-five key topic and 79% reported that their commitment to ESG has intensified over the past two years. Approximately three-fifths of respondents (58%) said regulators are having the greatest impact on their ESG efforts.
  5. Compliance mandates set the tone: Against a background of diverse risks and rising uncertainties, clarifying the compliance mandate and the role of the compliance arm for different types of risk is critical. For example, only around half to two-thirds of organizations surveyed said key ESG-related topics were included in their compliance mandates—despite ESG's growing prominence.
  6. Business ethics remains a priority: More than half (52%) of respondents—regardless of industry, region, or maturity stage—included business ethics among the top five key topics most relevant to their compliance organizations.
  7. Attracting the right talent is a growing concern: When asked about the challenges they foresaw for their compliance organizations, 68% of respondents pointed to "attracting talent" as the top challenge within the workforce key topic—more than 20 percentage points higher than the second most cited option. ­­

"The past year has shone a new light on the crucial role of compliance. Every company needs a strategy, not just to manage current risks, but also to adapt quickly as circumstances, rules, and regulations develop," said Julia Gebhardt, a BCG managing director and partner and coauthor of the report. "Those that build and integrate all-encompassing compliance strategies, incorporating each of the key topics outlined in the report, will gain sustainable competitive advantage, attract and retain talent, and enhance their reputation for acting responsibly in a challenging business environment."

Download the publication here: https://www.bcg.com/publications/2022/global-esg-risk-compliance-function-report-2022

Media Contact:
Eric Gregoire
+1 617 850 3783
gregoire.eric@bcg.com 

About Boston Consulting Group
Boston Consulting Group partners with leaders in business and society to tackle their most important challenges and capture their greatest opportunities. BCG was the pioneer in business strategy when it was founded in 1963. Today, we work closely with clients to embrace a transformational approach aimed at benefiting all stakeholders—empowering organizations to grow, build sustainable competitive advantage, and drive positive societal impact.

Our diverse, global teams bring deep industry and functional expertise and a range of perspectives that question the status quo and spark change. BCG delivers solutions through leading-edge management consulting, technology and design, and corporate and digital ventures. We work in a uniquely collaborative model across the firm and throughout all levels of the client organization, fueled by the goal of helping our clients thrive and enabling them to make the world a better place.

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SOURCE Boston Consulting Group (BCG)