Incoming! Are You Prepared for What’s Next in Regulatory Compliance?

Introduction

Cybersecurity and data privacy, ESG and climate change, operational resilience, artificial intelligence (AI), and so on. The focus areas of regulatory authorities worldwide are constantly growing both in number and in scope with the evolving risk landscape and stakeholder expectations. Still, recent developments, innovations, and risks seem to outpace regulatory efforts. The good news is that this is starting to change now.  

In the past couple of months, we have seen significant regulatory activity around the world. From the US to the EU, the UK, Singapore, India, and beyond, authorities are relentlessly striving to establish the regulatory perimeters on cybersecurity, risk management, business continuity and operational resilience, ESG and sustainability, and other areas for critical industry verticals.  

Cyber Risk and Financial Sector: Top Focus Areas

The spiraling number of high-impact cyber incidents in recent years, including the Colonial Pipeline ransomware attack, the SolarWinds hack, WannaCry ransomware, and the Microsoft Exchange Server hack, among others, has underscored the need for stringent cyber laws and regulations.  

To secure the US digital ecosystem, the White House released the National Cybersecurity Strategy in March 2023, which focused on defending critical infrastructure, addressing threat actors, and strengthening resilience. It was closely followed by the Securities and Exchange Commission (SEC) proposing new cybersecurity rules for public/listed companies and other selected financial entities, which, if adopted, would require them to dramatically level up their cybersecurity risk management approach.

  The proposed rules are likely the first of many to be aligned with the National Cybersecurity Strategy. Considering the acute focus on safeguarding critical infrastructure, other industry regulators are expected to soon follow suit. 

[For a deeper dive, read the blog on SEC’s Proposed Rules on Cybersecurity Risk Management by MetricStream’s Agnishwar Banerjee.]   

Unsurprisingly, the SEC noted that the “interconnectedness” of market entities amplifies cyber risk. A cyber incident at any organization can impact several other connected organizations, resulting in a systemic failure. This holds true for organizations operating in any industry. Businesses today operate as a complex ecosystem of third-party suppliers, technology providers, and partners, with growing digital dependencies.   

Similar regulatory initiatives are also in the works in other countries. European regulators are focusing on strengthening the “digital operational resilience” of the financial services sector. In 2022, the European Council adopted the Digital Operational Resilience Act (DORA) to bolster the IT security of financial entities such as banks, insurance companies, and investment firms. The act will come into force in January 2025. 

Likewise, in the UK, the supervisory authorities – the Bank of England, the Prudential Regulation Authority (PRA), and the Financial Conduct Authority (FCA) – are focusing on critical third parties in the UK financial sector. In the discussion paper (DP) 3/22, the regulators have laid out potential measures to strengthen the resilience of critical third parties (CTPs) services to the UK financial sector.  

This is just the beginning. From the current focus primarily on financial institutions, soon there will be similar efforts for other industries and sectors – not just limited to public/listed companies but more comprehensive and inclusive of all participants.  

And not just IT and cyber, businesses across industries and geographies are bracing themselves for a regulatory deluge on multiple fronts – diversity, equality, and inclusion (DEI), ESG and climate change, cryptocurrency regulations, AI regulations, and many more.  

 Which brings us to the question – Are you prepared?  

The Answer Lies in Technology and Automation

 According to a recent Ponemon Institute study, the average annual cost of non-compliance is around $14.82 million. The ever-increasing number of regulations and regulatory updates warrant a technology-driven approach to compliance. The regulatory change management process – scanning the regulatory horizon, capturing the latest updates, analyzing the impact on internal policies and controls, identifying and remediating issues, reporting, and more – is a continuous process and requires a continuous approach. Think automated compliance, if you will.

 Manually carrying out these processes is not only labor and time-intensive but also prone to errors. Today, organizations can leverage cutting-edge tools and technologies that can do these tasks for you in a more efficient and accurate way, allowing you to better focus on areas that require human expertise. By facilitating an integrated and centralized approach through seamless mapping of regulations with organizational processes, business units, controls, assets, policies, etc., these software solutions provide contextual information in a timely manner and help accelerate the compliance process. 

The time to act is now. Including compliance and regulatory change management in the organizational digital transformation strategy is a must today. Businesses need to identify compliance areas and processes that could be automated to improve efficiency, relieve the burden on overwhelmed compliance teams, and enhance preparedness for the next and future wave of regulatory changes. 

We understand the importance of demonstrating strong compliance for building trust and confidence with the board, customers, regulators, and other stakeholders. We also understand how organizations can leverage technology as an enabler of compliance automation and resilience. MetricStream Compliance Management and Regulatory Change Management products are purpose-built to help organizations stay on top of evolving compliance requirements.  

To learn more about MetricStream Regulatory Change Management, request a personalized product demo.