As global compliance regulations have surged over the past decade, corporations in both the U.S. and U.K. say that responding to regulatory changes creates operational pressure for their businesses, increases their risk, and has a negative affect on their profitability and growth, according to a new survey out today.
One impact of these mounting regulatory pressures is that companies often delay taking steps to comply because of budget constraints or a lack of resources, the survey found.
Roughly four in 10 corporations said they are not yet fully compliant with the GDPR, which took effect more than two years ago, or with the CCPA, which took effect at the start of this year.
Another impact of the regulatory surge, the survey found, is that law firms are pressured to reduce costs and ramp up quickly to advise clients on regulatory events, requiring many to seek external resources to meet clients’ needs.
The survey polled 200 compliance and legal professionals in the U.S. and U.K. to determine and assess the compliance challenges corporations and law firms face. The report found that 82% of corporations agreed that responding to regulatory change creates operational pressure for their business, 68% said responding to regulatory change increases their business’s risk profile, and 69% agreed that increased regulation is having a negative effect on profitability and growth.
The report found that about half (51%) of corporations wait until six months or less before a regulatory event to seek external legal advice, giving their law firms and other service providers limited time to counsel and support them. Further, only 35% of corporations completely agree that they have the resources and budget to adequately achieve and maintain compliance.
Asked the biggest challenges their corporations face when responding to regulatory changes, 27% said it is is not having enough internal staff to help support regulatory change response. Other top challenges are not enough technology investment (21%) and disruption to business-as-usual activities (14%).
Many corporations are leveraging external human and technology automation resources to support their preparedness efforts, the report said.
Since corporations are under extreme financial strain to comply with regulations, it’s understandable that 62% of law firms responding said they are under client cost pressures when delivering legal solutions and services in support of regulatory change.
Only 37% of law firm professionals completely agreed that their firm had the internal resources to help multiple clients with regulatory change simultaneously, meaning that 63% had inadequate resources. Forty-one percent of firms relieve those pressures by either outsourcing to alternative legal service providers or relying on their offshore captive operations.
The Report also benchmarked compliance readiness for established data privacy legislation. It found:
- 38% of corporations are not fully compliant with GDPR, even though the regulation came into force in May 2018.
- 41% of corporations are not fully compliant with CCPA, while 55% are compliant.
- 53% of corporations believe they are well-prepared for the LIBOR transition as the LIBOR reference rate expires on Dec. 31, 2021.
- 56% of corporations believe they are well-prepared for Brexit.
- Only 43% of corporations believe they are ready for IM5 (deadline September 1, 2021).
“Corporate compliance teams are being stressed by regulatory requirements, which have globally ballooned five-fold from 2009 to 2019, according to Thomson Reuters data,” said Bob Rowe, CEO of Integreon, a global managed services and alternative legal services provider. “The Report showed the substantial impact this is having on corporations and their law firms.
“Achieving compliance with current regulations while preparing for upcoming transitions like LIBOR, Brexit and IM5 is a massive undertaking which requires highly skilled people, innovative technology, and experts on change and program management including assistance from qualified external resources like Integreon.”