Post By: Amy Matsuo, Principal and Leader, Regulatory and ESG Insights
2022 brings increasing and interconnected regulatory, risk and compliance challenges. As the regulatory perimeter expands, business, ethics, and compliance leaders should take action to avoid these potential pitfalls.
Companies should expect high levels of supervision and enforcement activity. Learn what key actions you can help your company take to address these areas in our Ten Key Regulatory Challenges of 2022:
Rapid Changes
- Fairness and Inclusion: Investor demand, public awareness, social unrest, and the priorities and directives of the Administration have focused regulatory attention on supervision and enforcement of consumer and investor protection on a broad scale and expanded the parameters of “fairness” to include all consumer touchpoints.
- Climate and Sustainability: Pushed largely by significant and widespread investor demand and facilitated by myriad voluntary disclosure frameworks, organizations are working toward measuring, monitoring, and mitigating their climate-related risk.
- Crypto and Digital Assets: Regulatory activity around crypto and digital assets is intensifying as usage by investors, companies, and even some central banks, shows widespread interest and adoption at retail and institutional levels.
- Platforms and Conduct: Rapid developments in technology, increases in digital banking activity, growing sophistication of data collection, and the increasing influence of social media is reshaping the industries’ landscape in ways that have never been seen or anticipated.
Maintaining Focus
- Cyber and Data: Regulators have called cyber risk the foremost risk to stability across industries—and the Administration has called it a persistent and increasingly sophisticated threat that weighs heavily on governments and organizations alike.
- Fraud and Financial Crimes: The adoption of innovative technologies to improve the effectiveness of fraud and related risks management is becoming an imperative as regulators emphasize innovative approaches (e.g., machine learning, enhanced data analytics) and the preponderance of threat risks, from cybersecurity to ransomware to cryptocurrency to identity theft, are technology driven.
- Valuation Vulnerabilities: There is a large amount of debt and leverage in sectors across some industries, coupled with historically elevated valuations for almost all asset classes (from corporate equities to real estate to cryptocurrencies).
Mitigating Risk
- Third party and Cloud: Driven to enhance competitiveness, expand operations, and accommodate customer needs, organizations are forming more numerous and complex relationships with third-party companies at significant speed and scale, including technology-focused entities such as cloud service providers.
- Tech and Resiliency: Recent events, including technology-based failures, cyber incidents, pandemic outbreaks, and natural disasters, have made clear that significant disruptions are increasingly likely and can be interconnected.
- Risk “Complacency”: Regulators see “risk complacency” by companies as a potential threat to both stakeholder trust and safety and soundness.
About the Author: Amy Matsuo is a Principal and Leader of the KPMG LLP Regulatory and ESG Insights team. She can be reached at amatsuo@kpmg.com.