Introduction
For many organisations, compliance is a cornerstone that ensures companies operate within the legal frameworks and ethical boundaries set by regulatory bodies. As we move through the period 2024-2025, the landscape of compliance is undergoing significant transformations, influenced by technological advancements, evolving regulations, and global events. This blog explores how compliance is changing in the UK and worldwide, what we have observed this year, what we can expect in the coming year, and how compliance can positively influence businesses.
How Compliance is Changing in the UK and Worldwide
The compliance landscape is continuously evolving, driven by several key factors. Technological advancements, for instance, are revolutionising compliance processes. The rise of artificial intelligence (AI) and machine learning enables more efficient monitoring and reporting, reducing the risk of human error and enhancing the ability to detect fraudulent activities. AI can analyse vast amounts of data to identify patterns and anomalies that might indicate non-compliance, making it a powerful tool for compliance professionals.
Regulatory changes are also playing a significant role in shaping the compliance landscape. In the UK, the 2024 Corporate Governance Code introduces new requirements for risk management and internal controls. Companies must now provide explicit declarations on the effectiveness of their material controls, necessitating a more robust approach to governance and reporting. Globally, there is a growing emphasis on environmental, social, and governance (ESG) criteria, with regulators demanding greater transparency and accountability from businesses. This shift reflects a broader trend towards sustainable and ethical business practices, driven by both regulatory bodies and investor demand.
Globalisation and cross-border regulations add another layer of complexity to the compliance landscape. As businesses expand globally, they must navigate a complex web of international regulations. Compliance professionals need to stay abreast of changes in different jurisdictions and ensure that their companies adhere to local laws while maintaining global standards. This requires a deep understanding of both local and international regulatory environments and the ability to implement compliance strategies that are both effective and adaptable.
What We Have Seen This Year
2024 has been a year of significant developments in the compliance arena. One of the most notable trends has been the increased focus on ESG. Companies are now required to disclose their environmental impact, social responsibility initiatives, and governance practices in greater detail. This shift is driven by growing investor demand for sustainable and ethical business practices, as well as regulatory requirements that mandate greater transparency and accountability.
Enhanced data privacy regulations have also been a major focus this year. With the proliferation of data breaches and cyber threats, regulators have tightened data privacy laws. The UK’s Data Protection Act and the EU’s General Data Protection Regulation (GDPR) have set high standards for data protection, and companies must implement stringent measures to safeguard personal information. This has led to increased investment in cybersecurity measures and a greater emphasis on data protection within compliance programs.
Another significant development has been the adoption of digital reporting methods by regulatory bodies. This shift towards digitalisation aims to streamline compliance processes, improve accuracy, and facilitate real-time monitoring. Companies are investing in digital tools and platforms to meet these new requirements, which not only enhance compliance but also improve operational efficiency.
Additionally, 2024 has seen the introduction of ISO 27001:2022 as the new mandated certification standard for information security. This standard provides a comprehensive framework for managing information security risks and ensuring the confidentiality, integrity, and availability of information. The adoption of ISO 27001:2022 is crucial for businesses aiming to enhance their cybersecurity posture and comply with international best practices.
The year has also witnessed the introduction of extraterritorial legislation such as the Digital Operational Resilience Act (DORA) in the EU, which aims to strengthen the IT security of financial entities and ensure their resilience in the face of severe operational disruptions. Similarly, the new Network and Information Systems (NIS 2) Directive has been introduced to enhance the overall level of cybersecurity across the EU. These regulations reflect a growing recognition of the importance of digital resilience and cybersecurity in maintaining the stability and integrity of financial systems and critical infrastructure.
What We Will See Next Year
Looking ahead to 2025, several trends are expected to shape the compliance landscape. The focus on ESG will continue to intensify, with regulators introducing more stringent reporting requirements. Companies will need to demonstrate their commitment to sustainability and ethical practices through comprehensive disclosures and transparent reporting. This will require a more integrated approach to ESG, with companies embedding these principles into their core business strategies.
The adoption of AI and machine learning in compliance will also continue to grow. These technologies will play a crucial role in automating compliance processes, enhancing risk management, and improving the accuracy of reporting. Companies that leverage AI effectively will be better positioned to navigate the complex regulatory environment and maintain compliance.
Evolving cybersecurity regulations will be another key trend in 2025. As cyber threats become more sophisticated, regulators will introduce new cybersecurity standards. Companies will need to invest in advanced security measures and adopt proactive approaches to protect their data and systems. This will involve not only implementing robust cybersecurity technologies but also fostering a culture of security awareness within the organisation.
There will also be a push towards harmonising regulations across different jurisdictions to facilitate global business operations. This trend will require companies to adopt a more integrated approach to compliance, ensuring consistency and alignment with international standards. This will be particularly important for multinational companies that operate in multiple regulatory environments.
Furthermore, we can expect to see the implementation of DORA and NIS 2 within areas of UK legislation. These regulations will likely influence the UK’s approach to digital resilience and cybersecurity, aligning it more closely with EU standards. This alignment will be crucial for businesses operating across both the UK and EU, ensuring a consistent and robust approach to managing cyber risks and maintaining operational resilience.
Opinion: How Compliance Should, Could Help or Influence a Business in a Good Way
Compliance should not be viewed merely as a regulatory burden but as a strategic asset that can drive business success. Adhering to compliance standards enhances a company’s reputation and builds trust with stakeholders, including customers, investors, and regulators. A strong compliance record demonstrates a commitment to ethical practices and corporate responsibility, which can attract investment and foster customer loyalty.
Effective compliance programs help identify and mitigate risks, reducing the likelihood of legal issues, financial penalties, and reputational damage. By proactively addressing potential compliance breaches, companies can safeguard their operations and maintain business continuity. Compliance initiatives often lead to the implementation of robust processes and controls, which can improve operational efficiency. For example, digital reporting tools streamline data collection and analysis, reducing administrative burdens and enabling more informed decision-making.
Companies that prioritise compliance can gain a competitive edge by differentiating themselves as trustworthy and reliable partners. In industries where regulatory standards are high, compliance can be a key differentiator that sets a company apart from its competitors. Furthermore, compliance can drive innovation by encouraging companies to adopt new technologies and best practices. For instance, the integration of AI in compliance processes not only enhances efficiency but also opens up new opportunities for innovation and growth.
Conclusion
As we navigate the evolving landscape of compliance, it is clear that staying ahead of regulatory changes and leveraging compliance as a strategic asset is crucial for business success. By embracing technological advancements, adhering to regulatory requirements, and viewing compliance as a driver of trust, efficiency, and innovation, companies can turn compliance challenges into opportunities for growth and resilience.
For more information about how Sapphire can help you achieve your compliance goals, contact us on 0845 58 27001.
References
- Thomson Reuters Institute, “10 Global Compliance Concerns for 2024”
- EY, “Six steps for risk and internal control reform”
- Steptoe, “Regulatory Landscape in the EU and the UK: Key Considerations in 2024”
- Controllers Council, “Global Financial Compliance Trends in 2024”
- ISO, “ISO/IEC 27001:2022 – Information security management systems”
- EIOPA, “Digital Operational Resilience Act (DORA)”
- EUR-Lex, “Directive (EU) 2022/2555 – NIS 2 Directive”
