Automating Compliance: A Necessity for Modern Compliance

Written by The GRC Pundit

Published on2024-10-07Updated on2024-10-07Discussion5 Comments on Automating Compliance: A Necessity for Modern Compliance

The modern regulatory landscape is evolving at an unprecedented pace. Organizations across industries are facing a deluge of new regulations, amendments to existing laws, and enforcement actions that can overwhelm compliance teams. This is particularly evident in industries like financial services, where regulatory scrutiny is intense and constantly changing. Yet, the challenge of managing regulatory change is not limited to financial services; it spans all sectors as organizations face complex and overlapping compliance requirements. To effectively navigate this environment, businesses must adopt automated solutions that streamline regulatory change management and ensure compliance.

Drivers for regulatory change management automation include:

• Regulatory Proliferation. Regulatory bodies worldwide are introducing new laws and updating existing ones at a faster rate than ever before. Financial services alone face a few hundred regulatory changes every business day, a number that has more than doubled over the last five years. Keeping up with this deluge of changes is a monumental task for compliance teams, particularly when regulatory requirements are inconsistent across jurisdictions.
• Cross-Industry Compliance Challenges. While financial services often take center stage in discussions around regulatory compliance, other industries like healthcare, technology, gaming, and crypto face similarly complex regulatory environments. Each of these sectors must comply with global regulations related to anti-money laundering (AML), Know Your Customer (KYC), data privacy, cybersecurity, and industry-specific rules.
• Operational Risk and Reputational Damage. Failure to comply with new regulations or amendments can expose organizations to significant penalties, legal liabilities, and reputational damage. Many industries, especially those in regulated markets, operate under intense scrutiny, and a single oversight in compliance could lead to damaging fines, loss of licenses, or legal actions.
• Internal Complexity. As organizations grow, so do their internal processes and relationships with third parties. Mergers, acquisitions, and expanding product lines further complicate regulatory compliance, requiring organizations to manage an ever-growing catalog of legal obligations across various jurisdictions and operational units.

The Inevitability of Failure: Manual Processes and Silos of Information

For decades, organizations have relied on manual processes—documents, spreadsheets, and emails—to manage regulatory change. While this approach may have been feasible in less dynamic regulatory environments, it is increasingly inadequate today. Consider the impact of:

• Siloed and Scattered Information. In a manual environment, regulatory change management is often decentralized, with each department relying on disparate sources of regulatory information. These sources can range from newsletters and regulatory feeds to third-party legal databases. The result is fragmented compliance efforts, where critical updates are missed, redundant tasks are performed, and information silos prevent collaboration.
• Inefficient Reconciliation. Relying on manual processes makes reconciling regulatory updates with internal policies, controls, and risks time-consuming and error-prone. Compliance professionals must sift through hundreds of updates, extract relevant information, and then manually determine the impact on the organization. This leads to delayed responses, incomplete analysis, and a higher risk of non-compliance.
• Lack of Accountability and Auditability. Manual workflows offer little accountability or traceability. Compliance teams often struggle to document who reviewed which changes, what actions were taken, and what decisions were made. This lack of an audit trail not only complicates internal compliance but also fails to satisfy external regulators who demand clear evidence of compliance.
• Wasted Resources. Regulatory change management in a manual environment is resource-intensive. Organizations must dedicate significant time and effort to tasks that could easily be automated. This reliance on human intervention increases the likelihood of errors and drains resources that could be better allocated to strategic initiatives.

The New Era of AI-Powered Regulatory Change & Compliance

As regulatory complexity continues to grow, so too does the need for intelligent automation. The advent of AI-driven solutions has transformed the way organizations manage regulatory change and compliance workflows. 

With AI-empowered regulatory change and compliance management processes, organizations can have:

• Comprehensive and Curated Law Libraries. AI-powered platforms provide organizations with centralized, curated regulatory content across jurisdictions. These platforms continuously track and update legal requirements, reducing the need for organizations to manage multiple, scattered sources of information. This ensures that compliance teams have access to relevant and up-to-date information without the noise of irrelevant updates.
• Automated Workflow and Task Management. AI solutions eliminate manual processes by automatically routing regulatory updates to relevant stakeholders, initiating business impact analyses, and generating tasks based on predefined criteria. This enhances accountability, ensures timely action, and creates a defensible audit trail for regulators.
• Horizon Scanning and Change Tracking. Advanced AI solutions offer horizon scanning capabilities that monitor for new or pending legislation, regulatory changes, and enforcement actions. By anticipating regulatory developments, organizations can proactively adjust their compliance strategies and ensure that policies, risks, and controls are updated in real-time.
• Risk-Based Approach to Compliance. AI-driven platforms allow organizations to adopt a risk-based approach to regulatory compliance. These solutions can map regulations to internal policies, risks, controls, and even third-party relationships, enabling organizations to prioritize compliance efforts based on risk exposure and operational impact.
• Generative AI for Compliance Insights. Generative AI models, like those built into some advanced regulatory platforms, empower compliance teams by summarizing complex regulatory requirements in natural language. These models can also generate policy drafts, identify gaps in controls, and provide actionable insights that streamline compliance workflows.

The regulatory landscape is shifting, and manual approaches to compliance management are no longer sufficient. Organizations that continue to rely on fragmented, manual processes will face increasing risks of non-compliance, operational inefficiencies, and financial penalties. To stay competitive and compliant, organizations must embrace AI-powered regulatory change management solutions that automate workflows, streamline compliance, and provide actionable insights.

Organizations should act now to implement AI-driven solutions that automate regulatory intelligence, manage compliance workflows, and ensure timely responses to regulatory changes. By doing so, they will not only reduce operational risk and improve regulatory outcomes but also free up valuable resources to focus on innovation and growth in an increasingly complex regulatory environment.

I am doing two workshops on this topic in November:

London, November 5 @ 9:00 am – 6:30 pm GMT

• Compliance Management by Design Workshop, LONDON

New York City, November 20 @ 1:00 pm – 7:00 pm EST

• Mastering the Regulatory Rollercoaster: Navigating New Rules and Emerging Risks, New York