Compliance and Legal Professionals at US/UK Corporations and Law Firms are Increasingly Challenged to Support Exponential Growth of Global Compliance Regulations
September 8, 2020 – FARGO and LONDON – Global compliance regulations have increased exponentially in the past decade, placing unprecedented burdens on corporations. Today, Integreon released findings of its first Regulatory Readiness Report which shows that US and UK corporations and law firms are feeling increased operational pressure, risk exposure, and the impact on profitability and growth due to compliance surges. In turn, law firms are pressured to reduce costs and ramp up quickly and advise clients on regulatory events, requiring many to seek external resources to meet clients’ needs.
Conducted by Pensar Media, the Integreon Report polled 200 compliance and legal professionals in the US and UK to determine and assess the compliance challenges corporations and law firms face. The Report found that a staggering 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.
About half (51%) of corporations wait until six months or less before any regulatory event before they seek external legal advice, giving their law firms and other service providers limited time to counsel and support them. Only 35% of corporations completely agree that they have the resources and budget to adequately achieve and maintain compliance. 27% said their biggest challenge is not having enough internal staff to help support regulatory change response, followed by 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.
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. 41% 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 like General Data Protection Regulation/GDPR (EU) and California Consumer Privacy Act/CCPA (State of California – US) and preparedness measures for impending events like the LIBOR reference rate transition, Brexit and Initial Margin Phase 5 (IM5).
Highlights of regulation-specific preparedness among survey respondents included:
- 38% of corporations are still not fully compliant with GDPR, even though the regulation came into force in May 2018.
- 41% of corporations are not fully compliant with CCPA, and 55% are compliant even though CCPA just activated on January 1, 2020.
- 53% of corporations believe they are well-prepared for the LIBOR transition as the LIBOR reference rate expires on December 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.”
Jeffrey Catanzaro, EVP at Integreon and head of its Contracts and Compliance Services practice group and LIBOR Task Force, commented, “Both corporations and law firms are seeking assistance to shoulder the overwhelming workload resulting from regulatory readiness activity. Whether we are assisting financial institutions with repapering contracts for LIBOR, ensuring business controls and compliance, or managing risk, Integreon aims to be a flexible, essential part of the resource team – creating scale at all stages of the supply chain.”