The greatest danger in times of turbulence is not the turbulence itself, but to act with yesterday’s logic. (Peter Drucker).
2024 has been a year of great change with tech advancements, AI, and societal shifts. Businesses focus on innovation, sustainability, and diversity to keep up with the fast-paced world.
The technological advancements in AI and automation have created new opportunities; however, they also threaten traditional jobs. The future of work is uncertain as machines become more intelligent and capable. Individuals are concerned that their occupations may become obsolete or be replaced by machines.
Although these changes present opportunities for growth and advancement, they also present obstacles for compliance managers. Here are the top nine challenges that compliance managers are currently encountering in 2025, as we contemplate the future.
9 Biggest Challenges for Compliance Managers in 2024
Let’s dive into each of these challenges and explore their potential impact on compliance management in the future.
Artificial Intelligence (AI) and Automation in Compliance
Generative AI, machine learning, and robotic process automation (RPA) are changing the way businesses operate. AI is predicted to become a $299.64 billion market by 2026, with a CAGR of 37.3% between 2022 and 2030. 48% of businesses currently use AI, and this percentage is predicted to rise.
Industries such as finance and healthcare are heavily reliant on AI for decision-making. But with great power comes great responsibility. Compliance managers must ensure that AI systems are fair, unbiased, and compliant with regulations such as GDPR and CCPA. They also look for possible hazards including data breaches or algorithmic prejudices.
Automation in compliance processes can save time and reduce human errors but may also lead to job displacement. Compliance managers need to strike a balance between efficiency and maintaining a human touch in compliance practices.
Cybersecurity and Data Protection
The use of technology also means a higher risk of cyber threats. The sophistication of malicious actors, hackers, and data breaches is increasing.
It is anticipated that the annual costs of cybercrime in the US will amount to $10.5 trillion by 2025. Businesses that experience data breaches may be subject to expensive fines, legal action, and harm to their reputation.
In the past few years, there have been significant data breaches at companies like Marriott, Yahoo, and Equifax. Stronger data protection procedures and cybersecurity measures could have reduced the impact of these breaches.
Compliance managers need to stay updated on the latest security threats and regulations such as the EU’s General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA). They also have to make sure that the data of their business is safe from the inside as well as the outside.
Automation and artificial intelligence (AI) in cybersecurity can also aid in the detection and avoidance of cyberattacks. It is imperative for compliance managers to monitor these developments and integrate them into their compliance plans.
Globalization and Cross-Border Compliance
The expansion of businesses into international markets brings new challenges for compliance managers. It is difficult to maintain compliance standards across borders because of different laws, rules, and cultural norms.
The GDPR and CCPA have strict regulations on handling personal data, while countries like China and Russia have different laws regarding data privacy and censorship.Compliance managers now more than ever need to keep abreast of global regulations and maintain a global perspective.
Cross-border compliance also poses challenges in terms of managing third-party risks and due diligence. Compliance managers have to make sure they are following the same compliance criteria even while they are dealing with suppliers, vendors, and partners across borders.
As global supply chains become more prevalent, compliance managers must be well-versed in their organization’s whole network and make sure that everyone is in compliance.
Incorporating Environmental, Social, and Governance (ESG) Principles into Compliance Practices
Environmental, Social, and Governance (ESG) concepts have become much more important recently. Businesses are supposed to be ethically strong, environmentally friendly, and socially conscious.
ESG factors must be part of every compliance strategy used by managers. Tracking the company’s carbon footprint, guaranteeing fair labour policies, and advancing diversity and inclusion all fit under this category.
Ignoring ESG standards might lead to loss of investor confidence and damage of reputation. Clear knowledge of ESG ideas and how to apply them into compliance procedures is absolutely vital for compliance managers.
Regulators and investors also increasingly rely on ESG measures to evaluate businesses’ performance. These benchmarks let compliance managers show dedication to ESG principles.
Managing Third Party Risk and Due Diligence
Outsourcing tasks and working with third-party vendors is a common practice for businesses. This also brings additional compliance risks. Compliance managers need to conduct due diligence before partnering with any third party.
It is imperative that they conduct consistent assessments and monitoring of their vendors, suppliers, and partners’ compliance practices. Immediate attention must be given to any potential risks or non-compliance issues. The rise of global supply chains and the use of technology in outsourcing has made it more challenging.
Compliance managers need to have a robust third-party risk management strategy in place to mitigate any potential risks. When dealing with international vendors, they must also be aware of any cultural or regulatory differences that may impact compliance.
In order to mitigate the likelihood of human error, businesses have implemented automated due diligence procedures. Advanced technology, including artificial intelligence (AI) and data analytics, can also be employed by compliance managers to detect any compliance issues within their organization’s third-party network.
Maintaining Ethical Standards in a Changing Environment
It is the responsibility of compliance managers to ensure that their organization complies with all applicable laws and moral standards. The proliferation of social media platforms and the intensification of public scrutiny have resulted in an increase in the amount of pressure placed on businesses to uphold a positive image.
Promotion of workplace diversity and inclusion, prevention of harassment and discrimination, and ethical business practices are included. Compliance managers must anticipate and resolve company ethical issues. Implementing training programs, setting clear policies, and promoting compliance can help.
Compliance managers must also monitor social and cultural changes that may affect workplace ethics. They must react quickly and effectively to changes and issues.
Technology like AI-based ethics monitoring programs can help compliance managers spot ethical violations in their company.
Keeping Up with Regulatory Changes and Updates
Laws and regulations are not static and are constantly evolving. Compliance standards change with the changes in the data market and technological scene.
For instance, the acceptance of personal devices in the workplace and cloud computing has begged issues about data security and privacy. Ignored, these developments might expose businesses to non-compliance risk.
The role of a compliance manager includes staying updated on any regulatory changes and ensuring that the company is adhering to them. This involves regularly reviewing policies and procedures, conducting internal audits, and making necessary updates.
Compliance managers can also join industry associations and attend conferences to stay informed about the latest regulatory developments. They can also use technology, such as compliance management software, to track and manage any regulatory changes that may impact their company.
Addressing Employee Compliance Training and Education Needs
Employees are often the first line of defense in maintaining compliance within a company. If they are not aware of compliance policies and regulations, they may unknowingly engage in non-compliant actions.
In 2022, Pegasus Airlines faced a sensitive flight data exposure incident because of employee carelessness. To prevent such incidents, compliance managers must prioritize employee education and training.
The compliance team should develop and implement comprehensive training programs that cover all relevant compliance topics. This can include data privacy, anti-corruption policies, ethical standards, and more.
Regular training sessions and updates should be conducted to ensure that employees are aware of any changes or updates in compliance policies. Online training modules and quizzes can also be used to assess employees’ understanding of compliance regulations.
Balancing Cost-Effective Compliance Measures with Business Growth Strategies
Compliance can be a costly endeavor for businesses, especially with the constant changes and updates in regulations. Compliance managers are tasked with finding a balance between implementing effective compliance measures and minimizing costs.
This requires careful consideration and strategic planning. For example, implementing compliance management software can streamline processes and reduce costs in the long run. Compliance managers can also use data analytics to identify any areas where compliance measures may be too costly or inefficient.
At the same time, they must ensure that cost-cutting measures do not compromise the effectiveness of their compliance program. The key is to find a balance between cost-effectiveness and ensuring compliance with all necessary regulations.
How Chief Compliance Officers Can Prepare for These Challenges?
Chief Compliance Officers (CCOs) are responsible for overseeing the compliance program and managing the compliance team. To effectively tackle these challenges, CCOs should.
- Develop a strong understanding of the company’s business strategy and goals to align compliance efforts with them.
- Foster a culture of compliance throughout the organization, starting from the top level of management.
- Utilize technology and data analytics to streamline compliance processes and identify potential risks.
- Regular training should be conducted for employees to ensure they are aware of compliance policies and regulations.
- Continuously review and update compliance policies and procedures to stay compliant with changing regulations.
- Collaborate with other departments, such as legal and IT, to ensure a comprehensive approach to compliance.
- Stay informed about industry and regulatory developments by attending conferences and joining associations.
- Continuously monitor the effectiveness of the compliance program and make necessary adjustments.
By following these steps, CCOs can effectively prepare for the challenges of maintaining ethical standards in a changing environment. They must also be adaptable and willing to adjust their strategies as new challenges arise.