In every sector, regulation and compliance ranks among the top four risks.

Summary: In four out of seven sectors surveyed, regulation and compliance ranks first. Two sectors that rate the impact highest see risk levels rising still further by 2013.

Key factors

Regulation and compliance risks are the most serious perceived threat to global firms. This was also the case in 2010. In 2009, risks associated with the global credit crunch took the first position.

Regulation and compliance risks are of greatest concern to banking and life sciences firms, and of least concern to retail.

In every sector, regulation and compliance ranks among the top four risks. In fact, in four out of the seven sectors we surveyed, regulation and compliance risks rank first.

Drivers of regulation and compliance risks, as reported by organizations surveyed

2013 forecast

Sector view

• Banking and life sciences see this risk rising in the years ahead.
• Oil and gas and power and utilities expect this risk to diminish as 2013 approaches.

Geographic perspective

• Emerging markets (China, India, Russia, Middle East/North Africa (MENA)) expect regulation and compliance risks to fall by 2013. This may be attributable to economic development in these countries that is producing enhanced stability of regulatory regimes.
• Respondents in the US are very concerned about the perceived impact of regulation and compliance risks. They expect to see these risks to rise further by 2013.

Regulation and compliance

Managing the risk

Given that regulation and compliance has been the number-one rated risk for four of the five years in which we have conducted our study, it is unsurprising that companies and governments are aware of, and actively responding to, the threat.

More than 60% of organizations surveyed report that they have implemented measures to address these risks.

Organizations' responses to regulation and compliance risk

Sector strategies

• Banking companies are particularly confident in their approach. More than 70% report that a strong risk management function is effective in addressing the threat.
• In health care and power and utilities, firms appear more likely to report that new legislation and general trends toward regulatory tightening are key challenges.
• In oil and gas, power and utilities and retail, firms tend to report that the broadening of regulation into areas such as CSR is making this risk difficult to address.

Factors mitigating pricing pressure risks, as reported by organizations surveyed

Geographic approaches

• Organizations from Russia, Sweden and Australia are particularly likely to be confident in their ability to manage this risk.
• Firms based in Poland are the least confident (only 40% of respondents from Poland report that their current risk mitigation measures are effective). The challenges faced by companies in Poland could be ascribed to the rapid evolution of regulatory standards associated with EU entry.
• The strengthening of risk management and government relations functions is the approach favored by a majority of respondents in nearly all geographies covered. However, respondents from China are particularly likely to adopt an approach which seeks to embed suppliers and customers in their regulation and compliance efforts.

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