As 2022 comes to a close, the RegTech industry begins to look toward a new year and the new challenges they could face.
In the opinion of Diligent, the key trend to watch out for in the new year could be the topic of risk.
The company said, “For boards and management, heightened pressure around climate action dovetails with the SEC’s proposed rules about cybersecurity oversight, which may soon become law. When they do, companies will need to prepare for more disclosures about their cybersecurity policies and procedures.
“With fresh scrutiny on directors’ cybersecurity expertise, or lack thereof, boards will need to take their cyber savviness to the next level as well. At a time when less than a fifth of risk and compliance professionals profess to be very confident in their ability to clearly communicate risk to the board, it’s clear that lines of communication – not to mention understanding – must be improved.”
Elsewhere, risk also pertains with geopolitical instability, Diligent believes this will continue to be a governance issue, particularly with the ned to oversee third-party and supply chain risk. “If new trade sanctions or customer preferences affect a region or supplier, does your company have alternatives in place to pivot as necessary?” said Diligent.
The company also highlighted the importance of crypto and blockchain being in the radar of a company board, stating that digital products like crypto and blockchain will affect a company’s risk profile.
Diligent continued, “Audit’s role in corporate governance and risk management has been evolving. Once strictly focused on finance and compliance, internal audit teams are now increasingly expected to help boards and executive management identify, prioritize, manage and mitigate interconnected risks across the organization.”
The key risks Diligent believe with ‘run the gamut’ in 2023 are geopolitical volatility, talent management, DEI, ESG, IT security amid continued remote and hybrid work and business continuity amid the threat of large-scale operational and utility interruptions.
Risk’s time frame has been expanding as well. While companies still require a short-term view of imminent threats, they also need insight over the next 5-10 years into evolving challenges such as recession, war and supply chain issues.
Diligent remarked, “Watch for continued war between Russia and Ukraine marking a turning point for ESG and risk, as countries and companies shift from Russian oil and gas to green energy solutions.
“Regulatory developments further solidify the ESG-risk connection, particularly new rules by the SEC, codification of the Corporate Sustainability Reporting Directive (CSRD) and a host of regulatory developments around the world.”
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