Compliance officers in the spotlight amid regulatory churn

Insight

2023 KPMG Chief Ethics & Compliance Officer Survey

Anticipating more scrutiny

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Estimated read time: 3-4 minutes

In a year marked by increasing regulatory intensity, the role of the chief ethics and compliance officer (CCO) has never been more important. Once considered a “nice-to-have” by some organizations, the ethics and compliance function is now essential to helping organizations identify, measure, and mitigate risks. 

And there are plenty of risks to monitor, as we detailed in a recent KPMG survey. CCOs are juggling a mix of competing concerns that include new guidelines from regulators on multiple fronts; enhanced enforcement of existing measures; stops-and-starts on environmental, social, and governance (ESG) reporting; and complex new technology considerations in areas like artificial intelligence (AI) and generative AI.

Our new report, the KPMG Chief Ethics and Compliance Officer Survey, captures feedback from 240 CCOs from large companies to provide insights on how they are navigating short- and long-term planning, resolving operational challenges, and driving an ethical firm culture. Here’s a closer look at what we found.

The big picture

The pace and scale of regulatory activity quickly emerged as a dominant theme across our survey, as compliance officers adjust to an expanding “regulatory perimeter.” 

But rather than viewing this as a one-time cyclical spike and hunkering down until the storm passes, many of the CCOs we surveyed are addressing challenges head-on today—and preparing for a more persistent, heightened volume of compliance activity for the long term.

Here’s a brief snapshot of three of the top findings from our survey:

The compliance forecast: Most CCOs are anticipating that compliance pressures will continue to rise, with expanded scrutiny coming from both the outside (regulators) as well as from within (the board).

Top mitigation tactics: Strengthening the role of the board and senior management; monitoring stakeholder activity.

The top challenge: New regulatory requirements pose the greatest challenge to compliance efforts over the next two years, respondents said, with potential risks from advanced data models the second-most cited concern.

Top mitigation tactics: Clearly map out the organization’s regulatory complexity; prioritize investments in the talent and technology needed to manage that complexity.

The top enhancement: The majority of CCOs cited technology and data analytics as the top ways to enhance compliance operations in the next two years, with nearly two-thirds expecting an increased technology budget.

Top mitigation tactics: Prioritizing “privacy-by-design” technology architecture principles; regularly reviewing and updating technology governance protocols.

The industry-level view

Beyond the macro concern about overall regulatory activity, the CCOs in our survey were especially focused on industry-specific regulations. 

Indeed, nearly half the respondents said their top compliance focus was improving processes related to regulations in their industry—a priority that was well ahead of other pressing issues, such as strengthening cybersecurity (33 percent) and consumer information protections (32 percent).

Each industry, of course, has its own unique challenges, and so our new report includes drill-downs on seven different sectors. In the consumer and retail industry, for example, compliance officers are especially feeling the pressure from their boards around overall risks and from their customers in areas like ESG. But they also expect lower technology budgets to beef up compliance operations compared to other sectors.