Proactively manage your regulatory risks

The growing challenge of regulatory obligations in financial services

This is no exaggeration: Managing the volume and complexity of regulatory obligations on a global scale is more overwhelming and resource-intensive than ever for financial services institutions.

With regulations steadily increasing for a decade and expectations to demonstrate coverage across rules and jurisdictions also expanding, managing regulatory obligations is already a huge cost, time and resource burden. That’s before laws, rules and regulations change, which they seem poised to do significantly, given the roller coaster start of 2025—a year we at KPMG LLP (KPMG) are calling “The Year of Regulatory Shift."¹

Further exacerbating the challenge is that while authorities have historically enforced coverage mandates primarily on top-tier banks, they are increasingly focusing on institutions of all sizes and segments. Everyone will have to level up, including large institutions which—despite their head start—still largely struggle to consistently capture obligations, manage changes, and ensure compliance.

In other words, 2025 has all the ingredients for surging complexity: an unpredictable administration in Washington and extensive changes in agency leadership, not to mention disruptive geopolitical and economic events, revolutionary technology advances, expanded regulatory divergence, and expanded scrutiny of coverage.

The crucial need for proactive compliance

Financial sector risk and compliance executives must adopt proactive, repeatable strategies to avoid penalties, maintain stability and meet requirements amid intense regulatory pressure. By leveraging advanced technologies like AI, analytics and automation across your risk and compliance operations, your organization can stay ahead of regulatory shifts and quickly adapt to new rules and changes—even those no one sees coming.

Firms face increasing regulatory pressures and need to demonstrate understanding and coverage of their obligations. Historically, firms have been reactive. Even in times of less volatility, this approach has proven costly, inefficient, and largely ineffective. Now, there is even greater urgency to be proactive in managing regulatory change with agile, tech-enabled risk and compliance strategies.

The time to act is now. The stakes for rapidly adjusting to regulatory changes are high as can be. Failing to adopt proactive compliance measures can have severe consequences. Organizations risk facing hefty fines, reputational damage, and operational disruptions. The cost of inaction is too great to ignore.

But this challenge also presents an opportunity: Establishing future-proof regulatory compliance and risk management operations. Risk and compliance functions must embrace and embed fast, flexible, data-driven processes to both stay ahead of evolving regulations now and build the resilience financial services organizations will need to compete in the long-term.

Four key challenges of demonstrating regulatory coverage

Why is it so difficult for financial services firms to meet rising expectations to demonstrate regulatory coverage? Because regulatory obligation management involves constant mapping and updating of controls, often requiring repetitive, manual efforts. Inefficiencies block progress all along the way, from standardizing how you capture obligations, to maintaining and updating your inventory of obligations, to mapping policies, procedures, and controls to laws, rules, and regulations.

Four root issues stand out:

1 | Standardization and traceability

The only way to manage regulatory obligations at the pace required and without overspending is creating a standardized way to capture regulatory obligations and ensuring traceability across different regulators and jurisdictions. This approach is absolutely crucial for managing obligations efficiently, effectively and consistently, and aligned to the firm's risk appetite. However, many firms are stuck with disconnected, non-repeatable, and nontransparent processes, as different teams create their own control inventories.

2 | Mapping policies and controls

Similarly, firms struggle with mapping policies, procedures, and controls to laws, rules, and regulations to demonstrate coverage. This process is very manual and time-consuming, and firms are looking for automation through AI and machine learning to make it more efficient and standardized.

3 | Inventory maintenance

Maintaining an inventory of obligations and linking changes to the inventory from a data perspective are significant hurdles to effective compliance. Firms need processes and tools to house this inventory and manage changes. Although there is high demand for automated solutions, current market offerings do not meet these needs fully.

4 | Documenting controls

The quality of control inventories is often poor, making it difficult to get a complete and organized inventory for mapping. Firms need to document everything and get all stakeholders involved. This includes creating a complete and well-organized inventory of control descriptions, which can be used to map policies and procedures to regulatory requirement.

The future of regulatory compliance and risk management is tech-enabled

If proactive compliance and risk management is the goal—and The Year of the Regulatory Shift makes it imperative—integrating advanced technology is the most direct path to success.

Advanced technologies like AI, predictive analytics, and automation are revolutionizing compliance and risk management processes. These technologies can streamline workflows, enhance accuracy, and reduce manual tasks, allowing organizations to stay aligned with evolving risk and regulatory expectations. They are especially good at helping organizations manage large volumes of data and automate repetitive tasks.

And as powerful as they are today, these tools will only continue to evolve, providing even more sophisticated solutions for managing regulatory obligations in the future.

For example, firms leverage KPMG AI-enabled automation technology to map risk controls, standards and procedures to regulatory obligations, identify gaps, and (with the help of guidance by our subject matter experts) identify enhancements and new controls to close those gaps. When firms face changes to regulations or new regulations—a fact of life in financial services—we can instantly rerun those mapping processes to quickly and efficiently determine if the changes are significant enough to warrant enhancements to the controls.

KPMG offers advisory services with cloud-based technology enablers, such as AI and machine learning, to help firms improve mapping processes, integrate in-house AI and machine learning capabilities into client compliance processes, and manage their regulatory obligations more proactively, consistently and cost-effectively.

Start your journey to proactive regulatory obligation management

As a financial services risk and compliance leader, you must be proactive in addressing emerging risks and aligning with evolving regulatory expectations. The regulatory landscape in 2025 will be characterized by increased volume, complexity, and impact, but with the right tools and mindset, you can transform your risk and compliance processes, allowing your organization to stay ahead of regulatory change, reduce compliance and operational risks, and ensure long-term resilience.

Take action today: Leverage KPMG’s expertise to proactively standardize and centralize your regulatory obligation traceability processes while utilizing advanced technology to help manage and update control inventories efficiently. Achieve detailed regulatory compliance coverage, avoid sanctions, and manage costs effectively in a dynamic regulatory landscape.

¹Ten key regulatory challenges of 2025 (KPMG LLP)