Early in 2021 we published Helena Hu’s article about the top five compliance trends for 2021. As a reminder, Helena suggested that we expected to see:
- AI chatbot use doubling within the next five years
- remote learning and conferencing to continue with improved experiences and security
- increased investment in data security
- virtual/remote compliance audits continuing
- SEC whistleblowing programme changes impacting whistleblowing globally
So far, it looks like Helena was reasonably accurate in her assessment. Remote activity for both learning and compliance activity played a significant role in 2021, and there has been a continued investment in data security. Those three predictions were clearly correct. However, we are still waiting to see some significant changes in whistleblowing legislation, so it remains to be seen what the impacts of any changes will be.
With the end of 2021 nearing, now seems like a good time to look at 2022 and get an assessment of what might happen in our industry and give people some food for thought. This time, we are broadening the scope out to ten trends that we expect to see in 2022. Some of these trends are truly compliance-related; others are still compliance-related but linked to overall macroeconomic and business trends that will impact compliance in a significant way.
1. The pandemic is not going away anytime soon
It is clear that the impacts of the pandemic will be seen for many years, and 2022 will be the start of the next cycle. As COVID-19 continues to exist and develop through new variants, we will not see any significant change to how businesses operate in the pandemic environment. The expansion of vaccine availability will continue, as will the hesitancy about vaccine usage.
The need to press forward with ‘pandemic’ compliance actions, including changed compliance training and policies that have been implemented to make things easier through the pandemic, will likely continue for at least 2022 and likely 2023. Compliance teams will need to continually consider the issues around mandated vaccines and how their businesses manage that in respect of their workforces and customers.
2. Move ahead with new initiatives and don’t continue to put things off
There was a tendency through the beginning of the pandemic to ‘batten down the hatches’ and stick with current compliance solutions, with the view being that you would not want to change providers or initiate a platform change during uncertain times. It is now obvious that COVID-19 will be around for a long time and placing new initiatives on hold is no longer sustainable – things need to improve, processes need to change, and technology needs to be upgraded.
3. Travel will remain severely reduced and compliance will continue to be virtually managed
Business travel virtually stopped in 2020 and, while there has been some movement in domestic markets, it has continued to be incredibly limited in 2021. This will likely continue in 2022, with international business travel expected to be almost non-existent due to lockdowns, quarantines, testing, vaccine passports and the limited availability and inflated pricing of flights.
The impact on compliance is less office visits, less travel to overseas markets, remote training, remote investigations and remote programme development.
4. If the economy remains strong, enforcement will be subdued, but troubled waters are ahead
The year of 2021 has been a super year for most stock markets, with many economies bouncing back from the initial pandemic levels. It has been an extraordinary year for stock valuations and the availability of cheap capital.
The free loans and massive government handouts given to companies and individuals with little oversight and minimal governance also fuelled a false sense of enrichment, with the cash inflows put to great use propping up balance sheets and supporting increased spending.
It is expected that 2022 will see a tightening of monetary policy, with more inflation, higher job costs, increased interest rates and efforts to slow down some of the growing economies. This, combined with the late-2021 Chinese Government policy to rein back some industries, flatten the curve around wealth and curb foreign investment, means we will likely see significant changes in the economic markets in 2022 that will hugely impact companies.
As is often the case, when the tide is in and the beach is full of water, no one notices the rocks on the beach. Its only when the tide is out that the coastline is exposed. That tide is likely to move out in 2022 and the excesses of 2021 are likely to show in mid to late 2022.
5. Business costs will increase and reducing compliance costs might be inevitable
Most (but not all) companies have seen record profits and stock prices in 2021. Few industries have fallen by the wayside, at least as far as large- and medium-sized companies are concerned.
The next few years will likely see increased borrowing costs, employee costs, and fuel and shipping costs. But one thing that is almost certain is the need to increase corporate and individual taxes to pay for the costs of the pandemic. Higher taxes must be built into the expected cost-base increase in 2022 and beyond.
For companies that have had such a bumper year in 2021, it might be hard to accept the likely change in 2022 and 2023. In terms of compliance, it would make sense to start on any projects now to secure the budgets. Do not expect the same budget to be there in 2022 and 2023.
If securing budgets is not possible this year, then you must still be ready to trim costs in 2022. You might think about tendering out some of your vendors or service providers and looking for lower-cost providers.
6. The compliance industry will continue to search for a way to integrate with governance
Over the years we have had lots of names given to our industry: ‘ethics and compliance’, ‘GRC’ and ‘corporate compliance’, to name just a few. What seems clear is that there is a push for ESG to be a leader in several areas.
At least to the extent that it applies to integrity, ethics and anti-corruption, compliance falls within the ‘G’ in ‘ESG’: governance. What seems quite reasonable for most compliance leaders is that there is an opportunity to ‘manage up’ and encompass all areas of governance. Indeed, many compliance teams are already referring to their governance responsibilities in their titles.
While there is talk about compliance teams going another level higher and managing ESG in its entirety, we think this is unlikely at this stage, at least for 2022 and 2023. There is a great deal of content in environmental and sustainability and there are numerous experts in that space that might be better suited to continue to manage those areas.
While we think it would certainly be a good thing for governance and compliance to come closer together, we do not see ESG falling under compliance anytime in 2022. Beyond the next couple of years though, that may change.
7. Ratings and certifications of compliance will start to be recognised and accepted
These days, a plethora of ratings exist for companies and their businesses. Some ratings are provided by agencies and based on open and public information, and some are generated by customer or user content.
Ratings for compliance, however, have been more limited, with few options available to companies that want an independent rating for their compliance initiatives.
As more ratings are developed and more people start making decisions on who they want to work with as suppliers, vendors or partners, compliance ratings will become more important and start to take over where the due diligence craze has begun.
Until 2021, ISO 37001 was one of the few certifiable standards focused on anti-bribery. Now, with ISO 37301, there is an unlimited number of compliance management systems that could be created and certified across an unlimited amount of risk areas.
8. Compliance tools will go digital and mobile
If our predictions of added cost pressures in 2022 and beyond and continued remote compliance work are correct, then technology solutions that support compliance will need to be highly evolved and mobile.
With the expansion of the 5G network, there will be better connectivity and better video display for training and automation. The HR industry now has many great mobile-first tools and the compliance industry should be no different. All compliance tools have to be available for users to access and use on a mobile device.
It is clear that all digital tools need to be secure and certified as such. Likewise, all compliance tools have to be resilient, strong and have 99.99% availability.
9. China compliance will need to be reconsidered
As the role of the Chinese Government changes in the Special Administrative Region of Hong Kong, global companies operating in Hong Kong SAR should reconsider their existing compliance initiatives and start to think about how best to comply with new laws in the territory as they apply to ‘national security’.
In addition, as the Chinese mainland takes a more active interest in Hong Kong affairs, there should be some keen observation of these changes to see whether the operations need to change in light of these additional risks. While the new risks forming around the independence of some government offices and the transparency of certain decisions at a governmental level are not necessarily good or bad, they need to be understood and managed accordingly.
Companies should also keep watch for changes regarding Taiwan (as they have been doing for many years).
While mainland China is likely to continue to grow rapidly in 2022 and 2023, there is an increasing view that China will extend its tightening control over several industries. This is likely to touch all levels of foreign investment across all industries. This re-established level of control by the government (particularly if there are relationships with risky debt-filled local companies) could lead to employment issues, supply-chain interruptions and some degree of unrest.
Companies operating in China should use 2022 and 2023 to look at their compliance programmes and decide the way forward.
10. Expect a significant increase in whistleblowing issues as the pandemic subsides, financial duress increases and the economic tide changes
It is an old saying that when the economy decreases, the work in the dispute resolution and investigations practices of law firms significantly increases. Similarly, we believe that in 2022 and 2023 you will see an uptick in whistleblowing reports, which in 2020 and 2021 seemed to be on the decline.
With remote work removing the ‘chatter around the water cooler’, companies are experiencing lower numbers of reports in 2021. As the pandemic starts to subside and people return to the office, we expect this will change in 2022 and 2023.
Likewise, we also expect an uptick for the same reason that dispute resolution matters in law firms have an uptick: the increased risks as the business and economic climate declines.
While Speeki and our sister company ETHIC Intelligence are not economic consultancies and do not purport to be economic experts, there is a connection between macroeconomics/microeconomics, the operation of governments, consumer activity, and how corporations work to manage compliance. These elements are directly linked to how corporate compliance departments will need to function in a changing environment.
Corporate compliance teams do not operate on their own; they are inextricably linked to the environment in which they operate. That is why it is so important for companies to consider broader changes in how they manage corporate compliance, governance and integrity across business as things change in 2022 and beyond.
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