When The Guardrails Come Off: The New Risk Leadership Challenge

Across the globe, we’re seeing a divergence of regulatory strategies, forcing leaders to confront the mounting challenges of a conflicting compliance landscape. Some major economies are embracing regulatory cooling and simplification, while others are tightening their grip. At first glance, easing regulations in some areas may seem like welcome relief for organizations, but the reality is much more complex.

Without external guidance to lean on, internal governance practices become the frontline defence for managing fragmented regulatory requirements. Diverging trends are introducing new strategy challenges for risk leaders, who are recognizing that:

• Deregulation doesn’t eliminate risk – it creates a riskier operating environment.

  History shows us that regulation often emerges in response to disaster. The Sarbanes-Oxley Act of 2002, for example, was born from financial reporting failures that led to massive bankruptcies. Just because a regulation is rolled back doesn’t mean the underlying risk has disappeared – in fact, it often means the onus is now squarely on the organization. In a deregulated environment, firms face higher exposure to issues like supply chain fraud, corruption and operational failures. Fewer disclosure requirements make due diligence information gathering harder, creating gaps where workarounds and quick fixes can flourish. Rapid changes in tariffs and trade policies further complicate supply chain risk management. Moreover, emerging technologies like AI and crypto make security information management particularly vulnerable. A reduction in regulation in these areas shifts the burden of risk assessment and ethical decision-making from regulators to individual organizations.

• Global regulatory divergence is increasing – adding complexity to compliance.

  The world is shifting from a US-led global structure to a more multipolar system, where China, India and the EU are each shaping their own regulatory and trade environments. The EU is cautiously pushing forward with enforcement rules on AI, ESG disclosures and consumer protection. Meanwhile, the US is witnessing a near-total federal rollback of climate policies and moves to deregulate areas such as AI, DEI and financial oversight. This growing divergence means that multinational organizations can’t assume regulatory simplicity just because one region has eased the rules. This splintering is adding new layers of complexity and uncertainty, especially for supply chains and cross-border operations (see Verdantix Smart Innovators: Third-Party Risk Management Software (TPRM)).

• The Chief Compliance Officer must evolve into the Chief Integrity Officer.As regulatory guardrails loosen, organizations must elevate their internal standards and apply greater scrutiny to their own practices. The Chief Compliance Officer is increasingly taking on the mantle of ‘Chief Integrity Officer’, shifting from a focus on regulatory checklists to cultivating an ethical culture and leading proactive risk management efforts. This means taking ownership of residual risks that persist within the organization despite regulatory rollbacks, finding new ways to strengthen resilience with existing resources and maintaining vigilant oversight of evolving regulations and global risk landscapes.

Regulatory shifts are reshaping the global risk landscape, creating new challenges as organizations face navigating fragmented rules and evolving expectations. Firms can no longer rely on external frameworks to define safe operating boundaries; investing in stronger, more connected compliance frameworks and integrated risk management has never been more critical. Regulatory cooling may reduce paperwork, but it doesn’t reduce business risk. In fact, it raises the stakes. In a world with fewer rules, doing the right thing isn’t about staying legal – it’s about demonstrating credibility. The most resilient organizations will be those that choose to lead with integrity even when regulators aren’t watching.