The compliance conundrum: costly burden or competitive advantage?
Irish businesses are falling behind on compliance, with a lack of investment in technology and processes threatening competitiveness at a critical time, warns Julie Kennedy
Ireland’s compliance landscape has hit a critical inflection point, as organisations grappling with a burgeoning regulatory burden fall behind their global counterparts in their willingness to embrace innovation to keep up.
New research released this year by PwC has found that regulatory complexity is making effective compliance more challenging in Ireland than in other countries globally.
Published in May, PwC’s Global and Irish Compliance Study surveyed 1,802 executives in 63 territories, including 32 in Ireland.
Among the survey’s Irish respondents, concern regarding complex regulatory and compliance requirements was markedly higher than in other countries.
Ninety-seven percent of the Irish respondents surveyed said their organisation’s compliance requirements had become more complex in the last three years, compared to 85 percent globally.
Regulatory complexity was cited by 78 percent of Irish respondents as the main reason effective compliance had become more challenging. This was higher than the corresponding global average of 47 percent.
This complexity is having a significant impact on competitiveness, warns Julie Kennedy, Risk and Regulation Partner, PwC Ireland—highlighting an urgent need for Irish organisations to rethink their approach to compliance in an increasingly challenging global trading environment.
Critical inflection point
“I think we’ve reached a critical inflection point in how we view compliance in Irish business; we can see it either as an increasingly onerous regulatory burden or an enabler in business, underpinning competitive advantage,” says Kennedy.
Irish businesses, in particular, face a unique convergence of regulatory pressures, requiring a coordinated and proactive approach to managing compliance.
As an export-led economy, for example, Irish companies selling goods and services in overseas markets are subject to differing regulations operating in different jurisdictions.
“Over half of Irish firms are navigating multijurisdictional rules and regulations, amplifying their compliance complexity—and these regulations can vary substantially from one jurisdiction to the next,” says Kennedy.
“The risk posed by fraud and compliance with the Anti-Bribery/Anti-Corruption and Anti-Money Laundering regimes are top of mind for many Irish businesses while, for others, consumer protection is the priority following the publication of Ireland’s revised Consumer Protection Code.
“Added to this, you have the impact of broader trends globally, such as geopolitical risk and the recent introduction of trade restrictions, regimes and sanctions, the impact of digitalisation on customer expectations, digital trust and data privacy and cybersecurity risk, and the speed with which AI and other emerging technologies are advancing, prompting further regulatory change.”
Investment in technology
Irish companies are falling behind their global counterparts in AI adoption and investment in technology for compliance purposes, Kennedy says.
“On average, our research found that just 12 percent of Irish respondents are either piloting or already using AI across a wide range of business areas,” she says.
“Compare this to the corresponding 29 percent figure among their global counterparts using AI in predictive analytics, fraud detection and investigations.”
The biggest AI concern for most Irish respondents—88 percent—is data privacy and misinformation. Other cited impediments to the use of data to support compliance activities include the complexity of data across their organisation (63%) and lack of technology tools (50%).
“Overall, the global firms we surveyed plan to invest more in technology to optimise compliance than their Irish counterparts,” Kennedy says.
“Just 23 percent of our Irish respondents said they are planning to invest more in technology to optimise compliance activities, compared to 34 percent globally.
“Based on our findings, I don’t think Irish businesses can afford at this stage to fall any further behind global leaders in compliance. They must act decisively to close the gap.”
Best-in-class compliance
In the current economic environment of disruption and uncertainty, best-in-class compliance is critical to ensuring organisations prevent the financial loss and reputational damage associated with regulatory failures, Kennedy warns.
“I think now is the time for organisations to really rethink their approach to how they manage their regulatory requirements and responsibilities,” she says.
“It’s not just about preventing the potential losses associated with non-compliance but also about addressing the impact of systems and processes that are not fit-for-purpose from a business point-of-view and damaging to the bottom line.”
Close to three-quarters (73%) of the Irish respondents in PwC’s compliance study said the increasing complexity of compliance requirements was stunting key growth-related business areas, such as profitability, market expansion, launching new products and services, adoption of AI and resource capacity.
By embracing cutting-edge technology, nurturing diverse talent and adopting a strategic mindset, Kennedy says firms can transform compliance from a cost centre into a value driver.
“Those organisations that can effectively reimagine their compliance functions as strategic assets will gain a competitive edge in an increasingly complex business environment,” she says.
“In particular, there is a significant opportunity for Irish businesses to catch-up and leverage AI to enhance their compliance capabilities.
“As it stands, many companies continue to treat compliance in a very fragmented, siloed way.”
Where the compliance function is disconnected from operational functions, there can be a duplication of effort across departments, misalignment of data reporting standards and limited ability to respond holistically to regulatory change.
“Companies are relying on outdated compliance infrastructure and, in some cases, manual processes that can’t be scaled unless they are automated,” Kennedy says.
Reactive budgeting is another problem we see frequently, where investment in compliance is only ever made in the aftermath of regulatory breaches or inspections.
“Many businesses don’t seem to recognise that, when it comes to core revenue-driving business activities like new product or market launches—if compliance isn’t built into the process from the outset—you then have to deal with the operational drag and additional spend required to make changes ‘after the fact’.”
Compliance pioneers
PwC’s Global and Irish Compliance Study identified a group of “compliance pioneers”—about one in ten respondents— who are embracing compliance transformation more proactively.
“These pioneers are more likely to have broader responsibilities, offer proactive advice, get involved in strategic initiatives and invest more in technology and AI,” Kennedy says.
“They are leading on compliance innovation because they are focusing on three key value drivers: strategic alignment; technology enablement; and proactive investment.
“Strategic alignment means embedding compliance into business planning, transformation and innovation, and technology enablement requires proactive investment in AI, data analytics and automation.
“Cultural integration is equally important because it encourages cross-functional ownership of compliance and helps organisations develop future-ready compliance talent and foster a proactive risk culture.”