Navigating Regulatory and Legislative Change

Why Regulatory and Legislative Change Is Among Today’s Top Risks

In an era defined by rapid policy shifts and mounting geopolitical complexity, regulatory and legislative change continues to be a critical risk for businesses worldwide. Ranked as the fourth biggest risk in our Global Risk Management Survey, regulatory changes reshape the economic landscape along with operational decisions, investment strategies and risk management.

Businesses face a delicate balancing act: leveraging new technologies to drive efficiency and agility¹ while simultaneously managing evolving regulatory demands² and minimizing exposure. This complexity places regulatory risk firmly among the top 10 concerns for global enterprises.

High-Impact Areas: Sustainability, Technology and Pay Transparency

Sustainability and Climate Regulation

Despite geopolitical volatility, sustainability commitments remain a priority for many organizations.³ However, regulatory frameworks are shifting in response to market realities.

For example, the EU has adjusted interim deadlines for carbon neutrality to accommodate sectors like automotive,⁴ which is grappling with slowed demand for electric vehicles.⁵ These abrupt shifts create uncertainty around where and how to invest, underscoring the need for agile regulatory strategies.

Artificial Intelligence, Technology and Data Privacy

Data privacy and cyber security continue to dominate regulatory agendas, especially as artificial intelligence (AI) and advanced analytics reshape business models.

The EU’s 2024 Artificial Intelligence Act,⁶ effective in 2025, imposes stringent requirements on high-risk AI systems, with penalties reaching up to 7 percent of global revenue for non-compliant companies.

Meanwhile, US states are advancing their own data privacy laws,⁷ and China’s data governance policies continue to raise cross-border concerns over implications for data restrictions, data regulation and internet sovereignty.⁸

These developments demand vigilant monitoring and proactive risk management.

Pay Transparency

Pay transparency laws, requiring organizations to disclose salary information and address pay equity, continue to be adopted in many countries. However, many companies are not ready to comply.

Indeed, Aon’s 2025 Global Pay Transparency Study⁹ highlights that only 19 percent of organizations consider themselves ready for compliance.

The EU’s Pay Transparency Directive, coming into force in June 2026, also applies to companies that are based outside the EU but have employees in the EU. The directive has provisions to drive greater pay equity for the same work or work of equal value. Employers with more than 100 people in any individual EU member state will be required to report their pay gaps publicly and take action where a gap of more than 5 percent exists. Aon’s study also revealed that only 26 percent of companies surveyed had conducted a pay equity analysis in the past 12 to 18 months — with 12 percent having never conducted an independent pay equity analysis.

Failure to act risks regulatory penalties, reputational damage and greater challenges in attracting and retaining talent.

Managing Regulatory Risk to Unlock Opportunity

The pace and complexity of regulatory change continues to accelerate. By adopting best practices, organizations can mitigate risk and capitalize on emerging opportunities.

1. Build Robust Regulatory Intelligence
   
   Establish dedicated teams or partner with external experts to continuously monitor and interpret regulatory developments. Leveraging advanced monitoring technologies enables real-time tracking of legislative changes, allowing businesses to anticipate and adapt swiftly and avoid costly compliance failures.
2. Leverage Expert Legal Guidance
   
   The global regulatory landscape demands nuanced interpretation. Combining in-house and external expertise helps organizations decode complex requirements, identify enforcement trends and tailor compliance strategies to their industry and footprint.
3. Engage in Advocacy and Collaboration
   
   Beyond compliance, influencing regulatory outcomes is key. Active participation in trade associations and industry coalitions provides opportunities for business perspectives to be considered in policymaking, reducing uncertainty and fostering a more favorable regulatory environment.
4. Empower Your Workforce
   
   Employees are the frontline defense against regulatory risk. Clear communication, regular training and consistent updates can help teams understand evolving obligations and the consequences of non-compliance, contributing to the protection of both financial and reputational assets.
5. Develop Contingency Plans and Risk Transfer Solutions
   
   Companies can build resilience through scenario planning and stress testing regulatory impacts on operations and supply chains. Complementing these efforts with tailored insurance and risk transfer strategies go toward mitigating unforeseen liabilities and disruptions.

Why It Matters

Navigating regulatory and legislative changes is key to effective risk management. Organizations that invest in intelligence, expert counsel, advocacy, workforce readiness and comprehensive risk transfer will not only mitigate risk but also capitalize on emerging opportunities in a shifting global landscape.

¹ John Ferguson and Melanie Noronha, “The US has ushered in a new era of globalization. How are businesses adjusting?” World Economic Forum, February 21, 2025
² “Global economic outlook uncertain as growth slows, inflationary pressures persist and trade policies cloud outlook,” OECD, March 17, 2025; Trade and development foresights 2025 Under pressure: Uncertainty reshapes global economic prospects, UN Trade and Development, April 16, 2025
³ “Is sustainability in trade stalling?,” Economist Impact, 2025
⁴ Ajit Niranjan, “EU gives carmakers ‘breathing space’ on pollution target as EV sales slump,” The Guardian, March 3, 2025
⁵ Benjamin Zhang, Shubhangi Goel and Tom Carter, “From price hikes to boosting US production, heres how automakers are responding to Trump's tariffs,” Business Insider, May 12, 2025; “Nissan lays off 15% of its global work force amid slipping sales worldwide,” CBS News, May 14, 2025; Robert S. Miller, “Stellantis Scraps Maserati’s Electrification Plans,” Mopar Insiders, March 2, 2025; Yuri Kageyama, “Honda pulls back on EV strategy for now and will push hybrid sales,” Associated Press, May 20, 2025
⁶ The EU Artificial Intelligence Act"
⁷ Theo Burman, “How Trump AI Law Could Spark a Constitutional Crisis,” Newsweek, May 27, 2025; Angus Loten, “GOP Defends Ban on State AI Laws Over Data-Privacy Concerns,” Wall Street Journal, May 21, 2025; Sam Schechner and Stacy Meichtry, “Vance Warns U.S. Allies to Keep AI Regulation Light,” Wall Street Journal, February 11, 2025
⁸ Cristina Vanberghen, “How Beijing’s Digital Strategy Is Reshaping Global Rules – And What Europe Should Do About It,” Modern Diplomacy, May 25, 2025; Andrew Silver, “China’s data protection rules prompt pause from major European research funders,” Reuters, April 25, 2025
⁹ 2025 Global Pay Transparency Study; Brit Morse, “Exclusive: A wave of new pay transparency regulations is coming and 75% of US employers are unprepared,” Fortune, December 5, 2024

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