Our clients are often surprised to learn that as much as 75% to 80% of this digital regulation applies to them.
Dr. Björn Herbers, M.B.L.
Partner
Björn Herbers, Partner, CMS
Only 36% of respondents have revised their digital transformation strategies in response to regulation.
Survey respondents are cautiously confident they are up to the challenge. As we have seen, more than seven out of ten (71%) believe their organisation is ‘better prepared for the impact of recent and upcoming digital regulation than its competitors’, although only 11% ‘strongly’ agree with this statement.
For some, this confidence may be misplaced. “Our clients are often surprised to learn that as much as 75% to 80% of this digital regulation applies to them,” says Herbers.
Nevertheless, digital regulation is at least on the agenda for the majority of companies we surveyed. Nearly three quarters (73%) have assessed the risks it poses to their current business, making this the most widely adopted response. Sixty-three percent have consulted external counsel on digital regulation and 59% have discussed the strategic implications at board level (see Figure 10).
However, concrete actions are less widespread. Only 36% have revised their digital transformation priorities/strategies, for example, a figure at odds with the paradigmatic shift that some of these regulations will bring about in digital markets.
Just 29% have developed digital regulatory horizon scanning capabilities
Slightly more (39%) have hired in-house legal staff with specialist expertise. This strategy is especially common among respondents from the energy and infrastructure (47%) and automotive (45%) sectors.
And just 29% have developed digital regulatory horizon scanning capabilities. Understanding what regulation is on its way and its implications for the business is a crucial part of an in-house legal team’s contribution. When it comes to technology, this foresight can give organisations greater confidence in their strategic investments.
For this reason, CMS has developed a digital regulation tracker tool, 21 providing insights and detail of recent and upcoming changes to regulation and law, to help clients navigate the changing landscape.
For Smousavi, digital regulation is one of many areas in which frequent and far-reaching rule changes are challenging companies’ ability to keep pace. “The challenge that the clients face is the steady load of new regulation, not only digital regulation, but also ESG, reporting matters and more,” she explains. “Maintaining a reliable monitoring and controlling system, given the mass of new regulation, has become more of a challenge for company leaders.”
As a result, companies are now looking for help from external advisers to outsource their compliance monitoring. “Often, they recognise that they won’t have the personal capacity to handle everything on their own given the increasing number of regulations to comply with.”
What companies cannot outsource is the obligation to ensure they are ready for the oncoming wave of digital regulation, its opportunities, its threats and its legal implications. Some businesses have already engaged with this regulation in a concerted and sophisticated way. Others must start now if they want to grasp the advantage that lies in digital regulation.
