The Covid-19 pandemic’s impact on the economy is far from over. Ripple effects spread far beyond the typical business’s bottom line. Besides obvious health and safety concerns and the operational difficulties that accompany remote work, and in addition to supply chain problems plaguing much of the economy, the typical enterprise has also seen its regulatory compliance obligations change dramatically, altering risks and increasing costs.
With 2022 just around the corner, now is the time to chart a new path forward that makes sure 2020 and 2021 were anomalies, not the new normal. Some new regulatory obligations could take care of themselves as we emerge from the pandemic. Eviction moratoriums are a good example. Another is the U.S. Paycheck Protection Program (part of the CARES Act). While these regulatory changes have added new compliance costs, they should be temporary.
But other correctives may have a lasting impact, keeping compliance costs high even as the pandemic continues to slow.
According to the LexisNexis Risk Solutions 2020 True Cost of Financial Crime Compliance Study, financial institutions in the U.S. and Canada had more trouble meeting their regulatory obligations to block and report financial crimes in 2020 than they did in 2019. The study found that new regulations, such as the Paycheck Protection Program, as well as the large number of people working remotely, were the main drivers of rising compliance costs during the pandemic.
The study also found that global compliance costs increased $33 billion from 2019 to 2020, totaling $213.9 billion last year. More than 89% of those costs were borne by U.S. and western European businesses. German firms saw their compliance costs increase the most ($9.6 billion), while U.S. businesses were close behind ($8.8 billion).