Coping with inexorable regulatory inflation
Regulatory inflation continues unabated, with an ever-increasing number of regulations being imposed on companies, while those already in force are regularly adapted. So much so that, for managers, compliance has become one of their strategic pillars on a par with growth, optimizing resources and investments, building customer and employee loyalty... Whether it's data protectionGDPR and its global equivalents), anti-money launderingAML-CFT), environmental, social and governance (ESG) standards, or sector-specific regulations, the volume and complexity of laws and regulations have continued to grow. Companies operate in a dense legal maze, where every infraction can have cross-border repercussions.
In addition to regulatory inflation, there are three other trends that make compliance a strategic issue. Firstly, the increasing responsibility of management, who are increasingly held personally liable for compliance failures. Secondly, there is a growing demand for transparency on the part of customers, investors, suppliers, etc. Finally, digitalization and cyber-risks are making organizations more fragile. Cyber-attacks and data leaks are often the result of non-compliance with security standards.
When complicated becomes complex
The real break is discreet but profound: we have moved from a "complicated" mode to a "complex" mode. For many managers, this change is difficult to perceive, as the nuance between the two notions seems so tenuous. And yet, it is precisely this difference that makes compliance so difficult to master today.
- Complicated" means difficult to grasp, understand or analyze. This is typically the case with multiple regulations. Fortunately, a complicated system can be broken down into elementary units to make it easier to understand, for example, articles of law whose meaning and scope can be more easily understood.
- Complexity arises when there are many relationships or entanglements between the components of a system, making it very difficult to understand the whole and its evolution. Because all the elements are correlated, and we don't know, a priori and with any certainty, how each one interacts with the others! In the field of compliance, the two coexist: it's "complicated" to understand regulations, and "complex" to implement them with the necessary rigor. In fact, it's becoming increasingly complex, as the same regulations, such as AML-CFT, affect multiple business processes (finance, HR, logistics, supplier and customer relations, etc.).
In the face of ever-increasing fraud, reconfiguring processes
Complexity is both internal and external. Internally, it stems from the growing interactions between an organization's various entities, combined with the explosion in the volumes of data to be processed. Externally, it is accentuated by the constant evolution of money laundering and terrorist financing techniques, which must be taken into account in all AML-CFT processes. This pressure is exerted against a backdrop of ever-increasing fraud attempts. According to a Biocatch study, 71% of those responsible for combating fraud confirm that it will increase by 2024, while 59% say that the overall cost of fraud has risen. The consequences are far-reaching: more than half of French banks claim to lose more than 10 million euros a year to fraud, with 38% estimating their losses at between 10 and 24.9 million euros a year, and 13% exceeding 25 million.
Ensuring compliance: an increasingly difficult challenge
Companies are becoming increasingly aware of this growing complexity. According to a survey conducted by OnePoll for Splunk in 2025, involving 500 French managers from companies with over 250 employees, more than one in two (53%) say they have encountered difficulties in staying compliant with regulations over the past three years. And there's more to come: 61% believe that compliance will be even more difficult in the future. Another study, published by PwC in May 2025, confirms this trend even further: for companies, regulatory complexity and organizational complexity are now the two biggest challenges.
Compliance costs soar
The problem is that the compliance injunction, when not fully anticipated or controlled, can be very expensive. According to PwC's 2024 European AML Survey, 51% of companies saw their compliance costs increase by more than 10% in 2022 and 2023. On average, these costs have risen by 14%, mainly due to the necessary investments in personnel and technology. And the trend continues: 55% of companies surveyed plan to increase their budgets by more than 10% over the next two years.
Non-compliance is no longer an option
Ignoring the rules is no longer an option. In the past, some companies still tried to ignore the rules, wrongly banking on their ability to escape sanctions. Today, failure to comply with regulations has almost immediate financial consequences... but not only. The repercussions go far beyond mere fines: they also affect four key dimensions of the company: regulatory, operational, reputation and business opportunities.
Regulatory costs: watch out for fines!
This is the most visible aspect, and often the most feared: fines imposed by regulatory authorities can reach colossal amounts. For large companies, these penalties can amount to tens or even hundreds of millions of euros, and can represent a significant percentage of total sales. Added to this are the legal costs of defending oneself, as well as the costs of compliance imposed in a hurry, which are much higher than if they had been anticipated. The banking sector is a striking example: in 2024, it had to pay 3.2 billion euros in fines for failures to monitor transactions, update compliance systems, or report suspicious activities.
Operating costs: business at risk?
In addition to financial penalties, non-compliance can also lead to major business interruptions. This can range from the suspension of licenses, particularly in the financial sector, to a ban on operating in certain markets, or even the withdrawal of products. These interruptions not only result in immediate loss of revenue, but also in significant costs to correct the flaws: process overhaul, technical remediation, team training, etc. Productivity takes a hit, as resources are diverted from high value-added activities to be mobilized in crisis mode.
Reputational cost: brand image is priceless
Media coverage of sanctions or breaches of compliance has a lasting impact on a company's image and reputation, in the eyes of its customers, partners, shareholders and suppliers. The resulting crisis situation is difficult to manage, and costly in terms of lawyers' fees, advertising space purchases, etc.
Opportunity cost: a silent brake on growth
Less visible than fines or business interruptions, the opportunity cost is no less formidable. It represents everything a company can no longer do when it is caught up in a compliance crisis. A company under investigation or hit with a heavy penalty sees its ability to attract investors, conclude new contracts or explore new markets seriously compromised. Budgets initially earmarked for innovation, expansion or improving the customer experience are redirected to crisis management, to the detriment of development.
The difficulty of absorbing ever-increasing volumes of data remains one of the major challenges of compliance management: two-thirds of the companies surveyed in the Onepoll study mention it as the second most important constraint, ahead of the constantly changing regulatory environment(56%).
Reduce costs, absorb data: think Regtech!
In the face of growing data volumes and ever-increasing compliance costs, automation is emerging as an effective solution. AP Solutions IO is a RegTech offering high-performance, automated tools based on a variety of proven technologies, such as augmented intelligence, Big data, real-time flow analysis, APIs, cybersecurity, data protection... These technologies help to reduce compliance costs, which we have seen are steadily rising and weighing on companies' margins.
Automating and digitizing compliance processes has a direct impact on the four main sources of costs:
- Regulatory costs are reduced thanks to a significant reduction in the risk of non-compliance and the resulting heavy fines.
- Operational costs are kept under control through greater efficiency of dedicated teams, while revenue losses due to business interruptions are avoided.
- The reputational cost is limited by reinforced compliance, preserving the confidence of customers, partners and investors.
- Opportunity costs are reduced, freeing up precious resources for innovation and growth.
With the right technologies, costs are reduced, while the value created is increased. What used to be a cost center (for compliance) is gradually becoming a genuine lever for value creation, thanks to much better control of compliance!
Companies can thus confidently apply the four pillars of an effective compliance policy:
- anticipate risks,
- prevent fraud and suspicious transactions,
- quickly detect any abnormal behavior,
- act immediately to limit the impact.
