G20 companies are operating in a complex arena increasingly defined by disputes, investigations and regulation – and whilst firms both anticipate these risks and are proactively preparing for them, business leaders need to continue building vigilance in light of the threats they face
G20 firms are aware of the direct legal and regulatory risks they face, as well as their knock-on effects. Investigations in relation to ESG, including climate change, was the most commonly reported type, with almost a third (31%) of companies either currently facing, or expect to face, investigations by regulatory or government bodies in this area. By extension, more than half (51%) of companies expect media scrutiny in relation to ESG.
Almost a quarter (24%) of companies also expect both media scrutiny regarding fraud or financial crime (24%), and to be investigated by regulatory or government bodies for financial crime and sanctions compliance (24%) in 2022.
In light of these risks, the majority of G20 companies are taking proactive measures to increase resilience. In relation to disputes, half of the respondents allocated 20% or more of their legal budget to settlements of disputes, including from class actions. Meanwhile, 53% of G20 companies said they would allocate 20% or more of their legal spend on internal investigations.
Nearly nine out of 10 (87%) large G20 businesses also believe they have adequate resources to manage financial crime and sanctions risks. As part of their preparedness, companies are increasingly conducting extraordinary reviews or health checks of financial crime arrangements: 41% of G20 respondents stated they plan to conduct such reviews in the next 12 months, or have already done so.
With regards to proactive threat preparation, more than half (51%) of companies also said they are proactive when it comes to financial misstatement and fraud – a six-point increase compared to September 2021.