Navigating the regulatory maze
Proactive strategies for managing regulatory risks
"[External counsel's value comes from] helping my team understand materiality of risk and giving them actionable insights."
- One respondent on how external counsel brings value to legal teams
Why it matters
Keeping track of key regulatory trends is essential in managing compliance obligations, anticipating new rules (such as those in cyber resilience, employment, and ESG), and avoiding costly disruptions or exposure to legal risks in an environment of constant change in government priorities and increasing scrutiny into business practices from stakeholders.
Travers Smith view
Tracking key regulatory trends:
- UK government priorities for regulatory reform: The government's Regulation Action Plan outlined its key priorities, including streamlining the environmental and planning, health and safety, competition and financial reporting frameworks, as well as targeted reforms to support digital innovation and the growth sectors identified in the Industrial Strategy, although we have not yet witnessed a significant rolling back of regulation. On the contrary, as legal teams will be only too aware, the government is also focusing on tightening up rules to tackle key risk areas for the UK business community, including new rules on cyber resilience (see AI and Data section below), cryptoassets and corporate transparency and accountability. Given heightened national security concerns, it is also consulting on possible sector changes to its scrutiny powers under the National Security and Investment Act.
- EU reset and cross-border trade: It is also worth keeping an eye on the potential impact of the EU reset negotiations. Meaningful change is still some way off as the "common understanding" reached last year has yet to be implemented and negotiations continue on the content of binding agreements. The UK is reportedly still holding out against EU demands for a more generous EU youth mobility scheme which the government hoped to agree this year; there are also concerns that the non-regression provisions on environmental protection in the UK/EU Trade and Cooperation Agreement could prevent the UK from implementing some of its pro-growth planning and infrastructure measures, as discussed in our Infrastructure and Energy Spotlight. One to watch.
- EU simplification agenda: To boost competitiveness in a changing world order, the EU has embraced the "omnibus" approach to deregulatory reform across multiple areas in a single package. Whilst the business community will welcome the simplification agenda, constantly moving goalposts are difficult and costly in themselves. Current EU deregulatory priorities are focused on AI and digital regulation (including proposed reforms to GDPR and the AI Act), sustainability reporting and environmental policy, agriculture and food safety, pharmaceuticals, defence, chemicals, automotive standards, energy products, taxation and citizenship.
Preparing for impending employment reforms
Despite the daunting list of UK and EU employment reforms on the horizon, many are still some way off and there are really two immediate priorities for businesses:
- From June 2026, businesses with EU operations and 100 or more employees must publish gender pay gap information and employers of all sizes will have to provide certain pay information to job applicants and employees, under the EU Pay Transparency Directive.
- From October 2026, UK employers will become liable for harassment of their employees by third parties (e.g. clients or suppliers) unless they have reasonable steps in place to prevent it.
You will find some practical action points on these topics below.
Should we stop worrying about ESG?
Despite changes in political sentiment, ESG risks for businesses are as relevant as ever as we face the reality that the Paris Agreement 1.5° target is out of reach. While we have seen the EU's regulatory agenda turn to the simplification of existing regimes for sustainability reporting, supply chain, batteries, chemicals and the environment, both the EU and the UK remain committed to their new and existing national emissions reduction targets. This year, companies will be expected to plan their response to changes to the CSRD and CS3D, as well as the SFDR 2.0 framework, factoring in transition planning and supply chain due diligence considerations. Regulatory change in the EU and UK to drive sustainability-related opportunities in the real economy marches on, from the development of renewable energy infrastructure to enhanced product safety and quality legislation. In addition, despite the softening of ESG legislation in the EU and elsewhere, claimant attitudes are hardening – evidenced by the first UK climate-related action launched recently against Shell. The GC role is critical in helping organisations to plan for longer term imperatives and exploit opportunities without exposing the business to unwarranted ESG risk, including the rising tide of ESG-related litigation.
Compliance fatigue
The unrelenting flow of new regulation, coupled with geopolitical turbulence, makes it increasingly challenging for in-house legal teams to get meaningful engagement from the business on compliance issues. Below we offer some strategies for beating compliance fatigue.
Action points
Tracking key regulatory updates: At Travers Smith, we aim to keep you updated on key legal developments and trends to help your business assess risk and opportunities and prepare for new requirements ahead of time. You can subscribe to the newsletters and briefings on the topics which are most relevant to your business here, including our bi-annual round-up publication, Insights for In-house Counsel.
Focus on the priorities in preparing for employment reforms: Businesses should ensure they have reasonable measures in place to prevent third-party harassment, building on existing steps to prevent workplace sexual harassment, such as risk assessments and wording for third-party contracts or supplier codes of conduct. Those with European operations should also take steps to prepare for the EU Pay Transparency Directive, such as reviewing employee roles and pay, assessing current pay gap information, and updating recruitment practices.
ESG: Ensure you keep track of ESG-related legislative developments relevant to your business, such as whether you may be subject to upcoming UK Sustainability Reporting Standards (UK SRS) and/or the revised EU Corporate Sustainability Reporting and Due Diligence Directives (CSRD and CS3D) in the EU. Our ESG Toolkit will help your business to assess its key risk areas and focus on proportionate measures to mitigate those risks. Subscribe to our ESG Circular for our take on key developments and the actions you need to take.
Combatting compliance fatigue: Regulatory change can also present business opportunities, such as access to new markets or enhancing reputation. Avoid a tick-box approach; prioritise the most significant risks and build a strong business case for investing time and resources in compliance. For operations across multiple jurisdictions, consider adopting a "highest global standard" approach to simplify compliance, but only if the benefits outweigh the costs of such an approach. Monitor regulatory environments for changes that could reduce compliance burdens.
