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Regulatory Landscape 
– Fit for Purpose?

What happens when technological innovation outpaces the ability of regulators to keep up? This phenomenon is known as ‘the pacing problem,’ and regulators around the world are flagging.

However, there are signs that they are getting a second wind. For businesses, the AI and technology advancements on which many have staked the next stages of their growth may soon face a host of new red tape.

The Speed of Innovations

The pace of technological advancement has been breathtaking. New innovations appear, come on stream, and are adopted with increasing speed. For businesses that can quickly integrate new software, there is the potential and promise of commercial advantage. From new climate tech to game-changing advances in medical technology, we have seen the power of groundbreaking developments and how they quickly move into our everyday lives. However, there is an increasing awareness of the rising risks and potential harms of easy, unfettered access to these tools.

For governments and regulators, innovations present new challenges. How can they encourage innovation and investment while balancing their duty to safeguard consumers and society from the risks presented by new tech? How can they keep up with the speed of innovations when the product development cycle continues to shorten? 

1 %

of business leaders said they currently operate in a high-risk environment.

1 %

of business leaders are most worried about their ability to keep up with technology market shifts.

  • Proactive Stance of Legislators

    In the UK, last year, the Online Safety Act was passed by Parliament to protect children from online harm, while empowering adults with more choices over what their children see online.12 In the US, the American Privacy Rights Act has been introduced to Congress by a bi-partisan group to regulate high-impact social media companies and large data holders on data privacy.13

    In March this year, the EU implemented the Digital Markets Act which enables greater oversight of Core Platform Services and Big Tech firms such as Meta, Google, and Microsoft.14 All of this new red tape demonstrates an increasingly proactive stance of legislators when it comes to tech regulation and creating safeguards for society. The result? Scrutiny of activity is intensifying.

     

  • Stuck in the middle

    Every business, no matter its size or the sector, is likely to be exposed to new regulations and policy decision-making in the years ahead. For companies operating in multiple locations, the challenge becomes more acute as countries and regulators diverge on their approach. The lack of uniformity in tech regulation means that business leaders need to be aware of new regulations, rules and frameworks in different countries and how these initiatives can impact their operations and personnel on the ground.

    Failure to comply with new rules can lead to costly fines from regulators and hamper the growth ambitions of firms, and harm their reputation. This results in a heightened risk for directors & officers who might not be aware of new regulations and the potential impact on their businesses.  To stay ahead, ultimately, boardrooms need to anticipate new requirements and understand the associated risks of any new regulation. By doing so, companies can minimise the risk of potential exposures and remain one step ahead.

  •  

    “Privacy and data risks have been a significant challenge for businesses in recent years with concerns around consent. The US federal government is currently looking to legislate in this space to create standardised rules for data collection and sharing. There is a high likelihood of this passing in Congress at some point in future, leading to a step change in data handling.” 

    Katherine Heaton
    Claims Focus Group Leader - Cyber Services & InfoSec Claims

12- UK Government | May 2024
13- Global Treasurer | May 2024
14- Herbert Smith Freehills | March 2024

The information set forth in this document is intended as general risk management information. It is made available with the understanding that Beazley does not render legal services or advice. It should not be construed or relied upon as legal advice and is not intended as a substitute for consultation with counsel. Although reasonable care has been taken in preparing the information set forth in this document, Beazley accepts no responsibility for any errors it may contain or for any losses allegedly attributable to this information. BZ CBR 119.

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