2025 Promises to be a Year of Regulatory Shifts and Emerging Challenges for Organizations

As we step into 2025, organizations across the globe face a rapidly shifting regulatory landscape. With changes in political leadership, evolving priorities within key regulatory agencies, and growing divergence between federal and state regulations, organizations will need to stay ahead of the curve. From labor laws to cybersecurity standards, privacy rules and ESG regulations to financial crime enforcement, the coming year promises significant changes. Navigating this increasingly complex environment will require businesses to be proactive, strategic, and prepared for the unexpected. In particular, organizations will need to adopt new AI technologies to help them comprehend, analyze and comply with a new patchwork of regulations.

Federal Government: Regulations Expected to Loosen

One of the most notable trends for 2025 is the growing divergence in regulatory frameworks: with federal regulations loosening, a patchwork of state-level rules will remain. This fragmentation could add significant complexity for businesses, especially those that operate across multiple jurisdictions.  

According to the KPMG US Ten Key Regulatory Challenges of 2025 report, this year is set to be a pivotal moment, with businesses needing to ‘roll through’ a wave of regulatory change and emerging risks. The report highlights how regulatory divergence, changes in agency leadership, and the expansion of state-level actions will create new challenges for companies in various sectors.  Amy Matsuo, Regulatory Insights Leader at KPMG LLP, aptly captures the essence of the moment, “2025 will be the Year of Regulatory Shift fueled by a new Administration, agency leadership changes, and expanded regulatory divergence. Companies will look to ‘roll through the shift’ but must remain vigilant to potential new, emerging, and downstream risks—even amidst an agenda to reduce regulatory burden.”

As part of his agenda, Trump has promised to significantly reduce federal regulations—particularly those surrounding climate, clean air and clean water. These environmental rollbacks are expected to intersect with broader labor issues, potentially creating a regulatory perfect storm. The recent Supreme Court ruling on Chevron deference could further stymie federal agency powers.

State Governments: Rising to the Challenge, Remaining Agile

As the federal government scales back its regulatory reach, state governments are stepping up to the plate. This shift means businesses may soon have to contend with a more complex and diverse regulatory environment, as states aggressively enact laws to protect what the federal government has left behind. For example, California, with its history of challenging federal deregulation efforts, is expected to lead the charge in safeguarding worker rights and environmental protections. California's Attorney General Rob Bonta has already signaled his intent to challenge federal regulatory cuts, especially in environmental protections, and this may extend to workplace rights as well. Bonta indicated his commitment to engaging in "trench warfare" against deregulation, which could have sweeping implications for businesses across the country. For employers, this means a rising need to track and understand a growing number of state-specific regulations.  

For organizations, this presents both a challenge and an opportunity. While some regulations may loosen, the unpredictability of state-level shifts means businesses must remain flexible and prepared to respond quickly to new laws. Michele Ballard Miller, David Barron, and Michael Schmidt from Cozen O'Connor emphasize the importance of agility in a recent webinar, as employers face a world where federal oversight is diminishing and states are stepping in to fill the gaps. As Schmidt explains, the ripple effects of these changes will not be fully felt until 2025 and beyond, but they could reshape the regulatory landscape in profound ways. Compliance professionals will need to stay ahead of these developments, combining strategy with foresight to manage both federal and state-level shifts. Even for those organizations that are federally chartered, state regulations will still need to be understood and accounted for. And as we have experienced with past administrations, these may prove to be temporary changes that the next administration could reverse.

Navigating the Patchwork for AI  - Gaining Agility and Speed

This complexity is driving the second significant trend: the adoption of Artificial Intelligence (AI) technology.  AI can be a game-changer by offering secure, private, and domain-specific capabilities that significantly enhance a team’s agility, performance and efficiency by producing results up to 50 times faster than humans alone, allowing them to move faster based on sound decisions.  

Regulatory, Risk and Compliance program automation is accelerated in several ways:  

• Automated regulatory change management: Quickly analyze and interpret new regulations, assess their impact on the organization, and update policies and procedures accordingly. ‍
• Automated compliance monitoring: Continuously monitor compliance with relevant regulations, identify potential risks and gaps, and generate alerts for timely action.
• ‍Automated controls rationalization: Monitor controls coverage, merging similar requirements and highlighting duplicate or overlapping controls.
• ‍Automated risk assessments: Streamline risk assessments by automatically analyzing data, identifying potential threats, and prioritizing mitigation efforts. ‍
• Automated report generation: Generate accurate and comprehensive reports for regulatory reporting, internal audits, and management oversight.

As Schmidt aptly puts it, "Today’s employer must stay ahead of developments on all levels of government. The interplay between legislative enactments, regulatory action, and court rulings makes compliance increasingly complex." The risk of an ever-changing landscape is real — with states pushing forward their own labor regulations and worker protections, businesses must prepare to navigate a maze of evolving rules.  AI can help here as well, by quickly digitalizing and analyzing rules – connecting the dots for regulatory, risk and compliance teams.  

AI Governance and Cybersecurity: Managing Innovation Amid Regulation

AI adoption continues to dominate regulatory discussions, with 2025 poised to bring further changes in how AI is governed. The anticipated repeal of the current AI Executive Order is likely to be followed by a new order focused on encouraging AI innovation. However, this shift will not come at the cost of security and privacy. Balancing the growth of AI with the need to mitigate risks around cybersecurity, privacy, and national security will remain a top priority for regulators.

While the new administration may lean toward fostering innovation, there will still be a strong focus on ensuring trusted AI systems that adhere to security, privacy, and national security standards. Expect more emphasis on voluntary frameworks, like the NIST AI Risk Management Framework, and increased activity from states pushing for their own AI laws, potentially accelerating the push for federal AI policy.

For businesses involved in AI development, staying ahead of both federal and state regulations will be essential. Increased activity from state governments pushing their own AI laws could further complicate the regulatory environment. This dynamic will require companies to be proactive in managing AI-related risks, particularly in areas of privacy and cybersecurity, while remaining nimble in responding to both federal and state regulatory changes.

Financial Resiliency and Operational Risk

As disruptions from both internal and external sources become more frequent, organizations will face increasing pressure to demonstrate their financial and operational resilience, regardless of the administration. Whether it’s technological failures, economic volatility, or geopolitical tensions, businesses must be prepared to manage risks and recover swiftly from unexpected shocks. Regulatory scrutiny will continue to push companies toward developing robust business continuity plans and effective incident response strategies.  

Summary: AI will Aid Organizations in Navigating 2025

Organizations will need to stay informed about developments at both the federal and state levels, adopting flexible strategies to remain compliant in a fragmented regulatory environment. They will need to anticipate changes and their accompanying emerging risks and adapt quickly to new compliance demands. Investing in AI for regulatory, risk and compliance teams, paired with staff training, will be table stakes for adapting to the complexities of 2025’s regulatory landscape. By staying proactive and using AI smartly to stay ahead of the curve, businesses can not only ensure compliance but also position themselves to thrive in the face of regulatory uncertainty.

While some industries may also see a relaxation of capital and liquidity requirements, other sectors will face more stringent regulations. Companies that fail to take a proactive, risk-based approach to managing critical operations will find themselves at a disadvantage in 2025 and beyond. Understanding the evolving regulatory landscape—especially around the use of AI, environmental standards, cybersecurity, and financial crime—will be crucial for staying competitive and avoiding reputational damage.  

Skillful navigations of this patchwork of state and federal regulations means comprehensive regulatory, risk and compliance management strategies will be more critical than ever. Organizations must ensure their compliance frameworks are flexible enough to adapt to rapidly changing laws and regulations, while staying informed and proactive in addressing emerging risks. AI will be prove to be an ‘always-on analyst and advisor’ for many organizations.

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About 4CRisk.ai Products: Our AI products, AI Agents and Ask ARIA Co-Pilot use language models specifically trained for risk, compliance and regulatory domains to automate manual, effort-intensive tasks of risk and compliance professionals, providing results in minutes rather than days; up to 50 times faster than manual methods.  

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