Gartner Survey Shows Unsettled Regulatory and Legal Environment Tops Emerging Risks in First Quarter of 2025
The survey of 266 senior risk and assurance executives – taken in the first quarter of 2025 – revealed that the unsettled regulatory and legal environment, which is marked by increasing compliance complexity and costs due to regulatory authority changes, moved from the third most cited spot in 3Q24 and 4Q24 to rank as the most cited in 1Q25 (see Table 1).
Figure 1: Top Emerging Risks of Q1 2025
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Source: Gartner (April 2025)
Root Causes of the Unsettled Regulatory and Legal Environment
Adding to the complexity is the divergent approach to artificial intelligence (AI) regulation across regions. While some governments champion AI innovation through flexible regulatory measures, others intensify scrutiny, complicating the compliance landscape for companies operating globally. This regulatory tug-of-war leaves businesses grappling with the challenge of aligning their AI strategies with disparate legal requirements.
Potential Consequences
The consequences of an unsettled regulatory and legal environment affect every aspect of business operations. As new administrations take the helm, the focus on regulatory scrutiny and enforcement can shift dramatically. In certain jurisdictions, rules that were once rigorously enforced may fall by the wayside, leaving businesses in a state of flux as they attempt to anticipate and respond to these changes.
The financial burden of compliance is also evolving as different standards across borders reshape the cost landscape. Companies may be compelled to hire specialized staff or adapt their operations to adhere to varying regulations. This financial strain can impact profitability, forcing businesses to reevaluate their strategies and resource allocation in the face of mounting compliance costs.
Assessing Risk Exposure and Navigating Policy Uncertainty
- Trade, tariffs, and supply chain disruptions: Companies must prepare for critical input shortages, retaliatory tariffs, shifts in trade routes, increased production costs, capital investment uncertainty, exchange rate volatility, and lower consumer demand.
- Regulatory and legal volatility: Rapid changes in industry-specific regulations, uncertain legal and compliance costs, shifting tax policy, changes in federal spending, and evolving AI regulation require vigilant monitoring and adaptation.
- Shifting geopolitical landscape: Reduced government spending on foreign aid, employee safety concerns, business continuity challenges, and critical shipping lane disruptions necessitate strategic planning and risk mitigation efforts.
- Immigration and workforce changes: Shifting talent availability, productivity losses, weakened critical expertise, labor cost uncertainty, and legal and compliance changes demand agile workforce strategies.
“Businesses can better position themselves to adapt to these emerging threats by prioritizing potential disruptions and shifting resources to mitigate risks,” said Takkar.
