Regulatory change has become a constant consideration for multinationals, rather than an exception. This increases the compliance risks and strategic uncertainty associated with operating across borders in an interconnected, digital economy.
The challenge for these organizations is no longer simply complying with the latest regulations. It is building the agility, visibility and appropriate governance frameworks needed to respond effectively to ongoing change while maintaining operational efficiency.
Around half (47%) of global jurisdictions expect rules and regulations to become more complex over the next five years, according to TMF Group’s 2026 Global Business Complexity Index. Effective risk management will therefore require a much more proactive approach when it comes to monitoring regulatory developments and assessing their business impact.
Tackling Tensions
Unsurprisingly, political instability and geopolitical tensions continue to impact the management of global entities, with the proportion of jurisdictions anticipating stable conditions declining year-on-year.
New governments bring in new ideas and new plans. In the U.K., for example, businesses are waiting to see what the new Prime Minister Andy Burnham will implement. Change is often positive, but still something that businesses have to absorb. Constant adaptation to new laws, regulations and administrative requirements demands significant resources and can introduce unexpected costs.
Businesses are also grappling with the fallout from ongoing conflicts and trade policy shifts, and this is impacting supply chains. Developments around key routes such as the Strait of Hormuz highlight the geopolitical risks businesses face and how these influence strategic decisions about where to expand and place their people.
Aynsley Vaughan of TMF Group
Multinationals are learning to navigate around these shifts. One example is the China Plus One strategy, where companies retain operations in China but also find new suppliers in developing countries to mitigate concentration risk. Many are also adopting a “regional HQ” approach as a means of managing wider political tensions, splitting decision-making across multiple locations and establishing offices that can act as a bridge between global corporate goals and local market needs.
The biggest multinationals are becoming even more global. They are more willing to look at smaller countries and different trade corridors than they perhaps were in the past.
As the world becomes smaller, we are also seeing more harmonization efforts, such as the European Union’s 28th regime, a proposal for a single set of rules for incorporation to make it easier to start and grow an EU-wide business.
Watching the Horizon
Despite growing attempts at harmonization, divergent local requirements will continue to create complexity for organizations operating across multiple jurisdictions.
The 28th regime is audacious, but if it comes to fruition, companies must be careful not to underestimate complexity. Having an entity in place is one thing. But in order to do business in any given European market, companies will still have to comply with frequently changing local labor laws, filing obligations and reporting standards.
A company may spot an opportunity to recruit a salesperson in a new country, and while it may seem simple on the surface, they will have to find a payroll provider that can facilitate the local flavor of pensions, benefits and everything else that comes with a new hire.
Take the U.S. as an example. A business may choose to set up first in Delaware, but this doesn’t mean it is able to trade across the country. Rules and regulations vary by state, county and city.
The encouraging thing is that companies are aware that change is here to stay. They are taking steps to prepare themselves and ensure they are set up with the agility needed to deal with the raft of requirements across the jurisdictions where they are present.
Identifying Opportunities
Horizon scanning is crucial for proactive risk management. For example, in summer 2027 the EU will introduce a fully harmonized rulebook for Ultimate Beneficial Owner (UBO) identification. We have already had clients asking what it means for them and how they can prepare.
Companies are also considering the opportunities that accompany change. The EU Pay Transparency Directive took effect in June. Multinationals are thinking about whether they can apply these principles, and the same sense of transparency, to processes in other markets to help simplify and harmonize their global payroll.
Risk professionals should help their organization to identify and track the specific legislative changes that will have the most impact. Once the priority list has been established, it is important to understand who in the business is responsible for monitoring what the changes mean and the appropriate forums for disseminating that information.
Unpacking the Role of Technology
Strong governance, supported by the latest technology and reliable local expertise, helps multinationals to meet evolving obligations with greater confidence.
In TMF Group’s 2026 complexity index, 78% of jurisdictions report that technology is developing at a steady and predictable rate, an increase from 73% in 2025. This reflects the expanding appreciation of digital solutions and their ability to streamline processes, improve compliance and enhance the ease of doing business.
AI can help companies to horizon-scan more efficiently. But it is important to remember we are all still experimenting and iterating. There is so much tooling now available – in legaltech alone there are very specific tools for very specific pieces of work. Risk professionals must take responsibility for implementing the right guardrails regarding the use of such tools. Establishing an AI board with broad representation from across the business is something we see more companies consider.
Testing and Guardrails
Previously, technology felt like scaffolding to support a business. But AI tools are now being embedded into operations every day, and this introduces different considerations. It is important to kick the tires regularly to ensure the tools are being used responsibly and have the desired impact.
The contracting around AI-led vendors is quite different to traditional vendors. They add new features more frequently, so it is crucial that those features are robustly tested to check they sit within the guardrails. The businesses best equipped to answer will be the ones with clear guardrails and clear lines of responsibility.
Ultimately, there is risk in everything we do – and the risk parameters are always moving as AI and other emerging technologies widen their footprint across the global business landscape. The most effective risk professionals are those who collaborate with all stakeholders. The ones who ensure they are seen and heard across the organization so they can inform the right decisions, at the right time, in this fast-moving environment.
In a world where regulatory frameworks will continue to evolve, multinationals need greater visibility, coordination and preparedness. Those that can combine robust governance practices with timely regulatory insights will thrive and unlock sustainable growth.
Aynsley Vaughanis the Head of Corporate Practices at TMF Group. With more than 20 years' experience in financial services, she works with multinational organisations to navigate governance, compliance, entity management and regulatory complexity across international markets.
Topics: Regulation & Compliance, Geopolitical, Third Party Risk, Risks & Risk Factors