The Board’s Role in Managing Regulatory Risk and Identifying Blind Spots

At the heart of a director’s role is the ability to strip away the noise and bring a sharp, objective lens to risk management. While AI and cybersecurity seem to dominate the headlines, the rapid change in regulations is also putting compliance in a critical role — and often where hidden blind spots can emerge.

The challenge for boards is that compliance is complex, and its impact — good or bad — can catch an organization off guard. Boards should stay alert and aware to ensure that the entity’s compliance directly drive:

• Strategic planning: Charting multi-year investment and strategies that anticipate regulatory change, rather than scrambling to react to its implications
• Governance oversight: Keeping management sharp, agile and resilient in the face of shifting rules
• Risk management: Building compliance frameworks that can withstand regulatory whiplash

Below are key questions and concepts boards should consider when monitoring regulatory risk and steering compliance strategy:

1. Does the board understand the entity’s regulatory landscape and what management is required to monitor?

Today’s regulatory environment is fast paced and leaves little room for error. Boards must not only grasp the rules governing their industry, they must also understand what management is expected to monitor and report. Having this foundation is essential for effective oversight and to protect the entity from costly regulatory surprises. The following questions can help boards understand how regulations fit into an entity’s operating environment:

Have we defined the regulatory landscape?

• Defining the regulatory landscape starts with mapping the full range of rules and laws that shape operations. Firstly, it is understanding how federal, state and international regulations apply to the industry. It then extends to emerging areas that are rapidly becoming board-level priorities, such as AI governance, trade regulations, ESG and climate disclosures, and data privacy and protection.
• Boards can’t oversee what they don’t measure. The metrics used must be broad enough to capture strategic exposure yet precise enough to flag issues early. The following indicators will help strengthen oversight and keep management on a proactive path to compliance:
  • Regulatory change tracking: Monitoring the frequency, scope and speed of new or amended regulations
  • Compliance risk assessments: Identifying high-exposure areas requiring board attention
  • Internal control effectiveness: Reviewing audit results showing how well compliance controls are designed and whether they are operating effectively
  • Incident and enforcement trends: Monitoring the severity and root cause of noncompliance, penalties or regulatory inquiries
  • Training and culture metrics: Monitoring employee training completion rates, survey results and tone-at-the-top indicators of compliance culture

Have we performed a compliance risk assessment to understand monitoring priorities?

• Engage stakeholders: Gathering insight from legal, compliance, operations, IT and business leaders
• Analyze business processes: Pinpointing where regulatory obligations intersect with day-to-day operations
• Review past incidents: Leveraging audit findings, enforcement actions and near-miss events to identify vulnerabilities
• Assess third- and fourth-party dependencies: Evaluating vendors, partners and outsourced services for weaknesses
• Identify emerging risks: Tracking new laws, rulemakings and industry trends for exposure areas
• Prioritize by impact and likelihood: Focusing on areas with the highest exposure to penalties, reputation damage or operational disruption

How is the organization prepared to adjust to change based on new or emerging regulations and avoid regulatory whiplash?

• Anticipate change: Tracking proposed rules and stress-testing for potential regulatory shifts
• Stay agile: Building flexible compliance frameworks that can pivot quickly
• Stay connected: Engaging regulators, peers and experts to identify trends early

2. Does the board have visibility into how regulatory risks of third- and fourth-party relationships are managed?

Third- and fourth-party relationships can be a source of less subtle compliance exposure. Boards need clear visibility into how vendors, partners and subcontractors are monitored for compliance. Regulators expect companies to not only take responsibility for their own compliance but also for that of the extended enterprise. This means shining a light on governance, controls and accountability across the full spectrum of the operating environment.

Have third- and fourth-party dependencies been identified?

• Vendor inventory: Identifying third parties that deliver products or services directly tied to core operations and customer outcomes
• Fourth-party mapping: Identifying vendors of vendors that extend to the supply chain, where risk can cascade even if the relationship is indirect
• Contract review: Verifying vendor contract clauses to ensure compliance obligations, audit rights, data protection and accountability expectations are clearly defined

Is the third and fourth-party risk assessed at least annually?

• Due diligence: Performing risk reviews during onboarding and updating periodically to evaluate whether compliance programs are in place
• Maturity assessment: Evaluating the compliance maturity of third- and fourth-parties
• Concentration risk: Monitoring vendor dependencies to prevent over-reliance on a small group of vendors

Is accountability clearly defined?

• Ownership and oversight: Documenting who owns the relationship and clarifying who is responsible for oversight, escalation and performance tracking
• Performance integration: Incorporating accountability into performance reviews, contracts and service-level agreements
• Board reporting: Updating the board and/or risk committee using dashboards and trend reporting, highlighting both improvements and red flags

3. Is there a documented framework that ensures regulatory compliance is monitored and risk is mitigated?

A well-documented regulatory framework is the backbone of strong compliance oversight. It gives the board and management a clear, structured and reliable way to track obligations, assess risks and respond when gaps arise. Having a solid framework demonstrates that the organization is disciplined, transparent and proactive in mitigating compliance risk. This also instills confidence with regulators, investors and stakeholders. Without an established framework, monitoring can become fragmented, reactive and vulnerable to blind spots.

Does the framework have a governance structure to identify roles and responsibilities of staff?

• Management ownership: Responsibility for compliance requirements are assigned with accountability documented and tracked.
• Board oversight: Roles of board committees — audit, risk, compliance or hybrid — are clearly defined and aligned to regulatory expectations, including committee charters.
• Role clarity: The framework maps responsibilities across staff, management and the board to prevent overlaps and gaps.

Does the framework work effectively in identifying regulatory blind spots?

• Periodic reviews: Assessments are performed to highlight areas not fully covered by the current framework — such as new regulations, evolving risks or shifting industry practices.
• Independent assurance: Independent testing is performed to identify overlooked compliance risks and to provide fresh insight.
• Peer benchmarking: Compliance and risk practices are benchmarked against peers and best-in-class standards to uncover blind spots.
• Forward-looking focus: The framework includes monitoring of emerging areas — like AI, ESG and data privacy — where blind spots are more likely to develop quickly.

Is there a documented plan for reporting and responding when instances of noncompliance are identified?

• Clear playbooks: There are detailed response guides for regulatory breaches or investigations, ensuring actions are consistent and timely.
• Defined roles and protocols: Roles, responsibilities and escalation paths are mapped in advance, with clear communication channels to management, the board and external stakeholders.
• Testing and simulation: Regular tabletop exercises are performed to validate the plan, sharpen readiness and identify gaps before a real issue occurs.
• Continuous improvement: Lessons learned from incidents and simulations are used to update the response plan, making it a living document that evolves with emerging risks.

4. Are there resources with the right experience and insight to address the organization’s regulatory needs?

The strength of a compliance program depends on having professionals with specialized knowledge, certifications and real-world experience to navigate complex and evolving regulations. This includes not only compliance and legal teams, but also risk management, IT, and business leaders who understand how the regulations impact day-to-day operations. When gaps exist, subject-matter experts or professional advisors can provide targeted support. This, in turn, ensures there is a credible, proactive and resilient approach to regulatory oversight.

Can in-house personnel properly support the regulatory compliance requirements?

• Staffing adequacy: Compliance, legal and risk management functions are staffed with depth and skill to keep pace with regulatory demands.
• Professional insight: When internal bandwidth is stretched or technical skill is needed, external subject-matter experts should be tapped for fresh perspectives and know-how to quickly address issues.
• Board evaluation: Directors should actively evaluate whether resources match the growing complexity of regulations.

Have the right training needs been identified to ensure personnel can effectively comply with regulations?

• Skills gap analysis: Identify where staff and leadership need more compliance knowledge
• Align training with regulations: Tailor training content to high-risk rules, industry standards and new regulations
• Differentiate by role: Target trainings to the respective role — directors, management and frontline staff
• Leverage multiple formats: Use e-learning, workshops and scenario-based simulations
• Measure effectiveness: Monitor participation, certifications and test results
• Refresh: Update training to reflect new regulations and emerging risks

Have the right training resources been identified and budgeted to provide staff and the board with initial and ongoing training?

• Investment in ongoing training: Commit to continuous learning through certifications, external programs and industry updates; this should be focused on building credibility, technical knowledge and staying ahead of the curve.
• Leveraging technology: Use scalable platforms, e-learning tools and AI-driven training modules to make compliance training faster, more engaging and measurable.
• Board training:
  • Guest insights: Board meetings can double as learning opportunities by inviting guest speakers — vendors, key customers, attorneys or CPAs — who bring real-world, industry-specific intelligence.
  • Peer exchange: Directors can use their networks to understand what regulatory trends peers are seeing and how other boards are addressing the issues.
  • AI in practice: Explore how peers are using AI in regulatory compliance to spark new ideas for oversight, monitoring and efficiency; this can keep the board at the forefront of governance innovation.

Is there board reporting on the number of staff that meet training requirements and have compliance certifications?

• Reporting on compliance objectives: Boards should receive regular, transparent updates that show not just completion rates but how staff are actively achieving compliance objectives and certifications.
• Probing accountability: Directors should press for clarity as to whether objectives are realistic under the organization’s regulatory workload. Compliance must be tested in practice, not just on paper, and accountability must be clear when requirements are not met.

5. Does the board have visibility into the number of regulatory violations and remediated actions over a selected time period?

Are reports from management on violations discussed at board meetings?

• Reporting on violations: Use dashboards, heat maps and other metrics to report trends in violations and root causes. Also, report on the regulatory impact and risk stemming from the violations.
• Remediation: Assess whether new controls have been evaluated as to the design effectiveness and whether target implementation dates have been established.
• Follow-up and ongoing monitoring: Identify how management is leveraging lines of defense, such as internal audit or similar assurance functions, to perform follow-up procedures and monitoring of the long-term effectiveness of remediation actions.

Are stress testing scenarios used to identify weaknesses in the compliance program?

• Self-assessments: AI and/or the risk function should be used to continuously monitor where weaknesses in the compliance program could occur. Sources of information may be available on regulatory or other public forum websites.
• Independent testing: Assumptions used in stress testing models are independently evaluated to assess whether they are appropriate given the entity’s compliance risk profile.

Weaver offers insights to help boards strengthen oversight, anticipate regulatory change and identify emerging compliance blind spots before they escalate. Subscribe to our monthly insights for guidance on governance, risk and regulatory trends that shape board decision-making. Contact us to learn how Weaver can help your organization align compliance strategy with effective oversight and long-term resilience.

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