Europe’s Small-to-Medium-Sized Businesses

Compliance holds sway in Europe, but regulations are one clear challenge

When asked what internal challenges have increased in compliance over the past year, leaders at European SMB organizations indicated significant differences from global averages in several measures. 

Overall, Europe’s businesses appeared less likely to be facing increasing challenges related to Compliance’s role and influence. While about one-third of respondents globally cited increased challenges coordinating across functions, only about one-quarter of the SMB cohort in Europe said the same. This difference continued in areas like employee trust in reporting, lack of alignment in understanding risk and in ownership or reporting lines. Overall, a picture emerges where Compliance’s influence within Europe’s SMB organizations is facing less disruption than for peers globally. 

Still, challenges do exist. A significantly greater share of European SMB respondents said “difficulty keeping up with new regulatory demands” had increased. This may come as no surprise for France and Germany given developments like the implementation of the European Union AI Act. Yet not only do those changes impact many U.K. organizations operating in or doing business within the EU, the U.K. itself is experiencing regulatory shifts, including measures introduced under the Economic Crime and Corporate Transparency Act.

Compliance AI adoption higher for European SMB cohort

Our surveying showed European SMB organizations (100-5,999 employees) were more likely in every measure but one – policy administration – to expect to use AI in their compliance program in the next 12 months compared to global averages.  

Overall, the global SMB cohort was most likely to expect to use AI for training purposes in the next year. This included 48.4% for Europe, and globally, 44.0%. Other common areas of use, all where Europe was more likely to have plans, were investigations support and program reporting and analytics.  

The greatest difference was in expectations for board reporting. More than a quarter (25.5%) of Europe SMB group expected to use AI in the area, compared to just 16.5% globally.  

This higher rate of adoption comes interestingly as the EU AI Act continues its phased implementation. Though the U.K. is outside the jurisdiction, many organizations with some portion of business involving the EU are impacted. AI regulations continue to roll out across the globe, yet many remain relatively unsettled compared to the EU’s sweeping rules.

Many European businesses lack anonymous reporting channels

European SMB organizations are mixed in their relative likelihood to have certain elements in place to promote a strong speak-up culture. Yet they share one notable similarity to global peers – many firms lack reporting channels with anonymous features,  an important component of many effective speak-up and compliance programs. 

Fewer than half of European SMB respondents – 47.7% – said their organization has such channels in place, which was even lower than the global SMB rate of 54.0%. Even for the very smallest of organizations, a trusted mechanism through which individuals can raise concerns and report misconduct is critical due diligence. It is also often mandated under various regulatory schemes, making this low rate quite surprising. 

Among the brighter signs for European businesses was the greater likelihood of regular leadership messaging reinforcing the importance of speaking up. As explored in NAVEX’s full State of Risk & Compliance Report, leadership behavior has a major impact on compliance outcomes.