Regulatory volatility: Friction & pace of change
‘Regulation doesn’t go backwards. It morphs and demands’.
It could be argued that regulation has become less of a framework, and more of a moving target... Across our 2025 forums, leaders described rising expectations, inconsistent supervision and growing friction between policy intent and operational reality. As we kick off Q1, the challenge for many is no longer managing constantly shifting rules, but navigating the volatility with confidence.
‘The speed of change is… glacial.’
Sector overview
Regulatory change is both constant, and contradictory. Across our 2025 forums, attendees described a landscape where expectations were rising, clarity was diminishing and supervisory interactions felt increasingly unpredictable. The result was a pervasive sense of friction - between regulators and firms, between policy intent and operational reality, and between the pace of regulatory messaging and the pace of regulatory reform.
One comment captured the mood succinctly, saying: 'We’re not exactly short of rules, are we?!' Firms are grappling with overlapping frameworks, shifting interpretations and a growing divergence between high‑level regulatory rhetoric and the lived experience of supervision. As one attendee noted 'the risk‑friendly message from senior regulators isn’t impacting down into enforcement.' This disconnect is creating uncertainty at precisely the moment when boards need stability - and makes trusting your judgement when it comes to rolling out a plan a bit tricky...
As well as the uncertainty around whether firms were receiving the right slant on the information, we also heard repeated concerns about inconsistency of collaboration. Supervisory teams varied widely in their approach, with there appearing to be a somewhat 'luck of the draw' ethos at play - some were collaborative; others were adversarial. Some emphasised outcomes; others focused on process. This variability made it difficult for firms to calibrate their responses or anticipate regulatory priorities, and relatively impossible to join forces and work collaboratively firm to firm. It also placed additional pressure on Boards, requiring them to interpret supervisory signals without the benefit of clear, consistent guidance.
The pace of regulatory change was another recurring theme. Despite the volume of consultations, speeches and policy papers, many attendees felt that meaningful reform was slow to materialise. As one participant put it 'the speed of change is… glacial!' Yet, expectations on firms continued to accelerate. Boards were expected to demonstrate proactive oversight, anticipate emerging risks, and evidence cultural maturity even when the regulatory framework itself remained in flux.
This tension was particularly acute in areas such as operational resilience, consumer duty, financial crime and non‑financial misconduct. Firms are expected to interpret principles‑based regulation in ways that aligned with supervisory expectations, even when those expectations were not explicitly articulated. The result was a growing reliance on judgement, something that regulators encourage in theory but often challenge in practice.
We also heard concerns about the cumulative impact of regulatory demands on organisational capacity. Many attendees described a sense of 'regulatory fatigue,' where teams were stretched thin by continuous change and the pressure to evidence compliance at ever‑increasing levels of granularity. One participant summarised the feeling by saying: 'regulation doesn’t go backwards. It morphs, complicates, and demands more.' A sentiment that resonated across sectors and functions.
‘The risk‑friendly message from senior regulators isn’t
impacting down into enforcement'.
Looking ahead
Looking ahead to 2026, it is highly likely that regulatory volatility will remain a defining feature of the environment. Geopolitical instability, technological disruption and shifting public expectations will continue to shape regulatory priorities. That said, regulators are under pressure to demonstrate effectiveness, which may lead to more assertive supervision - something which may be welcomed by some.
For Boards, the challenge will be to move from reactive to anticipatory compliance - although a tricky ask. Whilst it is impossible to second guess the next regulatory move, building constructive, transparent relationships with regulators - where challenge is respectful, expectations are clarified early, and misunderstandings are addressed before they escalate - is key.
Ultimately, regulatory volatility is not a temporary disruption but a frustrating reality. Fostering a culture where regulatory risk is understood not as a constraint, but as a core component of organisational resilience could be the best option.
As we heard throughout the 2025 (and 2024, 3023...) eliminating regulatory friction is an impossible dream. But there is hope for navigating it with resilience.