Regulatory Change Management: Challenges and Solutions

Each time regulations shift, segments of your industry are thrown into disruption as organizations scramble to adapt. But this doesn’t have to be your experience.

With a proactive regulatory change management process, you can respond swiftly and flexibly to new compliance obligations. This allows you to implement updated processes while others are still in the preliminary stages of adjustment.

Let’s explore how regulatory change management works and how the Prosci Methodology can support a smooth, structured transition.

What is Regulatory Change Management?

Regulatory Change Management (RCM) is the process of ensuring organizations adopt changes in compliance regulations, laws and standards. It involves tracking regulatory updates, assessing their potential impact on the organization, and implementing necessary changes to policies, processes and systems. 

RCM is especially critical in highly regulated industries such as finance, healthcare and education, where noncompliance can result in severe penalties, legal repercussions and reputational damage.

How Organizational Change Management Aids RCM

Organizational change management (OCM) has the potential to boost RCM efforts significantly. Where many approaches to RCM focus exclusively on the technical side of change, OCM emphasizes the people side of change. It involves preparing, equipping and supporting individuals to adopt and use changes effectively. 

By incorporating this people-centered focus, you can implement changes more smoothly and successfully, with minimal resistance and more engagement from employees. In fact, organizations that use change management practices, even at just a “fair” level, meet their objectives three times more than those that don’t. On average, those with excellent change management practices see seven times more success.

Correlation of Change Management Effectiveness With Meeting Objectives

For example, when new data privacy regulations are introduced, organizations must update their data handling procedures and ensure all employees understand and comply with the new regulatory obligations. Focusing on the human side of change minimizes noncompliance risk by embedding regulatory adherence into your organization’s DNA.

To strengthen your RCM approach, consider your existing approach. Does your process focus only on technical changes? Or do you see RCM as as a people-driven change management process?

Common Challenges in Regulatory Change Management

Organizations often encounter challenges when adapting to regulatory changes. These obstacles can disrupt operations, elevate compliance risks, and hinder the successful implementation of new requirements. Recognizing and understanding these challenges is crucial for mitigating their impact effectively.

The rapid pace of change

Regulatory environments are constantly evolving, often with little advance notice. From 2021 to 2024, the Securities and Exchange Commission (SEC) created 64 new rules in just three years. Even if you stay informed of the changes, implementing them while meeting deadlines can be a serious challenge. The short timelines can strain resources and delay compliance.

Additionally, because regulatory changes are mandated by external bodies, organizations have limited control over the timing and specifics. Yet noncompliance can lead to legal penalties, financial losses and reputational damage.

Solution: Establish a standardized, repeatable regulatory change management approach, such as the Prosci Methodology, to build comprehensive change readiness and make responding to changes faster and easier.

For example, Latin American financial firm SURA partnered with Prosci Global Partner Faculta (now Prosci Latin America) to respond to changing financial regulations. According to Managing Partner Victor Romero, “Using Prosci’s approach to managing change, SURA met its regulatory requirements related to digitalization six months ahead of the competition.”

Complexity and scope

Regulatory changes often affect multiple departments, systems and processes, adding complexity to the change initiative. They may require significant adjustments in areas such as operations, technology and employee roles, creating interdependencies that complicate the transition.

Solution: Develop a comprehensive Change Management Plan that includes assessing your risk profile, allocating resources, and having a clear framework for accountability across business units. Creating a well-structured Communications Plan as part of your change management initiative ensures that all stakeholders understand their roles in the compliance process.

Using the Prosci Methodology, Microsoft Investor Relations successfully followed a 50-step process for their earnings release. This tightly regulated process needed to be error-free, and they navigated it successfully by following their tailored process. 

Keeping staff informed and aligned

Regulatory changes can overwhelm employees, especially when they involve significant shifts in daily responsibilities. Without proper guidance, confusion and resistance can arise, jeopardizing compliance efforts.

Solution: Regular training sessions and real-time updates from your compliance team help keep employees informed. Engaging leadership and aligning teams early in the process are critical for maintaining commitment.

For payments company Velera, the key to consistent training was building its own training capabilities with a Prosci License. This allowed Velera to train its own Prosci Change Practitioners and bring OCM to every part of its organization, even in highly regulated areas like fraud and risk management.

Regulatory Change Management Tools and Best Practices

Effectively managing regulatory changes requires a structured approach and the right tools to ensure regulatory compliance and minimize disruptions. Implementing a set of best practices can streamline the process and enhance organizational resilience.

Establish a structured framework

Adopting a structured change management framework like the Prosci ADKAR® Model provides a clear roadmap for navigating regulatory changes. The model focuses on individual transitions, ensuring that employees are aware of the reasons for the change, want to participate in it, and have the knowledge and skills to implement and sustain the change. 

Our ADKAR Model is part of the more comprehensive Prosci Methodology, which includes the Prosci 3-Phase Process and the Prosci Change Triangle (PCT) Model. Utilizing such a robust methodology enables a systematic approach to the people side of change.

Use compliance management software

Compliance management software like RiskSmart can automate the tracking of regulatory updates, assess their impact, and help manage the implementation process. These tools provide centralized repositories for regulatory information, facilitate communication across departments, and ensure that all stakeholders have access to the latest compliance requirements. Automation helps reduce the risk of human error and accelerates response times to regulatory changes.

Conduct regular risk assessments and audits

Regular risk assessments and compliance audits are essential to identifying potential gaps in compliance with regulatory requirements. These evaluations help create a proactive approach to addressing issues before they escalate into significant problems. They also help anticipate areas where change may be necessary.

For example, with cloud environment intrusions increasing by 75% between 2022 and 2023, governments might introduce new regulations to curb this trend. Being aware of such possibilities through risk assessments can prepare you to respond to regulatory changes even before they’re released.

Engage leadership and communicate effectively

Active and visible sponsorship from leadership is critical in driving change initiatives. Leaders should communicate the importance of regulatory changes and model the desired behaviors. Effective communication fosters a culture of transparency and trust, which is vital for successful implementation.

Build enterprise change capabilities

To sustain long-term success, organizations need to build enterprise change capabilities. This involves institutionalizing change management practices across the organization, ensuring that all teams are equipped to handle change efficiently. By creating a culture of continuous improvement and resilience, organizations better manage regulatory changes and remain agile.

The Prosci Change Management Maturity Model can be instrumental in this transformation. The model provides a framework for assessing current change management maturity levels and identifying areas for growth. Understanding their maturity level enables organizations to enhance their change management capabilities strategically, moving from ad-hoc or project-based approaches to embedded, enterprise-wide competencies. This structured progression supports effective change management and strengthens the organization's ability to adapt and thrive despite frequent regulatory changes.

Applying the Prosci Methodology to Regulatory Change Management

Regulatory changes often bring significant challenges to organizations, requiring them to swiftly adapt processes, systems and behaviors. The most effective way for large organizations to do this is through effective change management.

Prosci Methodology for Regulatory Change Management

Let's review the three main components of the Prosci Methodology and how each one can make your RCM process more effective:

Prosci Change Triangle (PCT) Model

The PCT Model shows the interrelationship of four critical aspects of any successful change effort: success, leadership/sponsorship, project management and change management.

• Success – Clearly defining what success looks like for regulatory changes ensures that all those impacted have a shared understanding of the objectives. This clarity helps align efforts and resources toward achieving compliance efficiently.
• Leadership/Sponsorship – Effective leadership is crucial in navigating regulatory changes. Leaders must actively and visibly support the change, build a coalition of sponsorship, and communicating directly with employees. This fosters a culture of compliance and ensures that the change is prioritized across the organization.
• Change Management – This discipline addresses the people side of change. By using the PCT Model, you can ensure your change initiative remains healthy by following change management best practices, such as open communication and engaging executive sponsors. 
• Project Management – This discipline focuses on the technical side of your change initiative. It complements change management by ensuring that you successfully design, develop, and deliver the necessary solutions.
  

The PCT ensures project health by monitoring, evaluating and improving each of the four aspects. When one aspect is doing poorly, it jeopardizes the success of the whole project.

Prosci 3-Phase Process

The Prosci 3-Phase Process helps organizations comprehensively address the people side of changes by providing a clear roadmap. This process is divided into three phases: 

Phase 1 – Prepare Approach – This phase involves developing a tailored change management strategy, ensuring that necessary sponsorship and commitment are secured. Aligning organizational goals with regulatory requirements in this phase sets a solid foundation for compliance.

Phase 2 – Manage Change – During this phase, organizations create and implement plans that facilitate the transition through the ADKAR elements. Focusing on adoption and usage helps organizations equip employees to meet new regulatory demands effectively.

Phase 3 – Sustain Outcomes – This final phase ensures that changes are embedded in the organization, maintaining compliance over time. It involves reviewing performance and transferring ownership to ensure long-term adherence to regulations. 

The Prosci ADKAR Model

Our ADKAR Model is the heart of the Prosci Methodology, enabling organizations to manage change effectively by focusing on the people affected. The model’s five key elements—Awareness, Desire, Knowledge, Ability and Reinforcement—help you ensure that people have what they need to move through their individual transitions so they can adopt regulatory requirements.

Here’s a high-level overview of how our ADKAR Model can be applied in regulatory change management.

Prosci ADKAR Model

1. Awareness of the need for change

The first element in the ADKAR Model is building awareness of why the regulatory change is necessary. This involves clearly communicating the risks of noncompliance, such as fines, legal actions and reputational risk, alongside the benefits of compliance.

Best Practices:

• Use multiple communication channels (e.g., emails, meetings, webinars) to ensure the message reaches all stakeholders.
• Leverage leadership to reinforce the importance of the change.
• Highlight external factors driving the change, such as new legislation or industry standards.

2. Desire to support and participate in the change

Once people have awareness, you need to help them build desire to support the change. Regulatory changes can often seem burdensome, so it’s essential to address concerns and answer the questions that people have transparently.

Best Practices:

• Emphasize how compliance benefits the organization and individual employees by reducing risk and enhancing job security.
• Involve employees early in the process through feedback sessions or pilot programs.
• Recognize and prevent resistance by understanding its root causes and providing support.

3. Knowledge of how to change

This element focuses on equipping employees with the necessary information and skills to comply with the new regulations. This includes training and clear documentation.

Best Practices:

• Develop comprehensive training programs tailored to different roles within the organization.
• Provide easily accessible resources, such as guides, checklists and FAQs, to support employees in understanding and implementing the changes.
• Use subject matter experts to clarify complex regulatory requirements.

4. Ability to implement new regulatory requirements

Even with knowledge, employees need opportunities to apply what they’ve learned in a practical setting. This element ensures that they can perform their duties in compliance with the new regulations.

Best Practices:

• Create environments for practice, such as simulations or role-playing exercises, to build confidence and competence.
• Offer coaching and mentoring to provide real-time feedback and support.
• Ensure that systems and tools are in place to facilitate compliance, such as updated software or streamlined workflows.

5. Reinforcement to sustain the change

The final element focuses on sustaining the change to ensure it becomes embedded in the organization’s operations. Effective reinforcement helps people adopt changes for the long term instead of reverting to non-compliant behaviors.

Best Practices:

• Monitor compliance through regular audits and reporting.
• Celebrate milestones and recognize employees or teams who demonstrate adherence to the new regulations.
• Continuously solicit feedback and make adjustments to policies or training as necessary to maintain compliance.

The ADKAR Model is flexible and adaptable to changes and organizations of all kinds. It can be scaled to regulatory changes affecting 10 people, 100 people, 10,000 people or more.

Use Organizational Change Management to Address Regulatory Changes

By applying OCM to your RCM efforts, you can embed change readiness in your culture and even grow stronger from change. The journey begins with embracing the Prosci Methodology on an enterprise scale. By developing proficiency in this research-based, practitioner-informed approach, and leveraging expert guidance, you can confidently address even the most complex regulatory changes, positioning your organization ahead of the curve.