Regulatory Risk Assessment

Introduction: What is Regulatory Risk Assessment?

Regulatory risk is the threat that a change in laws, rules, or regulations, or a failure to comply with them, could significantly damage a company's operations, lead to financial penalties, denial of licenses, or reputational harm. In Georgia, where the legislative environment is dynamically evolving and harmonizing with the EU, this risk is particularly high. Regulatory risk assessment is a proactive process where specialists analyze existing and upcoming legal changes and assess their impact on a specific business. This service is vital for regulated industries (banking, gambling, energy, pharmaceuticals), but it is useful for any company to understand its legal obligations.

What Does This Service Cover?

Regulatory risk assessment is a comprehensive service that includes:

• Legislative Horizon Scanning: Constant monitoring of planned legislative changes and analyzing their potential impact on the client's business.
• Compliance Audit: Checking existing business processes for compliance with current regulations (e.g., environmental norms, labor standards).
• Checking Licensing and Permit Conditions: Analyzing whether the company fulfills all license conditions and if there is a risk of license revocation.
• Relations with Regulators: Developing a communication strategy with state agencies (National Bank, Communications Commission, Competition Agency).
• Sanctions Risk Analysis: Checking compliance with international and local sanctions regimes (especially relevant for the financial sector).

Common Real-World Scenarios

Companies turn to regulatory risk assessors in the following situations:

• Adoption of a New Law: For example, when the new Law on Personal Data Protection came into force, companies needed large-scale changes in data processing workflows.
• Market Entry: A foreign company plans to operate in Georgia and needs to know what regulations apply to its sector (e.g., opening a crypto exchange).
• License Renewal: When a license expiration date approaches, and the company wants to ensure it fully meets updated requirements.
• Regulator Inspection: Conducting a "mock audit" to prepare before a scheduled inspection by a state agency.
• Sectoral Changes: When gambling regulations tighten, operators need immediate risk assessment to ensure business survival.

Georgian Legal Framework

Regulatory risk assessment is based on the governing legislation of a specific sector. In banking, this involves the Law on the National Bank of Georgia and the Law on Activities of Commercial Banks. The Law on Facilitating Prevention of Money Laundering and Terrorism Financing is also critical, as violations carry severe penalties. For a broad range of businesses, the Law on Competition (risk of abuse of dominant position) and the Law on Protection of Consumer Rights are important. When dealing with administrative bodies, knowledge of the General Administrative Code of Georgia is crucial, as it defines the rules of administrative proceedings and business rights during state inspections.

Service Process

The process typically proceeds as follows:

1. Scoping Phase: Defining the scope of research—a specific regulation, the entire sector, or a specific business process.
2. Gap Analysis: Comparing the company's current state with legislative requirements to identify discrepancies.
3. Risk Assessment: Determining the risk level for each discrepancy (amount of fine, threat of suspension of activities).
4. Recommendations: Lawyers develop a specific plan to eliminate gaps (changing policies, implementing new procedures).
5. Implementation Support: Assisting in the execution of recommendations.

Why Use Legal.ge?

On Legal.ge, you connect with lawyers who know not only general legislation but also the nuances of specific industries. Experience in dealing with regulators and deep knowledge of legislation allow the specialists represented on our platform to accurately identify the regulatory threats facing your business. Find a qualified advisor on Legal.ge and stay one step ahead in a changing legislative environment.