European firms are not adequately prepared to meet increasing regulatory requirements, despite acknowledging the importance of risk management, according to new research.

Some 40 per cent of major European companies believe they will be investigated within the next 12 months, but a quarter do not have any procedures in place to deal with it, says the European Regulatory Awareness Survey conducted by legal services firm DLA Piper.

Overall, 51 per cent of firms surveyed have no crisis management plan and 47 per cent of those with plans do not include procedures to deal with a Competition Authority investigation.

Jonathan Pickworth, partner in the regulatory and government affairs group at DLA Piper, says the number of firms facing regulatory threats is high.

‘Most large organisations are good at managing most kinds of business risk, but regulatory risk has not been managed in the same way,’ he said. ‘Many companies are not sure how to go about it. There is also a general feeling that nobody gets rewarded for compliance.’

Regulators can investigate firms for suspected corruption, price-fixing, abuse of dominant market position and tax and accounting irregularities.

Some 76 per cent of companies surveyed believe that the risk of criminal penalties for regulatory breaches is likely to grow over the next five years.

Neil Ward-Dutton, analyst at Macehiter Ward-Dutton, says the regulatory landscape is much more complicated in Europe than in the US.

‘The US is one geography with one set of rules, but Europe has the EU and individual governments, each with its own regulations,’ he said. ‘Some fit together nicely, but some do not.’

High-profile prosecutions in the US have also drawn attention to regulatory needs, which has not happened in Europe.

‘From an IT perspective, firms need to understand the critical regulatory issues and assess the risk,’ said Ward-Dutton. ‘They should also develop a forward-looking approach rather than deal with regulations on a project-by-project basis.’