The COO’s Playbook for Proactive Governance, Resilient Compliance, and Strategic Foresight

Executive Summary

In an era defined by geopolitical instability, economic uncertainty, and a fragmented regulatory landscape, the traditional view of corporate governance as a defensive, compliance-driven function is obsolete.1 Today, robust governance is a primary driver of operational resilience, stakeholder trust, and sustainable long-term value. The Chief Operating Officer (COO) is uniquely positioned as the central architect of this capability, tasked with translating board-level principles into a tangible, efficient, and forward-looking operational reality. The COO’s mandate has evolved from managing internal processes to orchestrating a sophisticated framework that not only meets evolving regulatory demands but also anticipates future shifts and turns external pressures into a competitive advantage.

This playbook provides a comprehensive, three-part framework for the modern COO to master this expanded role. First, it defines the Modern Governance Mandate, outlining the principles-based European and UK governance philosophies and the COO’s direct, personal accountability under frameworks like the Senior Managers and Certification Regime (SMCR). Second, it details how to Architect a Unified and Resilient Framework, providing a blueprint for integrating the traditionally siloed functions of governance, risk, and compliance (GRC) into a single, cohesive operational engine, anchored by international standards and codified in a robust corporate charter. Finally, it provides the tools for Mastering Regulatory Foresight and Strategic Engagement, equipping the COO with methodologies to anticipate change, navigate uncertainty, and proactively engage with regulators to shape best practices and influence the future operating environment. By following this playbook, COOs can strengthen their organization’s governance, ensure resilient compliance, and transform the operations function into a source of strategic intelligence and competitive differentiation.

 

Section 1: The Modern Governance Mandate: From Compliance to Competitive Edge

 

This section establishes the strategic context for modern governance, moving beyond a narrow, rules-based perspective to a principles-based approach that drives long-term success. It defines the Chief Operating Officer’s specific and expanding responsibilities within the demanding UK and European governance landscape, highlighting the convergence of principles-based flexibility with stringent personal accountability.

 

1.1 The European Governance Philosophy: A Compass in Volatile Times

 

Amidst increasing geopolitical instability and economic uncertainty, corporate governance frameworks across Europe are being positioned not as static rulebooks, but as dynamic guides for sustainable success.1 A joint statement from the chairs of national corporate governance institutions across Europe, including the UK, Germany, and France, reaffirms that the foundational principles of

accountability, trust, and transparency are essential for fostering long-term value creation and competitiveness. For the COO, this means the core mission is to ensure these abstract principles are woven into the very fabric of the company’s daily operations and culture.1

A primary challenge facing European companies is the increasingly fragmented regulatory environment, where diverging or even conflicting international standards on topics like Environmental, Social, and Governance (ESG) and Diversity, Equity, and Inclusion (DEI) create significant complexity.1 An effective governance framework, therefore, must empower a company to navigate this complexity with purpose and resilience. It should not be a burden that stifles entrepreneurial freedom but a “stabilising compass” that enables agility, innovation, and strategic clarity.1

 

1.2 Decoding the UK Corporate Governance Code (2024): The COO’s Action Plan

 

The UK Corporate Governance Code, periodically updated by the Financial Reporting Council (FRC), is a globally influential benchmark for best practice.2 The 2024 Code, which applies to financial years beginning on or after 1 January 2025, is mandatory for all companies listed in the UK’s commercial companies or closed-ended investment funds categories.3 It is structured around five pillars that form a comprehensive blueprint for board responsibility, each with direct implications for the COO.

1. Board Leadership and Company Purpose: The board is tasked with ensuring the company’s purpose, values, and strategy are aligned with its culture.4 The COO operationalizes this high-level mandate by designing the processes, monitoring the systems (e.g., employee feedback channels, whistleblowing mechanisms), and reporting on the behaviours that demonstrate this alignment in practice.6
2. Division of Responsibilities: The Code mandates a clear and effective division of responsibilities at the head of the company, most notably a separation between the Chair and CEO to prevent an excessive concentration of power.2 The COO supports this structure by ensuring operational reporting lines are unambiguous and that the executive team’s execution of strategy aligns with the distinct responsibilities delegated by the CEO.8
3. Composition, Succession, and Evaluation: An effective board must be diverse in skills, background, and experience, with a formal process for evaluation and succession planning.4 While board appointments are the Nomination Committee’s remit, the COO plays a crucial role in developing a diverse talent pipeline within senior management—the primary feeder pool for future executive directors.5
4. Audit, Risk, and Internal Control: This pillar represents a critical nexus for the COO. The 2024 Code introduces a significant new requirement: Provision 29 asks boards to make an explicit declaration in the annual report regarding the effectiveness of their material internal controls.3 This attestation relies directly on the systems and processes that the COO manages and oversees, making the COO’s role central to the board’s ability to comply. FRC reviews have noted that the quality of reporting on risk management and internal controls needs improvement, placing further pressure on companies to demonstrate robust systems and oversight.3
5. Remuneration: Executive pay must be transparently and fairly aligned with the company’s long-term success and stakeholder interests.4 The COO’s ability to deliver operational performance, manage risk, and drive efficiency is a key input into the Remuneration Committee’s evaluation of executive performance.

A defining feature of the UK system is the ‘comply or explain’ doctrine.2 This principle offers companies the flexibility to depart from specific Code provisions if they can provide a clear, persuasive explanation for how their alternative arrangement is more suitable and beneficial for upholding high governance standards.3 For the COO, this is a strategic opportunity. “Explain” should not be viewed as a failure but as a chance to design more innovative, efficient, or bespoke operational models that better fit the company’s unique circumstances. The key is the ability to articulate a compelling rationale that satisfies shareholders and regulators.3

 

1.3 The COO as Chief Governance Officer: The SMF24 Mandate

 

The UK’s governance philosophy is undergoing a sophisticated evolution, simultaneously becoming more principles-based through ‘comply or explain’ while also being more accountability-driven through personal liability. This is not a contradiction but a deliberate regulatory bargain: regulators grant flexibility in how firms operate in exchange for holding senior individuals personally accountable for the effectiveness of those operations.

This accountability is formalized for COOs in the financial services sector through the Financial Conduct Authority’s (FCA) Senior Managers and Certification Regime (SMCR). The Chief Operations Function (SMF24) is a designated Senior Management Function that confers overall responsibility for managing all or substantially all of a firm’s internal operations and technology.11 This remit explicitly includes the critical domains that underpin the entire internal control framework:

• Business continuity and operational resilience 11
• Cybersecurity and information technology 11
• Outsourcing, procurement, and vendor management 11
• Management of shared services 11

The SMF24 designation transforms the COO’s role from a purely internal manager into a key figure in the firm’s regulatory relationship, with direct, personal accountability to regulators for the operational integrity and resilience of the firm. This elevation makes the COO a central architect in designing and running an operational framework that is not only efficient but also demonstrably robust enough to meet the new, higher bar of board-level attestation and personal liability.

 

1.4 Case Study in Practice: The Board’s Role at Severn Trent and Dr. Martens

 

Examining the governance reports of leading UK companies provides a practical view of these principles in action.

• Severn Trent plc, winner of the FTSE 100 Annual Report of the Year award, demonstrates a deep commitment to the UK Code, stating full compliance for the 2024 financial year.12 The board’s structure, with dedicated committees for Audit and Risk, Corporate Sustainability, and Nominations, is a direct application of the Code’s pillars.13 Crucially, the board takes direct responsibility for establishing the company’s purpose and values, viewing them as the guide for culture and strategy.6 The COO’s role in an organization like this is to be the primary provider of assurance from the ground up, delivering the data on employee engagement, site visit feedback, and whistleblowing reports that allow the board to effectively monitor the alignment of culture with stated values.6
• Dr. Martens plc, winner of the FTSE 250 Annual Report of the Year and Board Disclosure awards, frames its entire governance approach around the strategic narrative of “brand custodianship”.12 This powerfully links governance directly to the company’s most valuable asset. The board states its responsibility is to provide “entrepreneurial leadership” while ensuring the strategy aligns with a culture rooted in “doing the right thing”.14 The COO is then responsible for the tangible systems that bring this ethos to life and make it auditable, such as the global ‘DOCtrine’ code of conduct for all employees and the confidential ‘Speak Up’ policy for raising concerns.15

The following table translates the UK Corporate Governance Code into a direct action plan for the COO.

Table 1: UK Corporate Governance Code 2024: A COO’s Action Checklist

 

Code Pillar	Key Provision for the COO	Direct COO Responsibility	Key Actions for the COO	Relevant KPIs
Board Leadership & Company Purpose	The board should assess and monitor culture to ensure alignment with purpose, values, and strategy.5	Designing and operating systems that reflect and measure the desired culture.	– Implement and monitor employee engagement surveys and feedback channels (e.g., Employee Listening Groups).15	– Oversee the ‘Speak Up’/whistleblowing framework and report metrics to the board.6	– Ensure operational processes and training materials reinforce company values.	– Employee Engagement Score 6	– Number and nature of whistleblowing reports – Staff turnover rates
Division of Responsibilities	Clear division of responsibilities between Chair and CEO, and between the board and management.7	Ensuring operational clarity and accountability in line with delegated authorities.	– Maintain and review the Delegations of Authority framework for operational matters. – Design clear operational reporting lines to the CEO and Executive Committee. – Ensure management information systems provide data relevant to the CEO’s specific responsibilities.	– Time to decision on key operational issues – Clarity of roles in employee surveys
Composition, Succession & Evaluation	The board should have an effective succession plan for board and senior management, promoting diversity.5	Developing a diverse talent pipeline within senior management.	– Implement leadership development and mentoring programs for high-potential operational leaders. – Partner with HR to establish and track diversity metrics for senior operational roles. – Report to the Nomination Committee on the diversity of the senior management pipeline.	– Diversity metrics (gender, ethnicity) at senior management levels 5	– Internal promotion rate to executive roles
Audit, Risk & Internal Control	The board must declare the effectiveness of material internal controls (Provision 29).3	Overseeing the design, implementation, and effectiveness of the firm’s operational and technology control framework.	– Commission an independent verification of the internal control framework ahead of the board’s declaration. – Develop a sub-certification process where operational heads attest to the effectiveness of controls in their areas. – Design and implement a real-time control monitoring dashboard for the Audit & Risk Committee.	– Number of material control failures – Percentage of controls automated – Time to remediate identified control deficiencies
Remuneration	Executive remuneration should be aligned with company purpose and long-term strategy.4	Delivering the operational performance that underpins executive performance evaluation.	– Ensure robust systems are in place to measure and report on operational KPIs. – Link operational efficiency and risk management outcomes to the performance metrics of senior operational leaders. – Provide the Remuneration Committee with verified data on operational performance.	– Operational Efficiency Ratio – Project delivery (on time, on budget) – Customer satisfaction scores

 

Section 2: Architecting a Unified and Resilient Framework

 

This section provides the blueprint for building the necessary governance structures. It focuses on breaking down organizational silos to create a single, cohesive system for managing governance, risk, and compliance (GRC), anchored by international standards and codified in a clear corporate charter.

 

2.1 The Core Problem: Overcoming Siloed Functions

 

A fundamental weakness in many organizations is the separation of risk management, compliance, and governance functions into distinct silos. This fragmentation leads to significant operational inefficiencies, including redundant activities, inconsistent risk assessments, and poor resource allocation.16 More critically, it results in a fragmented and incomplete view of the organization’s total risk landscape, preventing leadership from making fully informed strategic decisions.18 The objective is to dismantle these silos and move towards an integrated model—often referred to as Integrated Risk Management (IRM) or integrated GRC—that provides a holistic, enterprise-wide view of risk and aligns risk management directly with strategic objectives.16

 

2.2 Integrating GRC and ERM: The Unified Model

 

Successfully integrating GRC and Enterprise Risk Management (ERM) is less about deploying a single piece of software and more about a fundamental rewiring of the organization’s structure and culture. It requires top-down leadership, a common vocabulary, and a shared understanding that risk management is a collective responsibility. The COO, as the owner of cross-functional processes, is the natural champion for this transformation. The process can be broken down into five key steps, drawing on established frameworks like the one offered by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).21

• Step 1: Establish a Common Language & Framework. The foundation of integration is a shared understanding. This requires developing a common risk taxonomy, consistent definitions, and standardized assessment methodologies that can be used by all teams, including compliance, risk, legal, and cybersecurity. This common language eliminates ambiguity and ensures that when different functions discuss risk, they are speaking about the same concepts in the same way.16
• Step 2: Align Objectives, Strategy, and Risk Appetite. The integrated framework must be explicitly linked to the organization’s strategic goals and the board-defined risk appetite.16 For every major strategic initiative, leadership should ask a standard set of questions: What is the business objective? What new risks (regulatory, reputational, operational) does this strategy introduce? What are our mitigation plans? This ensures that risk management is a core part of strategic planning, not an afterthought.22
• Step 3: Create an Integrated Governance Structure. Clear roles, responsibilities, and accountabilities are paramount. Best practice suggests that the enterprise risk function (e.g., an ERM Council) should have high visibility, reporting directly to the Board and CEO to prevent its voice from being diluted within another department like finance.22 The COO should also consider creating permanent or ad-hoc cross-functional teams comprising representatives from compliance, risk, and legal to analyze and respond to complex, multifaceted issues.17
• Step 4: Implement a Unified Risk Process. The practical core of integration is a unified process for identifying, assessing, and responding to risk. This involves consolidating disparate risk logs into a single, enterprise-wide “risk universe” or “risk register”.22 This register becomes the single source of truth for risk, managed through a centralized system that provides transparent monitoring and reporting across the entire organization.16
• Step 5: Foster a Risk-Aware Culture. Ultimately, integration is a cultural transformation. It requires sustained advocacy from the board and executive team.22 It must be supported by continuous, role-specific training for all employees and reinforced by embedding risk management duties directly into job descriptions and performance evaluations. This shifts the perception of risk management from a specialized function to a shared responsibility.16

 

2.3 Leveraging International Standards as a Backbone (ISO)

 

The International Organization for Standardization (ISO) provides a suite of globally recognized standards that serve as a robust backbone for an integrated GRC framework. Adhering to these standards is not merely a compliance exercise; it signals a commitment to best practice that enhances stakeholder trust, global competitiveness, and operational excellence.23

• ISO 37000: Governance of Organizations: This is the first overarching international standard for good governance. It provides a high-level, principles-based framework to guide ethical and responsible decision-making, build stakeholder trust, and promote long-term success. It serves as the philosophical anchor for the entire integrated GRC system.25
• ISO 31000: Risk Management: This standard provides the definitive guidelines for the ‘R’ in GRC. It outlines the principles and processes for identifying, assessing, evaluating, and treating risk, aligning perfectly with the ERM component of the integrated framework.24
• ISO 37301 (formerly ISO 19600): Compliance Management Systems: This standard provides the framework for the ‘C’ in GRC. Crucially, it promotes a risk-based approach to compliance, ensuring that compliance efforts are prioritized and aligned with the organization’s most significant risks as identified through the ISO 31000 framework.23

For the COO, several supporting ISO standards are essential for managing specific operational domains:

• ISO 9001 (Quality Management): Ensures that core operational processes are consistent, efficient, and focused on continuous improvement.24
• ISO/IEC 27001 (Information Security Management): Provides the framework for managing critical data privacy and cybersecurity risks, a core responsibility under the SMF24 mandate.24
• ISO 22301 (Business Continuity Management): Directly supports the COO’s mandate for building and maintaining operational resilience in the face of disruption.24

 

2.4 The Corporate Governance Charter: Codifying the Framework

 

The Corporate Governance Charter (or Board Charter) is the formal, high-level policy document that codifies the integrated framework. It translates the abstract principles of governance into a concrete, reviewable, and enforceable set of rules for the organization’s leadership. It is the constitution for the board and its committees.28

A best-practice charter includes several key components:

• Purpose and Roles: It clearly defines the board’s dual purpose of ensuring both compliance (conforming with legal and regulatory requirements) and driving performance (assisting the organization to achieve its strategic potential). It must also establish a strict separation of roles, with the Board focused on strategy, policy, and oversight, while the CEO is delegated authority for operations and administration.28
• Board and Committee Structure: The charter details the composition, independence requirements, and terms of reference for the board and its principal committees (e.g., Audit, Risk, Nomination, Remuneration).31 The charter for the Finance/Audit/Risk Management Committee is a particularly critical document for the COO to help shape, as it defines the oversight of the very systems the COO manages.31
• Matters Reserved for the Board: To ensure clarity and prevent overreach by management, the charter must include an explicit list of decisions that are reserved for the board alone. These typically include approval of group strategy, major mergers and acquisitions, changes to capital structure, and dividend policy.8
• Division of Responsibilities: Beyond the general separation of Board and CEO roles, a robust charter is supported by a detailed, written statement outlining the distinct duties of the Chair, CEO, Senior Independent Director, and Company Secretary. This document eliminates ambiguity and provides a clear framework for accountability.8
• Review and Assessment: Governance is not static. The charter must mandate that it be reviewed at least annually by the board to ensure it remains fit for purpose and adapts to legal, regulatory, and business developments.28

 

Section 3: Driving Operational Compliance Excellence

 

This section transitions from architectural design to practical execution. It provides the COO with a detailed guide to building and running a world-class compliance function, leveraging technology and data to move from a reactive, check-the-box mentality to a proactive, data-driven assurance model.

 

3.1 The Compliance Management Engine: A Step-by-Step Process

 

A robust compliance program is built on a repeatable and auditable operational workflow. This engine ensures that compliance is managed systematically, not anecdotally. The process can be visualized using flowcharts to ensure clarity, consistency, and standardization across the organization.36

• Step 1: Identify Regulatory Landscape & Conduct Risk Analysis. The process begins with a comprehensive mapping of all relevant laws, regulations, and industry standards (e.g., HIPAA for healthcare, GDPR for data protection).38 This is immediately followed by a thorough risk analysis to identify potential failures, assess their likelihood and impact, and prioritize resources on the most critical vulnerabilities.38
• Step 2: Develop & Document Policies. The insights from the risk analysis are used to translate abstract regulations into concrete, actionable internal policies and procedures. This must be a top-down initiative, with policies sculpted by the risk assessment and formally approved by senior management to ensure they have the necessary authority.38
• Step 3: Communicate, Train, and Build Culture. A policy is ineffective if it is not understood and embraced by employees. The COO must champion engaging, role-specific training programs that use real-world scenarios rather than dry lectures.38 The goal is to embed compliance as a shared value and an automatic component of everyday decision-making, not a separate task to be remembered.4
• Step 4: Monitor, Audit, and Remediate. Compliance requires continuous vigilance. This means moving beyond periodic checks to implement continuous monitoring of key controls.40 Regular internal audits are essential to identify and correct issues before they are discovered by external parties.39 A clear, documented process must be in place for recording, investigating, and remediating any violations that occur.39

 

3.2 The RegTech Revolution: Automating and Enhancing Compliance

 

Regulatory Technology (RegTech) is the application of emerging technologies to improve and automate the management of regulatory compliance.41 For the COO, RegTech is a critical toolkit for enhancing efficiency, improving accuracy, reducing operational costs, and mitigating risk.42 The investment case for these technologies is not merely about cost reduction but about building a more intelligent and resilient compliance function.

Key RegTech categories that directly address the COO’s operational challenges include:

• Regulatory Intelligence & Change Management: These are horizon-scanning tools that use AI to automatically monitor thousands of regulatory sources, identify changes relevant to the firm, and provide workflows to assess their impact. This automates a highly manual and error-prone process.41
• Risk Management & GRC Platforms: These are centralized software platforms that serve as the technological backbone for the integrated framework described in Section 2. They aggregate regulatory obligations, internal controls, policies, risk assessments, and audit findings into a single source of truth.17
• Identity Management & Control (KYC/CDD): These solutions automate the labor-intensive processes of Know-Your-Customer (KYC) and Customer Due Diligence (CDD) required for client onboarding, using APIs and data analytics to reduce manual effort and improve speed and accuracy.43
• Transaction Monitoring (AML/Fraud): Using advanced analytics and machine learning, these systems provide real-time monitoring of transactions to detect suspicious patterns related to Anti-Money Laundering (AML), terrorist financing, or internal fraud.41
• Automated Reporting: These tools streamline the entire regulatory reporting process, from data aggregation and quality checks to the final submission, reducing the risk of errors and missed deadlines.43

The following table maps common operational challenges faced by a COO to their corresponding RegTech solutions, providing a practical guide for technology strategy and procurement.

Table 2: RegTech Solutions Mapping: From Operational Pain Point to Technology Solution

 

COO’s Operational Challenge	Strategic Objective	Relevant RegTech Category	Key Functionality to Seek
“Keeping pace with the constant flood of regulatory updates and changes.”	Automate regulatory intelligence to reduce manual effort and the risk of missed updates.	Regulatory Monitoring / Horizon Scanning 41	– AI-powered consolidation of global regulatory documents. – Real-time alerts on relevant rule changes. – Workflow tools for impact assessment and task assignment.
“Our risk, compliance, and audit data is spread across multiple spreadsheets and systems.”	Create a single source of truth for all GRC activities to enable a holistic view of risk.	GRC Platforms / Compliance Management 41	– Centralized repository for risks, controls, policies, and obligations. – Automated mapping of controls to multiple regulations (“test once, comply many”).19	– Integrated dashboards for board-level reporting.
“Client onboarding is too slow and manual, creating a poor customer experience and high costs.”	Improve efficiency and accuracy of client due diligence while reducing operational friction.	KYC/CDD Automation 43	– API-first architecture for seamless integration. – Automated data collection and verification against global watchlists. – Risk-scoring engines to triage cases for manual review.
“Detecting financial crime and internal fraud feels like searching for a needle in a haystack.”	Move from reactive investigation to proactive, real-time detection of suspicious activity.	Transaction Monitoring (AML/Fraud) 41	– Real-time analysis of transaction data using machine learning. – Advanced pattern recognition to detect anomalies. – Automated alert generation and case management workflows.
“Regulatory reporting is a massive, time-consuming effort every quarter, prone to manual error.”	Streamline the reporting lifecycle from data collection to submission, improving speed and accuracy.	Regulatory Reporting Automation 43	– Automated data aggregation from source systems. – Data quality and lineage frameworks to ensure accuracy. – Pre-built templates for major regulatory reports.

 

3.3 Harnessing AI and Data Analytics for Intelligent Compliance

 

Technology is fundamentally transforming compliance from a backward-looking, descriptive function (“what happened?”) into a forward-looking, predictive one (“what might happen?”). Artificial intelligence, particularly generative AI and machine learning, is at the heart of this shift.41

• Predictive Risk Assessment: AI algorithms can analyze vast internal and external datasets to identify subtle patterns and emerging risks, allowing organizations to anticipate and prevent compliance breaches before they occur.40
• Intelligent Automation: The impact of Generative AI is profound. It can be used to scan thousands of procurement contracts to check for compliance with payment terms, revealing millions in savings.46 It can automate the generation of new software code and the associated quality assurance documentation, saving time and improving quality.46 It can also be used to create first drafts of complex regulatory reports or policy documents, which can then be refined by human experts.41
• Human-in-the-Loop Governance: The power of AI also introduces new risks, such as algorithmic bias, data privacy violations, and “black box” decision-making.45 The forthcoming EU AI Act, expected to be enforced by 2026, will be the first large-scale governance framework for AI, imposing strict standards and heavy fines for non-compliance (up to €35 million or 7% of global revenue).45 Therefore, a critical role for the COO is to establish a robust AI governance structure that emphasizes human oversight, ensures high-quality and unbiased training data, and validates AI-generated outputs to maintain accuracy and ethical standards.46

 

3.4 A Dashboard of Essential KPIs for the COO

 

To manage the compliance engine effectively, the COO needs a dashboard of Key Performance Indicators (KPIs). Compliance KPIs are quantifiable metrics that measure the effectiveness of the compliance program against strategic goals.47 They are essential for demonstrating progress to the board and providing tangible evidence of compliance efforts to regulators.47

Key KPIs for the COO’s dashboard should cover effectiveness, cost, risk, and culture:

• Effectiveness KPIs:

• Mean Time to Issue Discovery: How quickly are compliance issues being found?
• Mean Time to Issue Resolution: How quickly are they being fixed? 47

• Cost & Impact KPIs:

• Total Regulatory Compliance Expense: What is the total cost of fines and penalties?
• Compliance Expense per Issue: What is the average cost of a single failure? 47

• Risk Management KPIs:

• Composite Risk Index: Are we focusing our resources on the highest-priority risks (based on likelihood and impact)?
• Risk Severity Gap: How accurate are our risk predictions compared to actual events? 47

• Culture & Training KPIs:

• Compliance Training Headcount & Expense: Are we investing adequately in educating our people?
• Number of Misconduct/Whistleblower Reports: An increasing number can be a positive indicator of a healthy reporting culture where employees feel safe to speak up.47

 

Section 4: Mastering Regulatory Foresight and Strategic Engagement

 

This section elevates the playbook from managing present compliance obligations to actively shaping the future operating environment. It equips the COO with the methodologies and mindset to anticipate regulatory change, navigate uncertainty, and proactively engage with rule-makers to influence outcomes and secure a competitive advantage.

 

4.1 The Foresight Toolkit: Building Anticipatory Capacity

 

In a world marked by poly-crisis and rapid transformation, waiting for new regulations to be finalized is a recipe for failure. Leading organizations build strategic foresight, a discipline focused on understanding, anticipating, and addressing emerging challenges and opportunities by systematically analyzing long-term trends and potential disruptions.49 The goal is not to predict a single future, but to challenge conventional thinking and build resilience by preparing for multiple possible futures.49 European and UK government bodies are actively using these tools to inform policymaking, and it is imperative for businesses to adopt the same methodologies to anticipate and influence these developments.49

Key foresight methodologies for the COO’s toolkit include:

• Horizon Scanning: This is the systematic, proactive monitoring of the external environment—including legislative proposals, academic research, technological breakthroughs, and social shifts—to detect early signals of change.50 It is a foundational process for spotting potential regulatory risks and uncovering opportunities for early adoption of new standards.53
• Scenario Planning: This involves developing several plausible, alternative future scenarios (e.g., a high-regulation future, a rapid-decarbonization future) and stress-testing the company’s strategy against each one. This builds adaptability and helps identify robust strategies that are effective across a range of potential outcomes.49
• Megatrends Analysis: This method identifies large-scale, transformative forces (e.g., the proliferation of AI, demographic shifts, climate change) and investigates their deep-seated impact on specific policy domains and business models.50

 

4.2 Navigating the 2025+ Regulatory Horizon: Key Battlegrounds

 

Applying the foresight toolkit to the known regulatory pipeline reveals several critical areas where the COO must take a leading role.

• Operational Resilience (DORA): The EU’s Digital Operational Resilience Act (DORA), which came into force in January 2025, alongside the UK’s own stringent operational resilience rules, creates a new paradigm for managing technology and third-party risk in the financial sector.54 The COO is at the epicenter of this regime, directly responsible for ICT risk management frameworks, the resilience of critical third-party providers, and new standardized operational incident reporting.54
• Sustainability & ESG (CSRD/CSDDD): The EU’s Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD) are dramatically expanding the scope and depth of mandatory ESG disclosure and supply chain accountability.53 This is no longer a communications exercise but a core operational challenge. COOs must implement robust data collection, verification, and reporting processes that extend deep into the supply chain to meet these new due diligence requirements.53
• Artificial Intelligence: The EU AI Act represents the world’s first comprehensive AI governance framework and will create significant new compliance obligations, particularly for systems deemed “high-risk”.45 With enforcement expected by 2026, COOs must urgently develop proactive AI governance frameworks to manage risks of bias, ensure data privacy, and conduct thorough due diligence on third-party AI vendors.45
• Crypto-Assets: The UK is actively constructing its regulatory framework for crypto-assets, with draft legislation and consultations on stablecoins, custody, and market abuse rules expected throughout 2025.54 For COOs in firms operating in or adjacent to this space, this is a critical period for engagement to help shape workable rules and prepare the operational infrastructure for a future authorization regime.54

 

4.3 The Art of Proactive Engagement: Shaping the Rules of the Game

 

The relationship between firms and their regulators is undergoing a fundamental transformation. The traditional model—a reactive, often adversarial interaction managed primarily by legal and compliance teams—is being replaced by a more collaborative and strategic dialogue. Well-prepared firms can now actively shape their future operating environment.

This shift is driven by a new regulatory posture, particularly in the UK, where the government is championing a pro-growth, pro-innovation agenda. Regulators like the PRA and FCA are being explicitly encouraged to support competitiveness and challenge their own risk aversion.55 This creates an unprecedented opening for firms to move beyond simply responding to consultations and instead engage in a co-creation process for new regulatory frameworks. A former senior regulator notes that firms should not treat regulators as a final checkpoint but should engage early and transparently to build trust and integrate regulatory thinking into the innovation process from day one.55

A key enabler of this new relationship is the UK’s Regulatory Innovation Office (RIO), established to identify barriers to innovation and help regulators adapt to new technologies like AI, drones, and engineering biology.56 The COO, as the owner of operational innovation, should view the RIO as a strategic partner—a channel through which to address regulatory hurdles and collaboratively develop enabling frameworks for new business models and technologies.56

To structure this engagement, leading firms develop a formal Regulatory Engagement Plan (REP). While originating in highly regulated sectors like nuclear energy, the principle is universally applicable.57 An REP is a strategic document that specifies desired meetings, topics for discussion, pre-application data submittals, and proposed timelines for engagement with regulatory bodies.57 Drawing on templates used for stakeholder engagement, a robust REP should identify key regulatory stakeholders, define what the firm wants from them (e.g., clarity, guidance) and what they want from the firm (e.g., data, transparency), and outline a schedule of activities.58 A well-executed REP allows the firm to manage the regulatory relationship strategically, build consensus on key issues, and achieve greater certainty, turning what was once a source of risk into a source of competitive advantage.

 

Section 5: Benchmarking Excellence: Case Studies in European Governance

 

This section provides tangible, real-world examples of the principles in this playbook in action. By deconstructing the practices of award-winning and leading UK and European companies, COOs can benchmark their own operations against a clear standard of “what good looks like.”

 

5.1 Deconstructing Award-Winning Governance Reports

 

An analysis of companies recognized for their governance disclosures reveals a common thread: they do not simply report on structures and processes; they frame them within a compelling strategic narrative. This transforms governance from a dry, technical disclosure into a powerful story about how the company protects and creates long-term value.

• Severn Trent plc (Winner, FTSE 100 Annual Report of the Year): Severn Trent’s reporting exemplifies the integration of governance with purpose and strategy.12 The company consistently links its governance practices to its overarching strategy of being “performance driven, sustainability led” and its core purpose of “taking care of one of life’s essentials”.60 Their strategic planning process, which explicitly models alternative futures and considers megatrends like climate change, is a textbook example of foresight in action, demonstrating to stakeholders that their governance is forward-looking and resilient.13
• Dr. Martens plc (Winner, FTSE 250 Annual Report of the Year & Board Disclosure): Dr. Martens frames its governance around the concept of “brand custodianship”.12 This narrative provides a clear “why” for their governance choices, connecting them directly to the protection of the company’s core asset. Their disclosures are exceptionally clear on the division of roles between the Chair and CEO and detail the specific ways the board engages with stakeholders and monitors the company’s unique culture.15
• London Stock Exchange Group (Winner, Governance Project of the Year): As a critical market infrastructure provider, LSEG’s own governance is a benchmark for excellence.12 Their board structure reflects the complexity of their risk environment, featuring a dedicated Risk Committee that operates alongside the Audit Committee.34 The public availability of their detailed committee terms of reference and a clear statement on the division of responsibilities provides an outstanding template for other organizations to follow.34

 

5.2 ESG as a Core Governance Metric: The SSE plc Case Study

 

SSE plc (Winner, Sustainability Disclosure of the Year) demonstrates how to embed sustainability at the very core of business strategy and governance, rather than treating it as an ancillary function.12

Their approach is characterized by strategic integration and detailed transparency. The company publishes a comprehensive, standalone Sustainability Report alongside its main Annual Report, providing deep insights into its ESG performance.61 The sustainability strategy is not a separate initiative but is fully integrated with the company’s massive £17.5bn “Net Zero Acceleration Programme Plus,” which is positioned as the engine of the company’s growth.62 The strategy is built on clear, actionable pillars—Just Transition, Nature Positive, Net Zero, and Circularity—and is supported by a detailed Net Zero Transition Plan that includes science-based targets and specific actions to address Scope 3 emissions within the supply chain.61 This level of strategic alignment, investment commitment, and granular disclosure is what defines leadership in modern ESG governance.

 

5.3 Learning from High-Performing Teams and Individuals

 

Effective governance is ultimately delivered by capable people and well-structured teams.

• Kier Group plc (Winner, Team of the Year): Kier’s governance framework showcases a clear cascade of responsibility from the Board to the Executive Committee and down to the Group Managing Directors of its business divisions.8 This structure ensures that board-level strategy is effectively implemented and monitored through a clear chain of command and accountability. The team’s proactive focus on preparing for the 2024 Code changes and managing board succession planning demonstrates a forward-looking, resilient approach to governance.64
• The Governance Professional as a Strategic Partner: The careers of award-winning governance professionals like Alia Fazal (Head of Corporate Governance, bp), Nicola Carroll (Corporate Governance Director, Rolls-Royce), and Robert Lyons (Deputy Company Secretary, M&S) illustrate the evolution of the modern governance role.12 They are not passive administrators but are recognized for being innovative, challenging the norm, and acting as trusted strategic advisors to the board. They translate complex regulatory requirements into workable business solutions and are instrumental in enabling the board to navigate crises and complex corporate transactions.67

 

5.4 What “Sustainability Integrators” Do Differently

 

The 2025 EY survey of senior European business leaders provides quantitative data on what separates the best from the rest. The report identifies a group of “Sustainability Integrators” who successfully embed sustainability into their core business strategy.69 The COO can use these metrics as a benchmark for their own organization’s maturity. Key differentiators include:

• Shared Board Responsibility: 50% of Integrators ensure all board members take responsibility for sustainability, compared to just 8% of other companies.69
• Widespread Skills: 83% of Integrators report having adequate sustainability skills throughout their business, not just in a specialized team, versus only 26% of others.69
• Dedicated Funding: 90% of Integrators state they are well-supported with adequate financing for sustainability initiatives, compared to a mere 26% of their peers.69
• Enabling Technology: 90% of Integrators believe they have the right technology programs in place to support delivery of their integrated strategy, versus 68% of others.69

The example of BAE Systems, which actively integrates ESG considerations into functions like engineering, design, manufacturing, and procurement, exemplifies this deeply embedded approach.69

 

Conclusion and Strategic Roadmap for the COO

 

The role of the Chief Operating Officer has fundamentally evolved. No longer confined to the management of internal processes, the COO is now the central architect of the firm’s governance, resilience, and foresight capabilities. This playbook has demonstrated that in the modern European and UK context, governance is not a constraint but a source of competitive advantage. It is a system built on a deliberate regulatory bargain: principles-based flexibility in exchange for stringent personal accountability.

The successful COO will master this new mandate by architecting a unified GRC and ERM framework, moving beyond silos to create a holistic, enterprise-wide view of risk. They will harness the power of RegTech and AI to transform compliance from a reactive cost center into a proactive, predictive source of strategic intelligence. And they will master the art of regulatory foresight and strategic engagement, anticipating change and actively shaping the rules of the game.

The journey to excellence is a strategic transformation that requires a prioritized, phased approach.

A Prioritized, Phased Roadmap for Implementation:

• Phase 1 (0-6 Months): Assess and Architect

• Conduct a Gap Analysis: Immediately benchmark current governance practices against the requirements of the 2024 UK Corporate Governance Code, with a specific focus on readiness for the new internal control declaration (Provision 29).
• Initiate GRC/ERM Integration: Secure formal board buy-in for an integrated GRC and ERM framework. Establish a cross-functional steering committee led by the COO, and begin the work of creating a common risk language and taxonomy.
• Commission an Independent Review: Engage an external expert to conduct a thorough review of the material internal control framework to identify weaknesses and prepare for the board’s first attestation.

• Phase 2 (6-18 Months): Build and Embed

• Deploy Technology: Select and roll out the integrated GRC/ERM technology platform that will serve as the single source of truth for risk and compliance data.
• Develop Engagement Plan: Create and implement a formal Regulatory Engagement Plan, identifying key regulators and scheduling a cadence of proactive dialogue, particularly around innovation and emerging technologies.
• Launch Culture Program: Roll out a comprehensive, role-based training program designed to embed a risk-aware culture throughout the organization. Reinforce this by integrating risk management responsibilities into job descriptions and performance metrics.
• Implement Horizon Scanning: Deploy a RegTech solution for automated regulatory intelligence and horizon scanning to ensure the firm is systematically monitoring for emerging threats and opportunities.

• Phase 3 (18-24+ Months): Optimize and Lead

• Leverage Advanced Analytics: Integrate AI and machine learning tools into the GRC platform to enable predictive risk management and intelligent automation of compliance tasks.
• Drive Policy Influence: Use the insights gained from foresight activities and strategic regulatory engagement to actively influence policy and help shape the market for the company’s new products and services.
• Report on Advantage: Continuously refine the governance framework and begin reporting on its effectiveness not just as a compliance function, but as a source of operational resilience, strategic insight, and tangible competitive advantage.