Since the recent US presidential elections, there has been a lot of speculation about what the future will look like under a second Trump presidency. Following the 2016 elections, I shared some insights on what I thought the upcoming Trump era would mean for internal auditors. A lot has happened in the ensuing eight years, including many things we could never have imagined. The fact that we now sit on the cusp of a second Trump era is just the latest in a series of implausible events including pandemics, geopolitical conflicts, macroeconomic turbulence, and more.

Reactions to the outcome of elections are often motivated by the impact we expect on our personal lives and the lives of those we love or care about. Such motivation is understandable, but there are also other considerations, including how the outcome of the election will affect us professionally and the work we undertake.

As a follow up to my blog following the first Trump election, I thought it might be useful to contemplate how a second Trump era could affect our roles as internal auditors, risk managers and compliance professionals in American companies and organizations. During the coming four years, we are likely to experience continued risk-induced-disruption in the era of what I call permacrisis. Some of it will have nothing to do with who sits in the White House, while other events might well be connected. We are likely to see continued geopolitical and macroeconomic turmoil, and our audit, risk and compliance priorities should always account for these risks.

Key factors

The priorities of the second Trump administration are most likely to influence our focus when it comes to compliance risks in several key areas:

Deregulation and reduction of federal oversight

Trump is almost certain to continue his previous efforts to reduce federal regulations, aiming to foster a more “business-friendly” environment in the US. This includes easing restrictions across various sectors, notably in financial services and energy. For instance, proposed policies have signaled an intent to lower capital requirements for banks and reduce fees restrictions, which could enhance profitability in the financial sector. Obviously, audit, risk and compliance professionals in the financial services industry will need to remain particularly attuned to shifts in these risks.

Trade and tariff policies

A significant focus will be on implementing protectionist trade measures. Trump has proposed a universal baseline tariff of 10% on all imports, with higher tariffs on specific countries, particularly China. This approach aims to encourage domestic manufacturing and reduce reliance on foreign goods.

Increased tariffs and retaliation by international trading partners could affect supply chains, the cost of raw materials and imported goods, as well as the overall rate of inflation. Those preparing corporate risk assessments and related internal audit plans should already have these potential developments on their radars as new and emerging risks for 2025 and beyond.

Energy and environmental policies

The next Trump administration is expected to roll back environmental regulations to boost fossil fuel production. Plans include increasing oil and gas drilling and withdrawing from international climate agreements, such as the Paris Agreement, to prioritize energy independence over environmental concerns.

While the short-term effect of these policies might be good news for the price of energy, audit, risk and compliance teams should keep an eye out for long-term risks such as the potential inflationary effects of lower energy prices and potential environmental risks that could result from less emphasis on carbon emissions.

Immigration enforcement

Trump intends to implement stringent immigration policies, including mass deportations and the reinstatement of travel bans on certain countries. These measures aim to enhance national security and reduce illegal immigration.

Few issues in the election stirred more passion than immigration. Audit, risk and compliance teams will need to anticipate the potential macroeconomic impacts of these policies – particularly if mass deportations reduce the unskilled labor pool in certain industries.

Restructuring federal agencies

There are plans to overhaul key federal agencies by appointing leaders aligned with Trump’s agenda. For example, he has expressed intentions to replace the heads of the SEC and the Federal Trade Commission (FTC) to shift regulatory priorities. These agencies and others are the sources of many of the regulations that create compliance risks in our companies and organizations across the country.

Audit, risk and compliance teams should monitor developments as potential risks are rolled back in the face of a de-regulatory environment – never losing sight of the fact that while compliance risks may abate in the short term, they could well be reinstated by administrations that follow.

Lessons from first Trump era

Based on reactions in the equity markets, there is widespread sentiment that a second Trump presidency will be good for business. But I would urge all of us not to get caught up in the euphoria – particularly when it comes to the potential rollback of regulatory requirements. As I said in my blog following the first Trump victory:

“If existing regulatory requirements ultimately are reduced or eliminated, it will be tempting for internal audit’s stakeholders to consider scaling back some of the resources dedicated to the third line of defense. However, it will be important to remind stakeholders that the risks any rescinded regulations were designed to mitigate still remain. Now is the time to promote internal auditing as being both necessary to assessing risk mitigation where regulations once did, and to making sure resources are allocated based solely on risk.

Secondly, we should offer our stakeholders an accurate picture of just how much – or how little – compliance risks make up in the average audit plan. Across all sectors, the typical US internal audit plan for 2017 allots a relatively small percentage of resources for coverage of compliance risks. Indeed, internal audit’s scope of work beyond compliance is expanding like never before, driven by a comprehensive portfolio of noncompliance risks, including operational and cybersecurity risks, as well as overall assessments of strategic risk management.”

Those words are as true today as they were eight years ago. We should all heed them and help our stakeholders to maintain a strategic view of the risk landscape that lies ahead.