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NAVEX's Recent Report on Risk and Compliance in Japan

Recently, NAVEX, a global leader in Governance, Risk, and Compliance (GRC) software based in Lake Oswego, Oregon, unveiled an extensive report titled "The State of Risk & Compliance in Japan 2026." This report provides insights from approximately 1,200 executives worldwide, with a special focus on Japan's compliance landscape.

Key Insights of the Report

Achieving Global Compliance Standards

The report indicates that while Japanese companies have developed compliance programs that meet global standards, specific challenges remain. These challenges include the effective management of third-party risks, board involvement in practical matters, and adjustments to the upcoming amended Whistleblower Protection Act set to take effect in December. The report highlights strong motivations for firms to enhance their governance frameworks, mentioning an increasing willingness to utilize AI for operational efficiency.

Pre-Compliance Experience Shows a Distinct Divide

One striking finding is that only 3% of companies with compliance issues reported pre-compliance readiness. In contrast, about 68% of firms that experienced no compliance problems claimed to be compliant already. This stark contrast underscores a concerning gap in preparation, especially as the amended Whistleblower Protection Act demands more stringent compliance measures from all companies. Interestingly, the data revealed that the main driver for Japanese companies to invest in compliance is not external regulatory changes, as seen in regions like Europe, but rather the outcome of internal audits and risk assessments at 56%.

Third-Party Risks Outpacing Global Averages

The findings also revealed that 26% of Japanese respondents experienced ethical or compliance issues related to third-party suppliers, which surpasses the global average of 18%. However, only 36% of these companies encouraged whistleblowing regarding third-party misconduct actively. Currently, the rate of AI adoption for third-party risk management stands at 13%, indicating a slow uptake. Despite these challenges, firms with mature compliance systems tend to operate proactive structures encouraging reporting from suppliers.

Gaps in Board Involvement and Oversight

When it comes to boardroom involvement, responses indicate Japanese companies lag behind global averages. About 40% reported receiving regular dashboards for compliance program operations (compared to a global average of 54%), and only 33% conducted reviews of key risks and emerging trends (global average: 42%). This lack of involvement could stem from Japan’s business culture, which values long-term relationships over frequent audits, but increasing board engagement can enhance overall compliance effectiveness.

Stagnant Compliance Budgets with Promising AI Adoption

As for budgets, an alarming 80% of Japanese respondents indicated they are maintaining or only slightly varying their compliance budgets. Nonetheless, 42% identified the need for advanced technologies and analysis as critical to improving their compliance programs. Positively, there seems to be a proactive trend regarding AI deployment: plans for monitoring fraud have nearly doubled from 28% to 50%, while support for investigations is expected to increase from 27% to 46% in the coming year.

Executive Insights from NAVEX Japan

Naoki Mitsutani, the Country Manager of NAVEX Japan, commented that the survey results highlight Japan's global compliance program maturity while acknowledging areas for improvement. He emphasized the importance for executives to provide stronger leadership in risk management and to strategically integrate advanced technologies like AI into their compliance priorities.

This extensive report provides a nuanced view of the Japanese risk and compliance environment, revealing both strengths and areas for growth. To access the full report, visit NAVEX Risk & Compliance Report.