The OCC said that it has directed its examiners and staff to cease screening banks for reputation risk which refers to the risk of potential scandals or any other type of negative publicity that can possibly emerge and negatively impact a bank’s business. The OCC expressed its disagreement with the examination as it placed too much judgmental and discretionary power in the hands of the examiners. Rather, it believes that more focus should be placed on more “transparent risk areas.”

“The OCC’s examination process has always been rooted in ensuring appropriate risk management processes for bank activities, not casting judgment on how a particular activity may fare with public opinion,” said Acting Comptroller of the Currency Rodney Hood. “The OCC has never used reputation risk as a catch-all justification for supervisory action. Focusing future examination activities on more transparent risk areas improves public confidence in the OCC’s supervisory process and makes clear that the OCC has not and does not make business decisions for banks.”

The OCC believes that by getting rid of reputation risk it will maintain strong risk management as well as fair customer treatment. The agency perceives the removal of such an risk assessment will ensure transparency and accountability within the OCC’s operations. According to the agency, the limitation of subjectiveness within the examination will enable the OCC to create a more effective regulatory environment.

OCC’s Move Receives Support From Banking Industry

This move has received much support from the banking industry. Financial Services Forum President and CEO Kevin Fromer called the OCC’s actions an “important step to create a more transparent and effective regulatory environment.” Greg Baer, president and CEO of the Bank Policy Institute added support to the agency’s actions in stating “Bank exams should be transparent and grounded in objective legal standards. This marks meaningful progress in refocusing oversight on material financial risk, rather than reputational risk, operational risk, corporate governance, vendor management and other matters that do not pose a material threat to safety and soundness.”

The OCC emphasized that while it is removing an aspect of the examination it will continue to regulate in a strict and efficient manner. “The removal of references to reputation risk from OCC handbooks and guidance issuances does not alter the OCC’s expectation that banks remain diligent and adhere to prudent risk management practices across all other risk areas,” according to its press release. “The OCC expects to complete its efforts to update its public documents in the coming weeks.”  

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The memo states that its purpose is to encompass programs, initiatives, or policies that discriminate, exclude, or divide individuals based on race or sex. It does not prohibit educational, cultural, or historical observances or similar events that celebrate diversity, recognize historical contributions, and promote awareness without engaging in exclusion or discrimination

According to the memo, the “DoJ’s Civil Rights Division will investigate, eliminate and penalize illegal [DEI] and DEIA preferences, mandates, policies, programs and activities in the private sector and in educational institutions that receive federal funds.”

The memo additionally instructs the Civil Rights Division and Office of Legal Policy to jointly submit a report containing recommendations or enforcing federal civil-rights laws and taking other appropriate measures to encourage the private sector to end illegal discrimination and preferences, including policies relating to DEI.

Specifically, the report should address the following:

• Key sectors of concern within the Department’s jurisdiction;
• The most egregious and discriminatory DEI and DEIA (“A” stands for accessibility) practitioners in each sector of concern
• A plan including specific steps or measures to deter the use of DEI and DEIA programs or principles that constitute illegal discrimination or preferences, including proposals for criminal investigations and for up to nine potential civil compliance investigations of publicly traded corporations, large non-profit corporations or associations, foundations with assets of 500 million dollars or more, State and local bar and medical associations, and institutions of higher education with endowments over 1 billion dollars; and
• Additional potential litigation activities, regulatory actions, and sub-regulatory guidance; and
• Other strategies to end illegal DEI and DEIA discrimination and preferences and to comply with all federal civil-rights laws.

AG Bondi’s memo follows President Trump’s executive order, titled “Ending Illegal Discrimination and Restoring Merit-Based Opportunity,” that is purposed to eliminate any DEI policies within the federal government that violate anti-discrimination law as well as encourage those in the private sector to end illegal DEI discrimination and preferences.

Companies must Reexamine Their DEI Policies 

Due to the expected prioritization of anti-DEI enforcement, many companies are now reassessing their DEI programs to analyze whether its program is compliant while others continue to stand by their DEI policies.

Given the expected civil and criminal investigations, many companies such as Amtrack, Lowe’s, and Harley-Davidson announced that it would no longer allocate money and other resources to its DEI program. These companies are now examining their policies to determine whether they are legally compliant.

Although DoJ anti-DEI enforcement is  expected to increase, the DoJ’s actions pertaining to the memo will likely face legal analysis as courts have typically upheld employers’ rights to promote DEI. While the DOJ is optimistic that the Supreme Court’s decision in Students for Fair Admissions v. Harvard, which struck down affirmative action, provides a sufficient basis for issuing this memo, its validity remains to be seen.  

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igital disruption and climate change have emerged as the two fasting-growing risk areas for organizations across industries, according to a new report.

Based on feedback from more than 3,500 internal audit leaders around the world, global risk levels for digital disruption and climate change are projected to increase 20 percent and 16 percent, respectively, over the next three years, outpacing other risk areas. The research was conducted by the Institute of Internal Auditor’s Internal Audit Foundation for its latest Risk in Focus report.

Despite the growing intensity of these risks, most audit plans do not currently prioritize them, the study found. In fact, neither digital disruption nor climate change were named among the top five areas where internal audit functions allocate the most time and effort, with both ranked in the lower half of audit priorities. Globally, internal audit functions focus predominantly on cybersecurity, governance and corporate reporting, and business continuity, indicating a gap between evolving threats and current areas of attention.

“Our latest research tells us cybersecurity, business continuity, and human capital continue to hold the top three spots in risk ratings. However, respondents anticipate significant changes as risks related to climate change and digital disruption accelerate in the coming years,” said Anthony Pugliese, president and CEO of the IIA. “To ensure both short-term success and long-term sustainability, organizations and their internal audit functions must adapt risk management practices to keep pace with the changing risk landscape.”

Risk in Focus offers a comprehensive view of the current global risk landscape and how it is expected to evolve in the coming years. Because threats are expected to rise steeply for technological advancements and climate change, the 2025 reports focus on leading practices for mitigation of these risks.

Keeping Pace with Digital Disruption

Approximately 39 percent of survey respondents worldwide ranked digital disruption as a top five risk, with that number expected to jump to 59 percent in three years. For North America, these figures are even higher at 48 percent and 70 percent, respectively. Furthermore, respondents worldwide expect digital disruption to rise from the fourth to the second highest ranked risk area in three years.

Artificial intelligence (AI) has introduced new risks to track, especially related to cybersecurity, according to 75 percent of respondents. AI has also impacted many other risk areas, including human capital, fraud, communications, reputation, and more.

AI is a particular focus for internal audit leaders concerning technology-related risks. Specifically, challenges include upskilling and adopting new tools, as well as global disparities in access to and knowledge of emerging technology.

Climate Regulations Driving New Risks

Climate-related risks are currently ranked relatively low, but they are expected to rise substantially soon. About one in four (23 percent) of global respondents view climate change as a top five risk today. However, nearly 40 percent of respondents anticipate it will reach the top five in the next three years, climbing from 13^th place to 5^th.

Globally, roundtable participants agree that sustainability reporting and compliance requirements are the primary drivers for boards, management, and internal audit functions to allocate resources to climate change. The report revealed significant regional differences in climate-related risk perceptions. For instance, 33 percent of European audit leaders and 30 percent of Canadian audit leaders rate climate change as a top five risk, compared to 9 percent for U.S. audit leaders. Despite the U.S. position, North American respondents expect ratings for climate change as a top 5 risk will double from 13 percent to 27 percent in three years.

“While climate change has long been recognized as a growing risk for organizations, these findings reveal the extent to which climate-related risks are expected to surge in the near term,” said Pugliese. “It is imperative for organizations, stakeholders, and internal audit leaders to objectively assess the short-term and longer-term risks to their organizations beyond basic compliance with regulations.”

Extreme weather can cause supply chain disruptions, higher operational costs, flooding, famine, and more. Some consumers and investors are calling on organizations to implement more sustainability initiatives. These sustainability initiatives, however, must be reported accurately to avoid greenwashing and reputational damage.

Regional Risk Differences

The study also explored regional differences in the risk landscape through roundtables and separate Risk in Focus reports for Africa, Asia Pacific, Europe, Latin America, the Middle East, and North America. These regional reports outline proactive steps that organizations and audit leaders across industries can take today to mitigate threats and embrace opportunities.

Embracing artificial intelligence and emerging technologies will be critical, as well as prioritizing upskilling, technology-oriented training, and recruitment to manage these risks effectively.

“The IIA has strongly advocated for internal audit functions to take a more strategic advisory role to better serve organizations and stakeholders,” said Pugliese. “The Risk in Focus findings underscore the importance of agile collaboration and partnership among internal audit functions, boards, and management to stay ahead of emerging threats and improve understanding of potential risk exposures.”  

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