As the U.S. moves forward to slash agency resources amid a broader deregulatory push, Canadian businesses face an escalating threat landscape.
While the full scope and impact of these changes are still taking shape, the elevated threat of unchecked fraud and systemic operational vulnerabilities should prompt a rethinking of resilience and risk tolerance.
The double-edged sword of deregulation
In January 2025, the U.S. administration signed an executive order requiring federal agencies to repeal “at least 10 existing rules, regulations, or guidance documents” for every new rule or regulation created.
At its core, deregulation can have many direct benefits for businesses, from enabling a faster speed to market to improved operational efficiency.
“With less bureaucratic red tape, new products can be introduced to the market faster and government funds can be issued to intended purposes quicker, helping to drive the economy. Ultimately, the goal is to empower businesses, giving them more control rather than imposing government constraints.”
While the benefits are appealing, it’s important to recognize why many regulations exist in the first place: to prevent financial misconduct, protect consumers, and ensure a stable economic environment. History has shown that with gaps in oversight, the risks of fraud increase.
Recall the Enron scandal, for example. The U.S. energy giant collapsed in 2001 after engaging in widespread accounting fraud. Enron exploited weak regulatory oversight and deregulated markets to manipulate financial statements, misleading investors and partners while hiding billions in debt. The fallout led to new financial regulations like the Sarbanes–Oxley Act of 2002 to prevent similar corporate fraud.
With deregulation, the critical question becomes whether the risks that originally necessitated these safeguards have genuinely faded, or if stripping them away might invite a return to the very problems they were designed to solve.
The impact on Canadian businesses
While the full details and effects of deregulation in the U.S. are still unfolding, one thing is clear: deregulation will have both direct and indirect implications for Canadian businesses and consumers.
These four risks should be top of mind:
The loss of transparency could translate into misjudged risks, unexpected losses, or entanglement in scandals sparked by fraudulent accounting practices once held in check by robust regulation.
Emerging technologies like artificial intelligence (AI) could exacerbate these threats. In a deregulated environment, where oversight of technology deployment thins, the barriers to misuse are significantly lowered, enabling fraudsters to exploit lax rules at scale.
"With the help of AI and machine learning, cyber criminals can now perpetrate fraud more easily and effectively. They can use tools like generative AI to write code and automate scripts, creating attacks that are far more sophisticated than anything we've seen before," says Sehgal.
Data privacy regulations exist to protect individuals against fraud. Reduced regulatory standards for data protection could fuel a rise in data breaches or corner-cutting that ripple northward. Canadian companies could become collateral damage or implicated by association if a breach in a U.S. partner’s system compromises shared customer databases, triggers cross-border legal liabilities, or erodes consumer trust.
Weaker oversight could also greenlight unethical sourcing—like labour exploitation or environmental shortcuts—leaving Canadian businesses unwittingly tied to suppliers hiding illicit practices behind falsified certifications.
Beyond fraud and financial threats, deregulation could tilt the competitive landscape.
If U.S. firms face fewer restrictions—say, in financial reporting or environmental compliance—they can operate faster, cheaper, and with fewer guard rails. Canadian businesses, still bound by more robust domestic and international regulations could struggle with competitive disadvantages. In the energy market, for example, the U.S. administration issued an executive order to withdraw from the Paris Agreement, a move that could give U.S. energy and natural resources companies an edge by avoiding emissions caps and compliance costs.
Investors and lenders may find U.S. businesses more attractive due to their ability to move faster and generate higher short-term returns.
5 ways businesses can build resilience in a deregulated environment
While the uncertainty of U.S. deregulation complicates proactive planning, businesses can take key steps to mitigate risk. It comes back to the first principles of running a business effectively: if a Canadian business has a strong internal framework, it will succeed in a less-regulated environment by being more resilient and robust.
The first step in building fraud resilience is identifying and understanding potential vulnerabilities within your business. This involves evaluating all aspects of your operations—customer interactions, supply chain dynamics, and partnerships—to pinpoint areas of exposure to fraud and regularly reassess as the business environment evolves.
Where U.S. regulations weaken, Canadian firms can maintain self-imposed standards. By setting voluntary compliance benchmarks, businesses can require suppliers to adhere to the same ethical, cybersecurity, and labour standards. These contractual obligations help ensure that all partners meet the same level of accountability, maintaining the confidence and trust of your stakeholders.
If U.S. deregulation weakens cybersecurity protections, sharing sensitive information with U.S. partners should be approached with caution. Implementing stringent cyber and data security measures can minimize exposure to fraud.
Perform background checks on U.S. business partners, suppliers, and investors through financial audits, supply chain investigations, and cybersecurity assessments to ensure transparency and ethical business practices. Know who you are dealing with, and their agenda.
“If a Canadian business wants to prepare for what may lie ahead, a big part of it is going to be understanding and embracing the need for a healthy dose of skepticism as they engage in business relationships going forward, particularly with U.S. partners,” says Mak.
Investing in advanced data analytics and cybersecurity measures can help detect irregularities in transactions and supply chains. AI-driven monitoring systems can flag suspicious activities before they escalate into significant fraud cases.
How BDO can help Canadian businesses thrive in a deregulated environment
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The impacts of U.S. deregulation and resource cuts to U.S. federal agencies will be felt in Canada. Our experienced team at BDO can help you understand the shifting landscape, assess risks, and implement proactive frameworks that safeguard your business and stakeholders.
Our services in areas like forensic disputes, cybersecurity, risk advisory, and financial reporting deliver integrated solutions across all aspects of your business, from fraud and cybersecurity risk assessments to supply chain warranties and due diligence.
Contact our team to get ahead deregulation risks.