Directors' Liability: A new era of risk exposure
In this report we explore the ever-expanding personal accountability faced by company directors at a time when regulators and enforcement agencies continue to have management in their sights.
In this seventh edition of our annual report in conjunction with Willis Towers Watson, we interviewed over 250 directors, non-executive directors, partners, in-house lawyers, risk officers and compliance professionals from across the globe, to help us assess what they consider to be the key areas of risk.
The impact of cyber attacks and data breaches remains the main concern. There has also been a notable increase in focus on the challenge of driving good corporate culture, which, for the first time, features in the top five legal, regulatory and business risks that are worrying respondents.
Despite the fact that no companies have been found liable for the effects of climate change to date, let alone any directors and officers, the results of our survey indicate that this is also fast moving to the top of the agenda of boards.
Technological advances and risks associated with artificial intelligence and machine learning are consistently identified as one of the most significant global risks.
Civil proceedings brought by third parties are identified as the most significant personal risk.
Geo-political and economic concerns have reduced slightly as a very significant or extremely significant concern. Instead, climate change has moved up the ranks – 40% of respondents rated it as a very significant or extremely significant concern.
Nearly all respondents claim to understand their organisation’s corporate culture but only half believe they can influence or change it.
Data loss is identified as the most significant legal, regulatory or business risk, closely followed by cyber attack.
Almost half of all respondents have experienced a claim or investigation involving a director in the past 12 months, and that number is increasing year on year.
More than half of respondents have experienced a cyber attack or loss of data significant enough to come to the attention of the board, and again this is increasing year on year.
For the first time in seven years the top threshold insurance coverage issue for directors is how claims against them will be controlled and settled.
There is a growing awareness of the role of litigation funders in driving large-scale actions and for the first time nearly half of respondents consider litigation risk to be high.