Safety at work, working from home, employment law, contract disputes… the risks that a director is exposed to are only going up. Directors of limited companies are advised to protect themselves personally and reduce the risk of personal financial loss.
Being a director or officer of an organisation comes with many advantages – driving growth, creating a legacy, leading a purpose, but it also comes with personal risks – you could be financially liable for claims made against you personally for the decisions you make or actions you take on behalf of your organisation. Directors’ and officers’ (D&O) cover can provide protection for claims made against anyone in or acting in a managerial role for alleged wrongful acts carried out in their various roles in the work place.
Typical business insurance protects the organisation, but doesn’t protect the individual. That’s where Directors’ and officers’ cover steps in. D&O protects the private wealth of individuals against claims made against them personally, not the company.
Looking ahead in 2023/24, we face new and emerging risks. Employers should address the following issues and assess how their organisation can minimise the chance of a problem arising:
Cyber-crime— Data breaches and cyber-incidents can lead to severe losses for an organisation, but the fallout can result in even further damage. Directors and officers may be blamed for not ensuring that proper cybersecurity measures were taken, and may be targeted by those seeking compensation. Organisations should prioritise cyber-security precautions, such as backing up important information, monitoring internal networks and regularly training employees on how to recognise phishing and social engineering tactics.
Workplace misconduct— Bullying, harassment and misconduct are a liability for employers. Colleagues today take workplace misconduct seriously and are less willing to tolerate bullying or harassment. If a worker becomes a victim of unacceptable workplace behaviour— whether the source is a superior or a colleague— directors and officers may face prosecution for failing to provide employees with a safe working environment.
Environmental issues— Concerns about climate change have increased in recent years. Organisations and their leaders may be at risk of facing a claim if they are suspected of contributing to climate change or causing an environmental incident. Leaders must be sure that their organisation complies with any climate-related regulations or requirements.
Lack of diversity—Many organisations have already been targeted with legal action alleging that leadership has not done enough to encourage and increase diversity in the workplace. Activists against systemic racism have become more vocal in promoting equal opportunities for people of all races, genders, religions and orientations. Furthermore, UK employers with over 250 employees are now required to report gender pay gap information. Employers and their leaders should prioritise equality, diversity and inclusivity as part of their strategic initiatives.
Insolvency— As the UK economy continues to struggle, insolvency may become a more frequent issue, which could result in claims being filed while plaintiffs attempt to recoup losses from directors.
Trade association leaders juggle multiple risks on a daily basis. Ensuring you understand the risks you face will enable you to mitigate, manage and transfer those risks, allowing your organisation to grow and prosper with the confidence robust protection brings.
Partners& is a Chartered insurance broker providing specialist insurance, employee benefits, risk management and claims advice to businesses and private clients. As a next generation insurance advisory business, Partners& combines the best traditions of broking, such as technical advice and client service, with modern thinking and intelligent use of technology, to enhance the client experience and create a dynamic workplace for its talented team.
Recent accolades include the Best Diversity & Inclusion Programme and Best UK Start Up at the 2021 UK Broker Awards and the Diversity and Inclusion category at the Broker Innovation Awards 2022. It has also been awarded its second gold Investor in Customers award demonstrating its commitment to delivering exceptional client experience and, most recently, shortlisted for two British Insurance Awards: Commercial Lines Broker of the Year and Insurance Broker of the Year.