Business leaders facing increasing levels of exposure to personal risk

Modern business pressures, hugely burdensome remits and continuous regulatory changes are exposing senior business executives like never before to liability claims, according to research by QBE Business Insurance. It found that the risk of prosecution, bankruptcy and jail terms is now firmly on the agenda.

According to the findings, 1 in 4 (23%) senior decision makers have had a claim made against them at least once in their capacity as a senior manager, while a third (32%) admit to concerns about a claim being made against them in the future.

The research investigated the impact of increased responsibility among 2,500 business owners and senior decision makers across the UK, Spain, Italy, Germany and France. It revealed that over two-thirds (70%) of respondents said the remit and responsibilities of their role have increased over the past year, with 36% saying significantly so. Greater levels of business to support (60%), technology and an ‘always on’ culture (42%) and regulatory change (31%) were listed as key contributing factors.

Claims can be made against senior officers for a broad range of reasons and from a variety of parties. Employees can assert discrimination, shareholders can claim mismanagement or inappropriate behaviour can be investigated by a regulatory body. Aside from the significant costs of mounting a legal defence, if found liable, senior executives face prosecution, hefty fines, and jail terms.

Environmental factors are playing a part, notably the growing trend for personal liability claims being made against senior executives. Survey respondents said they felt there was a greater emphasis now on senior management’s accountability than before (34%). Of those that have had a personal liability claim made against them already, the claims largely related to technology (21%), competition (20%), financial (18%) or political/regulatory (9%) issues.

Carly Eveniss, portfolio manager for management liability at QBE Business Insurance, said: “Senior executives are more exposed now than ever to liability claims arising from omissions and decisions made whilst acting in such capacity. Whilst this is in large part due to the expanding remit of their roles and external pressures like increased regulation, it is also symptomatic of a shifting culture whereby senior executives are increasingly seen as legitimate targets for legal action as disgruntled parties seek the right to have recourse to the party they deem responsible.”

Eveniss added that the insurer has seen a year-on-year increase in the number of claims against directors and officers. “Years ago, people wouldn’t have known who the senior people in businesses were, but the culture of personality means we increasingly know and often have very strong opinions on today’s leaders and we rightly hold them accountable for their actions.”

When asked to highlight the areas that concerned them most in the future, respondents highlighted technology as a key risk area. Cyber-attacks and data breaches were a primary concern for 34%. A fifth (19%) noted compliance with recent GDPR requirements as high on their list of worries. Other areas included; competition and profitability (24%), increasing regulation & government controls (18%) and financial turmoil (16%).

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