New risks facing new-age CEOs
The growing threats that heads of business face these days could put the company’s assets, and their own, at risk, warns the ‘Director & Officer Insurance Insights’ report, released by Allianz Global Corporate & Specialty (AGCS) recently.
“Executive liability is increasing yearly, driven by a constantly evolving legal and regulatory environment,” says Paul Schiavone, regional head Financial Lines North America at AGCS. “Regulations are being put in place to hold executives to account and increase executive liability.” With globalisation, an executive’s liability exposure is becoming more complex and interconnected.
Cyber breaches and technical disruptions, increased deal making and environmental and ethical issues in the supply chain are fast emerging as top sources of risks for CEOs and directors.
The Allianz Risk Barometer 2016 shows it as one of the top three corporate risks, threatening companies’ finances, operations and reputation.
Online attacks are becoming more sophisticated, a fact that companies are aware of. What they tend to underestimate is the cost of a technical failure, human error or even the actions of a rogue employee. With data protection laws becoming stronger, compliance gaps could prove expensive.
“Cyber and privacy is the number one emerging risk for directors and officers, but awareness and understanding of the risk is not always high,” said Schiavone.
Major cyber breaches almost always hurt the company’s stock price. Investors who face losses could turn their wrath on directors. “It may be possible to claim substantial damages from directors if there has been negligence in any failure to protect data or a lack of controls,” said Emy Donavan, regional head of Cyber Liability North America at AGCS. France and Italy have already taken steps to make directors liable if they don’t move to prevent data breaches.
A detailed strategy for combating cyber risks is set to join the to-do list of company boards, with privacy and network security increasingly being seen as a board issue. Going forward, it may become more difficult for directors to escape liability if the company faces a serious loss. With technology making greater inroads into corporate processes and operations, this threat cannot be ignored.
