Managing your liabilities

Interestingly, our panel of experts was divided as to whether the much talked about UK compensation culture was as widespread as it is made out to be. Company culture and the way that risks are managed clearly have an impact on both employer’s and public liability claims, with most participants very conscious of the potential reputational fall-out resulting from a badly handled claim. There was, however, general consensus that regulation, both national and European, is likely to encourage growth in litigation.

Another key point that emerged in the discussion was that too much focus on transferring liabilities within contracts can result in an unmanageable or uneconomic situation. Unrealistic requirements from third parties to buy insurance which may be either unavailable or overly expensive can break a deal. In connection with this, some participants deplored a lack of depth of knowledge in the insurance industry about the liabilities and profile of the specific businesses with which insurers are dealing. And procurement departments are sometimes more interested in achieving savings than in the appropriateness of the cover purchased. Not surprisingly, in view of these perceptions, insurance is viewed as a backstop, with the main emphasis being on risk management and carrying a significant portion of risk yourself.

Discussion of the risk manager’s role in identifying liabilities associated with mergers and acquisitions revealed that this tends to be reactive rather than pro-active, with the risk manager mostly called in at the tail end of the deal.

Communicating the fact that risk management can enhance business opportunities rather than simply representing a process clearly needs some work.

Finally, our participants gazed long and hard into the crystal ball and suggested some liability issues, both general and specific to their industries, that could be on the horizon.