Boardroom atmosphere has never been more uncomfortable as the chance of being sued increases
Non executive directors have been warned to check their companies have a robust personal risk mitigation strategy in place.
A KPMG client conference heard that the risks facing directors have never been greater and this would only intensify further.
The Bribery Act 2010, which comes into force in April this year, was cited as a major risk multiplier.
Paul O’Connor, a commercial insurance specialist with O’Connors LLP, said the Act contained provisions for prison sentences of up to 10 years for individuals and unlimited fines for companies found guilty.
O’Connor said: “The level of risk confronting directors has never been greater following the global credit crunch and the ensuing widespread economic slowdown. Investors demand financial redress and, in the most serious cases, provoke civil and criminal investigations to establish wrongdoing in a desire to pin responsibility on individuals.
“The atmosphere in the boardroom has also become considerably more intense with regular shuffles due to poor financial performance, an increased focus on investor relations management and increased disclosure requirements to markets and regulators.”
Jon Moulton, founder of Better Capital LLP said that the “chance of being sued is definitely increasing”.
O’Connor said a growing number of clients were instructing his firm to help them protect themselves by putting in place Directors & Officers insurance which covers the personal liability of directors and officers in relation to personal claims brought against them.
“While D&O insurance is becoming ever more popular, insurers will only meet claims if the policy wording requires them to do so. Draft policies need to be scrutinised line by line and the wording negotiated with insurers before a premium is paid,” O’Connor added.
