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In recent decades, the risk and liability outlook for directors and officers (D&Os) has grown increasingly challenging. Senior leaders are making more complex decisions on behalf of their organisations – decisions likely to be scrutinised and called into question by a range of stakeholders. In light of these pressures, companies must take the requisite steps to protect their D&Os. To this end, D&O liability insurance is not merely a ‘nice to have’, but an essential part of a robust risk management programme.

UNITED STATES

Hub International Limited

“Personal risks for board members have increased regularly over the last 15 to 20 years. Historically, the catalyst for enhanced risk has often been the notoriety of large corporate scandals that have brought greater scrutiny to the boardroom and more focus on the individuals most responsible for strategic decision making that impacts the culture and behaviour – perceived or real – of the organisations themselves. The risk profile has evolved, and the decisions are more complex and require deeper understanding than they ever have before. It is now virtually impossible to separate the personal risks for board members without understanding the context in which they perform.”

MEXICO

Nader, Hayaux & Goebel

“The personal risks that board members face continue to increase in Mexico. This is particularly true in the financial sector and capital markets, partly due to the abundant regulations imposing obligations on the directors and officers (D&Os) of financial institutions (FIs) and public companies. Due to the current challenging business environment, corporate board members are making daily judgement calls that could be considered mistakes or omissions that may cause their companies, shareholders, investors and third parties to incur losses on a global scale. D&Os must be aware of the increased risk of breaching their fiduciary duties by failing to meet ESG considerations.”

BRAZIL

Chalfin, Goldberg & Vainboim Advogados

“In the current business environment, the personal risks facing directors and officers (D&Os) have significantly increased. Several factors have contributed to this heightened risk, such as complex regulations, growing cyber security threats and more demanding shareholders. There is currently a bill of law in progress in Brazil to institute a class action procedure against D&Os, which previously has not existed in the country – Bill of law no. 2925/2023. The prospect of directors being held civilly liable for losses suffered by investors as a result of an issuer’s action or omission in violation of securities market laws and regulations represents a significant increase in personal risk for D&Os.”

SPAIN

Aon Spain

“Being a director or executive is a high-risk profession. There is increasing pressure from regulators, both in the US and Europe, to incorporate a wider range of liabilities into the agenda of directors’ duties, such as cyber security, sustainability, regulatory compliance, taxation, and consumer or user protection. The European Union (EU) published the Whistleblowing Directive to protect individuals who report regulatory violations, including corruption. This practice is well established in the US, but in Europe and Spain a whistleblowing reporting channel was only implemented in February 2023, for companies with 50 or more employees.”

ITALY

Norton Rose Fulbright Studio Legale

“Board members may face elevated risks of liability due to a variety of factors. Increased regulatory scrutiny has resulted in stricter compliance requirements, making board members personally liable for non-compliance or misconduct within their organisations. Also, the legal landscape is constantly evolving, and new laws and court rulings can impact the personal liability of board members. For example, expanded fiduciary duties make directors more susceptible to lawsuits for alleged breaches of their duties.”

AUSTRIA

CMS

“Inflation, rising interest rates, the energy crisis, supply chain issues and cyber incidents, to name only a few, pose enormous challenges for board members and managing directors. In this fragile economic environment, their personal liability risks for allegedly failing to respond adequately to these company risks have increased significantly. The European Union (EU) Corporate Sustainability Reporting Directive, from a regulatory perspective, certainly further increases this risk.”

AUSTRALIA

Herbert Smith Freehills

“To the extent there is an increased personal risk for directors, this is focused on emerging risks which may manifest through regulatory, environmental, social and governance (ESG), activist or class action activity. Much of the focus is on ESG risks, and with good reason, as they are an increasing focus for regulators. For example, the Australian Securities and Investments Commission (ASIC) and the Australian Securities Exchange (ASX) have made public statements regarding their proactive approach to disclosures on ESG risks and the practice of ‘greenwashing’, have numerous greenwashing enforcement investigations on foot, and ASIC has achieved multiple greenwashing enforcement outcomes in the form of infringement notices.”

CONTRIBUTORS

Aon Spain

Chalfin, Goldberg & Vainboim Advogados

CMS

Herbert Smith Freehills

Hub International Limited

Nader, Hayaux & Goebel

Norton Rose Fulbright Studio Legale