Board members & execs on the hook in growing number of scenarios
Risk Exposure for Directors and Officers
What’s in this report from Allianz Commercial:
Board members and company executives can be held liable for an increasing number of scenarios. Inadequate responses to economic pressures, geopolitical issues, implementing innovative technologies such as GenAI, or environmental, social and governance (ESG) challenges are among the main factors driving the possibility that a company and its directors and officers may be sued in 2024, according to Allianz Commercial’s D&O insurance report.
“The challenge for directors and officers for 2024 is to be prepared for headwinds,” said Jarrod Schlesinger, regional head of financial lines in North America at Allianz Commercial. “To not only be nimble but to have a strategy that can adapt when presented with an obstacle to the business. Diversity in the boardroom continues to allow companies to have varied approaches when presented with problems. To assist with the challenges ahead, the C-suite should push beyond the norm in their industry and allow themselves a better chance to be on the front foot for the future.”
A few key trends outlined include:
- Gloomy outlook prevails: Since the world eased out of lockdown from the Covid-19 pandemic, a new normal has not made daily challenges for companies any easier. Economic growth across the globe remains disappointing. Business insolvencies are expected to rise by +10% in 2024, according to Allianz analysis.
- Generative AI: Litigation recently filed against AI companies has already highlighted privacy risks and copyright law violations. These cases, as well as the challenges noted above, have the potential to bring securities claims, intellectual property claims, breach of fiduciary duty claims, misrepresentation claims and shareholder and derivative lawsuits.
- ESG claims from both sides: Regulatory action or litigation risks due to ESG-related issues are another major concern for boards, driven by increasing reporting and disclosure requirements around such topics, which could trigger claims in case of an inadequate response or non-compliance.