Company Directors warned on risk mitigation strategy


Company Directors warned on risk mitigation strategy

According to law firm O'Connors LLP, non-executive directors must check their employer companies have a personal risk mitigation strategy in place, especially as the risks facing directors had never been greater and will only intensify further once the Bribery Act 2010 comes into force this year.

The Act contains provisions for prison sentences of up to 10 years for individuals and unlimited fines and debarring from public contracts for companies found guilty.

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 reshuffles due to poor financial performance, an increased focus on investor relations management and increased disclosure requirements to markets and regulators.

The chance of being sued is definitely increasing and Directors & Officers Insurance, which covers the personal liability of directors and officers in relation to personal claims brought against them, can be taken out and paid for by the company.

It's worth noting that insurers will only meet claims if the policy wording requires them to do so. Draft policies need to be scrutinised and the wording negotiated with insurers before a premium is paid.

This was first published in February 2011

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