Since the financial crisis in 2008, claims against directors and officers have grown more frequent, complex and expensive. One reason for this rise is government legislation that has increased business transparency and placed the responsibility on directors and officers. In fact, after new guidelines from the Sentencing Council came into force in February 2016, the number of health and safety prosecutions against directors and officers tripled. What’s more, the value of the 20 highest fines in 2016 totalled £38.5 million, which was just slightly more than all 660 successful prosecutions in 2015-16.
In addition to stricter legislation, the emergence of new risks—such as cyber breaches—has heightened the circumstances surrounding boardroom decisions. With good cause, as each UK business was hit 230,000 times by cyber attacks in 2016. As a result, 73 per cent of directors and officers are regularly discussing their organisations’ cyber security policies, according to a recent industry survey. Unfortunately, despite the increased awareness about the potential cyber dangers, only 57 per cent of all UK organisations have taken action to identify and prevent cyber security risks. Failing to take necessary action on cyber threats could make you and your fellow senior directors liable for fines and prosecutions based on your directors’ and officers’ responsibility to prioritise cyber defence.
To help ensure that your organisation’s directors and officers are complying with government legislation and protecting against cyber threats, consider adopting the following best practices:
- Keep clear and concise records on your organisation’s practices as well as any boardroom decisions.
- Conduct a thorough risk assessment along with a health and safety review of your premises and policies.
- Monitor emerging risk areas at the senior level to ensure you can respond to them quickly.
- Update your network security and keep a safe backup of your vital files.
Company Directors can be held personally liable for a variety of events that fall outside of their control. The Companies Act 1985 lists over 200 offences alone, and that is only scratching the surface. Add in the Health & Safety at Work Act, EU Directives and ever increasing consumer protection legislation and it’s easy to see why the potential for litigation against Directors has never been higher.
Directors & Officers insurance gives Directors comprehensive protection against the costs of defending litigation and any damages that may ensue from the actions against them. Having the right insurance in place can sometimes mean the difference between a business being able to continue trading or not. If you would like more advice about getting the right protection in place, please contact your local A-Plan commercial branch today.
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