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.
Did you know?
The number of health and safety prosecutions against directors has tripled since the new sentencing guidelines came into force.
- The 20 largest health and safety fines in 2016 totalled £38.6 million.
- The 20 largest health and safety fines in 2015 totalled £13.5 million.
- The 20 largest in 2014 totalled £4.3 million.
What to do
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. Consider using Bollington't bespoke risk management services to help you with this.
- 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.
Additionally, make sure that your organisation has adequate directors' and officers' insurance (sometimes also known as trustees' liability insurance or management liability insurance). Speak to Bollington about protecting your business from cyber threats, managing risks and obtaining the right insurance to meet your needs.