Economic and cyber risks, particularly those associated with data loss and ransomware, are causing increasing concern for directors and officers in enterprises, according to a new report from WTW and Clyde & Co.
The global law firm’s Directors’ and Officers’ Liability Survey Report 2023 is based on a survey of respondents based in 40 countries across Europe, Asia, Australasia, Latin America and North America.
Economic risk was considered the top risk for businesses by 63% of global directors, closely followed by cyber risk at 62%. Geopolitical risk grew in importance, moving up to 4th place from 6th last year.
Overall, the results are consistent with 2022, with cyber, data loss and cyber extortion continuing to dominate the highest ranks of risks for directors.
In percentage terms, cyber attacks and data loss are still the most significant with 62% of directors concerned.
For the first time, the survey also broke down economic risk into three perils, inflation, recession and the job market, with most global directors citing inflation as the biggest economic risk (69%), closely followed by recession (67%).
The study also found that in Asia, while cyber risk continues to be the top risk for directors, there is an increase in risk ranking of regulatory breaches, and health and safety prosecutions.
Also, bribery and corruption ranks amongst the top 5 risks in Asia with 57% respondents indicating it as a key risk.
Namit Mahajan, head of financial and executive risks in Asia at WTW, said: the trends in Asia are consistent with global trends where economic uncertainty and cyber issues continue to be key concerns for directors.
“With a volatile business environment resulting from the current geopolitical uncertainty, it is no surprise that geopolitical risk is also rising on the list of directors’ concerns on business operations,” he said.
Regulatory and legislative changes also continue to be a key concern for Directors. There has been heightened scrutiny by more proactive regulators, with a continued focus on tackling financial crime and market abuse, improving consumer protection, as well as having an increasing emphasis on ESG, including climate related risks.
James Cooper, partner, and head of insurance at Clyde & Co, said that with companies and their leaders operating in an almost unprecedented climate of uncertainty, this year’s survey provides timely and valuable insights into the evolving risk landscape.
“We asked directors about 28 risks and overall, the results are very consistent with last year, with cyber risks ranking significantly above other risks,” said Cooper.
“There have been developments, however, with notable new risks including systems and controls, sufficient cyber expertise at board level and employee crime and cyber-crime as a sub-set of crime risks,” he said.