Directors and officers worldwide are becoming more worried about economic and cyber risks, specifically those linked to data loss and ransomware, according to a survey on directors’ liability in 2023 conducted by WTW and law firm Clyde & Co.
The Directors’ and Officers’ Liability Survey Report identified the key risks for directors across the globe (covering UK, Europe, Asia, Australasia, Latin America and North America), with responses from 40 countries around the world.
Economic risk was considered the top risk for businesses by 63% of global directors, closely followed by cyber risk at 62%.
The survey found that geopolitical risk has become more significant, rising from 6th place to 4th place in 2023. However, the overall results are consistent with the previous year’s survey, with cyber threats such as data loss and cyber extortion remaining the top risks for directors. In fact, 62% of directors are concerned about cyber attacks and data loss, which continue to be the most significant risks in percentage terms.
In a first for the survey, economic risk was broken down into three categories: inflation, recession, and the job market. The majority of directors worldwide identified inflation as the most significant economic risk (69%), followed closely by recession (67%).
Other key findings of the report are as follows:
- In Asia, cyber risk remains the top concern for directors, but there has been an increase in the ranking of regulatory breaches and health and safety prosecutions as significant risks.
- Bribery and corruption ranked amongst the top 5 risks in Asia with 57% respondents identifying it as a key risk.
According to Namit Mahajan, Head of FINEX (Financial & Executive Risks) Asia at WTW, “The trends we are seeing 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.”
Mahajan also noted that regulatory and legislative changes continue to be a key concern for directors. In recent years, 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. While climate change may not be ranked amongst the top 5 risks in Asia this year, it is certainly still a rising concern for directors in this region.
With companies and their leaders operating in an almost unprecedented climate of uncertainty, this year’s survey provided timely and valuable insights into the evolving risk landscape, noted James Cooper, Partner, Head of Insurance, Clyde & Co.
“We asked directors about 28 risks and overall, the results are very consistent with last year, with cyber risks ranking significantly above other risks. There have been developments, however, with notable new risks including systems and controls, sufficient cyber expertise at board level and employee crime and cybercrime as a subset of crime risks,” he said.
Cooper concluded that successfully navigating risk has never been more difficult, regardless of business size. The survey highlighted significant differences between how directors and risk managers at small companies rate risk compared to those at large enterprises. Additionally, the survey sheds light on marked geographical variations. Cooper emphasised that directors need a forward-looking view to anticipate threats and challenges.