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“REGULATORY RISK” is now the top concern for the board. So what can you do to mitigate this risk?
24/01/2022
According to new research from insurance brokers McGill and Partners, an overwhelming majority of board directors are increasingly concerned about the personal ramifications of a regulatory investigation (see below for link).
Regulatory investigations – could result in substantial fines, and, depending on the nature of the wrongdoing, could also result in criminal proceedings. According to AIG, defence costs per director for a typical SFO prosecution have doubled in recent years and could reach up to £4 million.
So, what are some practical tips to mitigate this horrendous risk?
- Arrange training on good corporate governance. Not only when onboarding but also annually (or more frequently as required).
- Read and understand matters reserved for the board and board authorities and know where recommendation and decision making sits.
- Ensure business decisions, objections and challenges are recorded in the minutes. Read the minutes in advance of the meeting, check the draft minutes, and amend if necessary before they approve.
- Review board member make-up e.g. skills, experience and behaviours and do non-executive directors challenge?
- Mandate a Risk & Compliance report into the board and ensure critical risk and compliance indicators feed into MI.
- Tone from the top and stakeholder and public perception is key, but is ‘tone from the middle’ right?
- Foster an open and transparent workplace culture where people feel confident to speak up.
- Implement policies, procedures and processes for the following:- 1] internal investigation,2] conduct and disciplinary matters, 3]whistleblowing and speaking up, 4]bribery & corruption, 5]recruitment and retention.
- Horizon scanning – look for emerging risks (e.g. hybrid and flexible work is an example of a huge risk emerging for some time).
- Have decent D&O and other insurance policies for investigations and review whether any other indemnities are necessary?
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