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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?

  1. Arrange training on good corporate governance. Not only when onboarding but also annually (or more frequently as required).
  2. Read and understand matters reserved for the board and board authorities and know where recommendation and decision making sits.
  3. 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.
  4. Review board member make-up e.g. skills, experience and behaviours and do non-executive directors challenge?
  5. Mandate a Risk & Compliance report into the board and ensure critical risk and compliance indicators feed into MI.
  6. Tone from the top and stakeholder and public perception is key, but is ‘tone from the middle’ right?
  7. Foster an open and transparent workplace culture where people feel confident to speak up.
  8. 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.
  9. Horizon scanning – look for emerging risks (e.g. hybrid and flexible work is an example of a huge risk emerging for some time).
  10. Have decent D&O and other insurance policies for investigations and review whether any other indemnities are necessary?

https://www.insurancebusinessmag.com/uk/news/professional-liability/survey-reveals-top-concern-for-board-directors-322496.aspx

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