2019 has officially arrived. As we approach the first few months of the year, which risks and issues are anticipated to be the greatest threat to directors in 2019? The Institute of Directors (IoD), a community of directors, entrepreneurs, and business owners, has recently revealed a list of the top largest threats to look out for this year. Read Pacific Prime's latest blog article to learn more today.
Top risks facing directors in 2019
According to IoD, 2019 will bring an ever-evolving melee of risks that, if not managed properly, could prove costly to directors and business owners. Here are 5 of the most prominent threats you can expect in 2019, as well as the suggested protective measures you can take:
Culture and conduct
The IoD revealed that there have been many cases globally where poor conduct resulted in harm to various stakeholders, chief among them being employees, clients, and investors. Because of this, corporate governance has come under intense scrutiny. Some of the main risk areas of poor conduct, according to this Forbes article, include:
- Complex auditing procedures
- Hidden interpersonal conflicts
- Influential subcultures that compromise unity
- Inefficient monitoring systems
- Unaccountable management and executive leadership
- Hard-driving sales quotas
To reduce conduct risk, building a robust conduct risk framework that defines your organizational culture - backed by solid identification of your company's main risk areas of poor conduct - is therefore imperative.
Climate change
Climate-related risks have also been identified as one of the most prominent in 2019. As we continue to witness the growing demand for businesses to be more involved in climate change related issues, companies and directors are expected to face louder calls to address this topic.
The Zero Carbon Bill in New Zealand, for example, is imminent, and a revamp to the country's Emissions Trading Scheme is anticipated. Directors all over the world are faced with fiduciary obligations as it pertains to climate-related risks, including physical and liability risks. There is, therefore, a compelling argument for companies to seek innovative ways of bolstering their business model to include considerations for climate-related risks.
Cyber risks
While directors grapple with uncertainty over Brexit and the economy, there's also another key threat facing businesses - cyber crime. Cyber breaches are so prominent, in fact, that almost 50 percent of companies in the UK are at risk of being attacked! Here are some of the main cyber-related threats that companies should watch out for in 2019:
- Fake emails and hacking: In 2018, there has been a large increase in the number of cases involving companies having their email accounts compromised. This is not a surprise, as email scams are lucrative; between 2014 and 2017, email-related scams and hacking have netted criminals approximately USD 5 billion.
- Phishing: This refers to sending emails purporting to be from reputable organizations in order to induce recipients to give out personal information (e.g. credit card details). Scam emails are becoming increasingly sophisticated, so much so that sometimes even experts have a hard time identifying them.
- Supply chain compromises: The upsurge in the number of managed service providers (companies offering outsourced business operations) has meant that cybercriminals are increasingly able to take advantage of access to companies' secure systems through their private network connections with third party service providers.
- Storm cloud: Another potential area that cybercriminals are likely to exploit is the cloud. Cloud-based services are pervasive; in fact, around 9 in 10 companies use at least one cloud-based platform. Less than half of all data currently stored in the cloud, however, is accessed securely.
With the rise of hacker attacks on databases, emails, networks, and bank accounts, one of the most basic steps organizations can take to minimize loss and potential damage is to perform a penetration test. Learn more about penetration tests by reading our article on the topic here.
Mental health
Mental health issues are pervasive across the world, yet stigma towards those battling with such issues remains in almost every country, leading many to suffer in silence. In recent years, the issue of mental health has received ever-increasing attention, as more and more studies are revealing the detrimental impact mentally ill employees can have on employers.
In our recent article on mental health in Hong Kong, for example, we cited a study which found that feeling of job insecurity increases the odds of reporting poor health by about 50 percent. Absenteeism, however, is not the only cost. Other costs to the business include reputation damage, presenteeism, and turnover.
There are many ways in which companies can tackle mental health issues at the workplace, chief among them being offering comprehensive employee benefits solutions that include considerations for mental health benefits so that employees are never left feeling like they don't have the support they need.
Compliance
Last but not least, the IoD stated in their 2018 Director Sentiment Survey that a large number of directors rated regulatory 'red tape' as one of the largest impediments to economic performance. Through the EU's new General Data Protection Regulation ( GDPR), for example, stringent compliance regulations have been placed on businesses handling and processing personal data belonging to citizens of the EU.
Running afoul of the GDPR can be incredibly costly for businesses due to the heavy fines that can be imposed by the EU. The challenge here for directors is, therefore, to ensure that adequate resources and time are being invested into ensuring that their companies remain on the right side of the law.
Do you have any questions? Talk to Pacific Prime today
Along with the right risk management strategy, having robust corporate insurance solutions - such as Directors & Officers' liability insurance and cyber insurance - in place that safeguard directors and organizations against emerging risks is critical.
As the broker of choice for over 4,000 corporations and schools, Pacific Prime has 19+ years of experience offering employee benefits and corporate insurance solutions and impartial advice. We're not just like any other broker; partnering with us grants you access not only to the best solutions for your organization, but also added-value services such as administration and renewal assistance, policy communications, and premium negotiations - at no extra cost vs going direct to the insurer.
To learn more about corporate insurance, read our wide range of corporate insurance resources, visit our corporate site, or get in touch with our team today.