According to the latest Directors and Officers Liability Insurance Survey by Willis in collaboration with Clyde & Co, 75% of the participating directors and officers in Asia view the risk of regulatory breaches as very important or extremely important to their organisations.
This top concern in Asia stands in stark contrast to global trends where health and safety risks have become the primary concern for directors and officers (D&O).
While the risk of data loss and cyber attacks remains among the top three concerns in Asia, health and safety risks have dropped three places from being the top concern in 2024 to fourth on the list this year. A notable exclusion from the top risks is climate change, which no longer features among the top seven risks in Asia.
In general, there is a strong alignment between perceived material risks and board expertise and priorities. However, there is an exception when it comes to cyber security and data privacy, with many boards indicating more time is needed. Data loss and cyber attacks, including extortion, are considered to be very important or extremely important for 72% of those surveyed in Asia.
AI lags behind (only 56% of respondents in Asia consider it to be very or extremely important and considered by the fewest number of respondents to be material to the business while also being the lowest ranked issue on which respondents considered the board to have the relevant expertise), but this perception may change in the future as new use cases and regulations develop.
Civil litigation and third-party claims were included among the top seven concerns for the first time since 2018 with 65% of Asia-based directors and officers surveyed considering these significant risks to them. Smaller organisations (<$50m in revenue) and those with revenues between $1bn and $5bn mentioned litigation more often. The largest organisations surveyed (>$5bn in revenue) included diversity, equity and inclusion, as well as bribery and corruption as top risks, while excluding the financial distress, bankruptcy and insolvency concerns of smaller organisations.
Willis head of financial, professional and executive risks Asia Namit Mahajan said, “It is not surprising that regulatory risk has become a top concern for directors in Asia. The region's diverse regulatory landscape requires companies to navigate a complex array of rules and regulations across multiple jurisdictions, significantly increasing the risk of non-compliance. This trend is also reflected in coverage concerns, with the majority of directors rating cover for multi-jurisdictional exposures as their top priority in Asia.
“By taking a proactive approach, companies can optimise their D&O coverage while mitigating financial and reputational risk. Our data helps clients anticipate emerging risks before they become serious exposures.”
Clyde & Co partner and head of financial institutions and D&O James Cooper said, “The risk landscape for directors and officers is fast evolving and complex, driven by a multitude of factors from geopolitics to tech advancements and a challenging economic climate.
Identifying the most critical risks and understanding where pressure points may appear is crucial in successfully navigating existing and emerging challenges. So too is ensuring that protections such as D&O insurance reflect this changing environment and can adequately cover areas where leaders may feel more exposed such as cyberattacks or data loss.”