While concern about regulatory risk has dropped this year amongst respondents when compared with last year’s survey (though still remaining in the top 5), the level of risk posed to companies and their directors and officers is considerable.
This is evidenced by 20% of respondents having experienceda regulatory claim involving a director, the figure rising to 34% for very large revenue companies. Companies in Europe, excluding the U.K., saw the largest percentage of such claims (26%) and, unsurprisingly, financial services firms experienced the most actions.
Regulatory requirements are ever-expanding and the chance of falling foul of the myriad of rules is considerable, especially in this era of accountability. Financial regulators in particular are taking a very proactive stance and are keen to stress any drop in activity related to the pandemic was temporary. They are focused on tackling traditional risks, such as market abuse and anti-money laundering failures, in addition to emerging issues, such as climate change-related risks.
Another area of focus is addressing the inadequacies highlighted by the pandemic, especially in relation to systems and controls, contingency planning and operational resilience.
Consumer protection remains a key priority in many jurisdictions with the Financial Conduct Authority (FCA) in the U.K., for example, proposing a new consumer duty. This presents not only an operational challenge and shift in approach to dealings with consumers, but the potential for further regulatory action against firms and senior management.
There is also growing pressure to expand current corporate criminal liabilities so wrongdoers are held to account and to encourage companies to take more responsibility for the culture they foster within their organisations.
In the U.K., this includes examining whether the identification principle needs to be reformed. This is where, in order for the company to be held liable, a prosecutor must prove the individuals involved in the crime represent the “directing mind and will” of that company, that is, the individual’s actions are to be considered those of the company.
| Title | File Type | File Size |
|---|---|---|
| Directors’ Liability Survey 2022 – Regulatory exposures | 2.1 MB |
