A recent study conducted by RSM discovered that 96% of company board members anticipate a rise in the number of critical prosecutions of businesses or indeed individuals that are implicated for poor risk management.
What is corporate governance?
According to the ICSA, corporate governance is “the system of rules, practices and processes by which a company is directed and controlled.” Put simply, it’s a way of a company policing itself.
Corporate governance defines:
- What the board of a company does
- Who is accountable for certain decisions
- Decision-making processes
- How shareholders are recognised
- Business ethics and how the company behaves
- The importance of stating finances and reporting accurately
- How to regulate risk in corporate activities
- How to analyse and mitigate risks
- … and so much more
It’s thought a huge 28% of boards have no corporate governance standards or guidelines. This, naturally, can lead to questions about its code of conduct should things go wrong. Corporate governance keeps a company on the straight and narrow, aiming to avoid corporate scandals and the subsequent damage (and monetary losses).
How can businesses mitigate risks?
It’s imperative to comply with regulatory and legal requirements. Having corporate policies on key areas such as health and safety and data security is vital to every business. It not only demonstrates it cares about its culture and its employees – having corporate policies helps to position the company as honest and open. A company without it can quickly become corrupt – and face significant consequences.
Businesses without corporate governance often leave directors with plenty of freedom, and a lack of scrutiny or accountability. When said directors are less than squeaky clean, this can lead to fraud or even criminal negligence. A disaster for the company, and also for the individual who can face severe consequences.
What is Directors’ & Officers’ Insurance and do I need it?
We work with customers to provide Directors’ and Officers’ Liability Insurance. This covers the cost of claims for compensation made against the insured person, which can include everything from health and safety claims right through to negligence, defamation or event manslaughter.
With an increasing trend for individuals to be held accountable, it’s certainly a sensible idea to look into this type of cover. Should the worst happen and a claim be made against you, at least you have peace of mind that you will be financially protected – both personally, and for defence costs.
Contact our award-winning team to discuss your cover.