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
SINGAPORE: According to the latest Directors and Officers Liability Insurance Survey by Willis, a WTW business, in collaboration with Clyde & Co, three quarters (75%) of directors and officers in Asia view the risk of regulatory breaches as very important or extremely important to their organisations.
This 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 cybersecurity 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.
Artificial intelligence 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.
Additionally, 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 (<$50 million in revenue) and those with revenues between $1 and $5 billion mentioned litigation more often.
The largest organisations surveyed (>$5 billion 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.
Namit Mahajan, Head of Financial, Professional & Executive Risks (FINEX), Asia at Willis said: “The latest survey results underscore the diverse challenges directors and officers face today, highlighting how fraught the landscape has become. It’s 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, said Mahajan.
Despite increasing concerns over litigation risks, cost remains the dominant driver for D&O insurance purchasing decisions. This trend persists even as regulatory scrutiny and shareholder activism increase global liability exposures. 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,” he added.
James Cooper, Partner and Head of Financial Institutions and D&O, Clyde & Co 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, Cooper highlighted.