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Key risks for D&Os
Knowing key risks is crucial and essential for proactive risk management, informed decision-making, and maintaining organisational resilience in the face of uncertainty.
Systems & Controls Effective systems and controls are vital to prevent and detect breaches of sanctions laws. In recent years, we have witnessed financial regulators imposing significant fines for a range of systems and controls failings, demonstrating the importance of such controls in preventing insider trading, money laundering, bribery and fraud, amongst other things.
Bribery & Corruption There is an increased focus by prosecutors on bribery & corruption and internationally coordinated investigations. In addition to direct prosecutions against D&Os, the ‘failure to prevent’ regime in the UK’s Bribery Act (plus the Criminal Finances Act 2017 and the Economic Crime and Corporate Transparency Act 2023) could see follow on prosecutions against D&Os following cooperation by the entity to secure a deferred prosecution agreement (DPA). Insolvency Insolvency-related claims have always been a large source of claims against directors in the UK, but the risk of claims has increased as insolvencies have rocketed in recent times, following all-time lows during the pandemic. Further, during difficult economic times, there is a higher risk of fraudulent, dishonest or wrongful actions – this could all lead to more actions against D&Os for breaches of insolvency legislation and the duties they to the company, in addition to disqualification proceedings, which have increased significantly in the UK, with higher bans imposed, alongside an increase in criminal prosecutions and the imposition of civil compensation orders.
Breach of Sanctions Since the Ukraine crisis, the sanctions regime has ramped up. For D&Os, civil monetary penalties may now be imposed by the OFSI who can now publicly report a breach leading to reputational damage. Exposure to enforcement actions may increase further as a result of a new unit, (OTSI). The OTSI is intended to play a pivotal role in assisting businesses in complying with sanctions, investigating potential breaches, issuing civil penalties and referring cases to HMRC for criminal enforcement, where necessary.
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