Understanding The Risk Factors For Directors And Officers in 2021

While senior leaders play key roles in the success and improvement of a business, they also carry a considerable amount of risks. Mistakes are a fact of life but alleged misconduct or negligence can have damaging consequences. This can result in legal action, government-issued penalties and irreparable damage to an organisation’s finances and/or reputation. 

In our experience as chartered insurance brokers, this is a topic that is often brought up. It's not always known that regardless of a company's trading, Directors, Officers and senior individuals within businesses, organisations and charities can be held personally liable for the actions they take in the course of their role. Regardless of a company’s trading, this affects even organisations and charities. Understanding the importance of this adds a certain level of protection from the risks and liabilities that could occur. Read on to learn more on the current trends related to Directors and Officers insurance. 

Not sure what Directors and Officers liability insurance is? Take a look at a recent article we wrote on what Directors and Officers Insurance is all about.

What are the risks to my business in 2021?

There are a variety of different risks and liabilities that may lead to filing D and O insurance claims. But what are some of the potential issues that could arise? And what can an organisation do to minimise the chance of a problem arising or escalating?


Insolvency has the potential to affect all businesses. Insolvency often results in claims being filed while plaintiffs attempt to recoup losses from directors. With many experts predicting that the UK economy will struggle in 2021, insolvency is set to become a frequent issue. We have already seen the start of this with legal disputes in the construction industry. This is following the downturn in the economy caused by the coronavirus pandemic.


Directors and Officers may be blamed for not ensuring that proper cyber-security measures were taken in the aftermath of a cyber attack. These leaders may then become a target by those seeking compensation. As you would expect, remote working is now expected to be a permanent element in many workplaces. Because of this, there is now a rising importance of technology across many sectors. As the use of technology in businesses increases, so does the chance of cyberattacks.

Organisations should prioritise cyber-security precautions. This means backing up important information, monitoring internal networks and having appropriate safety measures in place. As well as regularly training employees on how to recognise phishing and social engineering tactics. Our cyber scorecard can give you an insight into your organisation's exposure to a potential cyber-attack.

Workplace misconduct

Bullying, harassment, and misconduct are hardly new issues when it comes to liabilities for employers to address. There is an emerging theme of younger workers taking workplace misconduct more seriously. This seems to be more so than their older colleagues. Regardless of whether someone will tolerate bullying or harassment, it shouldn't happen in the workplace. If a worker becomes a victim of unacceptable behaviour, Directors and Officers may face prosecution. This is for failing to provide employees with a safe work environment.

Environmental issues

Our interest in climate change in society has increased in recent years. As such, Directors and Officers are being held to a higher standard when it comes to making environmental decisions. There is now a risk of facing a Directors and Officers insurance claim if they are suspected of causing an environmental incident. The leadership must ensure that their organisation has climate-related regulations or requirements.

Lack of diversity

Many organisations have already faced legal action due to diversity ethics. Most often where leadership has not done enough to encourage and increase diversity in the workplace. Activists against systemic racism have become much more vocal in recent years. They demand equal opportunities for people of all races, genders and religions. Furthermore, UK employers with over 250 employees are now required to report gender pay gap information. This creates another potential liability for organisations if they do not actively attempt to address disparities. With all of this in mind, it's clear that it'll continue to be important for both employers and their leaders. Equality, diversity, and inclusivity should be high up on any business’ agenda.

2021 has continued to bring uncertainty to organisations of all types and sizes. Whilst still going through a global pandemic, we are in an unpredictable economy. Even minor legal claims may affect an employer’s ability to make ends meet. Now more than ever, it's of the utmost importance that Directors and Officers are held to high standards. Every business should have Directors and Officers liability insurance cover. Moreover, organisations should assess and work to minimise any related risks.

How can I protect the Directors and Officers in my business?

  • Policies - Implement, document, follow and periodically review all policies within the business. It's won't be the most fun part of your job but it’s still important. Ensuring you have good practices on how to navigate various situations or activities will go a long way. This all contributes to minimising the likelihood of issues arising. 
  • Directors and Officers liability insurance – Also known as D and O insurance. This is there to protect Directors, Officers, and the business. Directors and Officers insurance covers the costs of defending allegations made against them. It also reimburses the settlements, fines and penalties (where acceptable under law).

If you have any questions about Directors and Officers liability insurance, please don't hesitate to contact us. At Alan & Thomas we offer a range of commercial insurance covers and private client insurance. As well as this, we can also help with extending your existing D and O insurance policy.  This can include Employment Practices Liability, Pensions Trustees Liability, and Crime. For any assistance with your Directors and Officers insurance cover, call 01202 754 900. You can also enquire via email at info@alan-thomas.co.uk.

Want a quote for D&O insurance?

Speak to your usual A&T contact or contact one of the team on 01202 754900