ADVICE
Businesses beware
Lee Elgie ( pictured ), MD of the Stockton-on- Tees office of insurance broker Gallagher , offers important advice around regulatory risk
In today ' s fast-changing business environment , leaders must adjust daily to numerous challenges that could materially affect business operations . Yet one of the most pressing concerns each business leader shares is the potential impact of regulatory changes .
Regulatory risk has the capacity to increase operational costs , introduce legal and administrative hurdles and even restrict a company ' s ability to conduct business .
One of the imminent regulatory changes that businesses should be paying attention to is the Economic Crime and Corporate Transparency Act , which is expected to introduce a new corporate offence for failing to prevent fraud , which will come into effect in 2024 or early 2025 .
Companies will be held liable if criminal activity is carried out for their benefit without adequate fraud prevention procedures in place . The ramifications for directors and officers are significant , as insurers will scrutinise a company ' s policies and procedures when assessing and underwriting risks .
Without robust fraud prevention measures , businesses may experience increased claims against their directors and officers . They should prioritise implementing comprehensive policies to mitigate the risk of fraudulent activities .
Martyn ’ s Law is also likely to place fresh responsibility in the hands of businesses to consider the types of attacks that could occur on their premises and take action to help reduce potential harm to the public .
Businesses and other premises accessible to the public with a capacity of more than 100 will be required to introduce some measures to mitigate threats , and venues with a capacity of 800 or more will be required to develop detailed incident response plans . The regulations are relevant to all businesses and non-profit organisations with premises that meet capacity criteria .
However , according to Gallagher ’ s latest research , many businesses are significantly unprepared for the measures proposed by Martyn ’ s Law . According to the research , just 23 per cent of surveyed firms are fully confident that they will be able to meet the requirements of the incoming law .
Failure to comply could have severe financial consequences , as the UK government is proposing potential fines of up to £ 18m , or five per cent of an operator ’ s worldwide revenue , as well as sanctions and restriction notices .
Another regulatory change that large businesses need to prepare for is the EU Corporate Reporting Sustainability Directive ( CRSD ). The CSRD will impact non-EU companies with subsidiaries or operations within the EU . It ’ s likely to impact many of the industries that are key to Teesside ’ s economy .
By 2028 , companies will be required to report on sustainability , diversity , corruption and other factors . Companies must assess and disclose their impact on topics such as climate change , pollution , water resources , biodiversity and worker and consumer rights . Companies ' ESG targets must align with ESRS ' s minimum disclosure requirements , including specific metrics , timeframes and reporting practices .
Companies must evaluate the financial implications of meeting these new obligations and consider the potential reputational risks of not meeting requirements , as the penalties could extend beyond formal sanctions .
Recent research from Gallagher found that nearly two-thirds ( 62 per cent ) of senior leaders at large UK businesses are concerned that their ESG targets put them at risk of litigation . Almost three-quarters ( 72 per cent ) admitted they felt pressure to set the targets without being sure how they were going to reach them .
While the recent political environment could create delays to regulatory changes , businesses shouldn ’ t become complacent when it comes to meeting compliancy requirements . Businesses who fail to prepare risk substantial financial loss and an arduous recovery process . We encourage business leaders to contact an insurance broker to discuss what their risks are and how they can stay protected .
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