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Coronavirus: Risks Continue for Directors and Officers


Over the last several weeks, the coronavirus outbreak has had damaging effects on businesses and the global economy. Financial markets have been turbulent, supply chains have seen massive disruptions, and business and personal travel has slowed to a crawl.

Recognising the harm the outbreak has already done to businesses and investors — and the additional damage it could cause in the weeks and months ahead — in the US the Securities and Exchange Commission (SEC) this week issued an order intended to provide a measure of regulatory relief to public companies and their boards. While this relief is surely helpful, businesses and their directors and officers should not become complacent about the risks they could still face as the outbreak persists. Directors and officers of companies anywhere in the world should be aware of the risks in their region and be prepared to act.

Watch for Event-Driven Litigation

More time to complete regulatory filings is certainly welcome news for public companies. But it doesn’t alleviate all of the risks that businesses and their directors and officers could face as the outbreak continues.

In the era of event-driven litigation — a period that has already seen businesses taken to task for their responses to #MeToo, cyber-attacks, wildfires, and climate change — it seems all but certain that COVID-19 will generate at least some directors and officers liability (D&O) insurance claims. These claims could derive from shareholder suits alleging the failure to disclose material risks, mismanagement, or the breach of fiduciary duties; regulatory investigations and actions; and more.

In light of these risks, it's critical that businesses:

  • Proactively manage their risks. Assess the outbreak's effects on your people and operations and take steps to address them. In responding to the outbreak, risk professionals and boards should work with other key stakeholders, including teams dedicated to business continuity and health and safety.
  • Remain transparent. Public companies should keep investors informed of their COVID-19 responses and potentially material financial and operational risks from the outbreak "to the fullest extent practicable."

It's difficult to predict how shareholders and financial markets will continue to react to the ongoing outbreak, including actions they may take to hold senior executives and boards responsible for perceived wrongdoing or inaction. But taking these steps can help limit risks for directors, officers, and public companies