First Business

June 18, 2012

Risk Management: Most Companies Do Not Expect – And Remain Unprepared For – Director Lawsuits

Seeing a chasm between risk perception and risk reality has ceased to surprise me. Virtually every survey, study and report I come across reveals that executives either (a.) don’t understand the risks they take or (b.) understand the risks they take but just opt not to do anything about them.

Well, here is another surprisingly-not-surprising revelation: 80% of public companies think it is unlikely that their directors and officers will be sued. This is despite the fact that, according to the latest "Chubb Public Company Risk Survey,†23% of companies have already been sued, and the rising risks of more lawsuits in the future due to rising mergers-and-acquisition activity and increasing enforcement actions related to the Foreign Corrupt Practices Act (FCPA).

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