“Businesses could be facing a future liability crisis if they do not face up to growing litigation issues,” Lloyd’s warns in its latest report -“‘Directors in the Dock – is business facing a liability crisis?”
The study, part of Lloyd’s ongoing 360 research project, found that “boards everywhere are feeling increasingly challenged by litigation and are spending more time and money addressing these issues.
“Product recalls are now a daily occurrence, rising 50 percent in Europe in the last year. Shareholder activism is on the rise, operating environments are becoming ever more complex and new legislation, such as the Corporate Manslaughter Act, is increasing risks even further. As a result the price of products and services is increasing and innovation and risk taking are being stifled.”
The report highlights the “growing concern among business leaders about the rise of a US style compensation culture in Europe and Asia and the liability fallout from the current instability in the financial markets,” Lloyd’s noted. It also examines a number of future liability issues that boards should be preparing for.
Key findings include the following:
— two thirds of European business leaders expect to spend more time on litigation-related issues over the next three years;
— 39 percent expect the growing risk of litigation to increase the cost of their products and services and stifle risk taking over the next three years;
— over half of all business leaders believe that a US-style compensation culture is spreading in Europe and Asia;
— two in three business leaders believe that the scale of liability claims arising from the credit crunch will exceed those arising from the Dotcom crash, and
— boards most fear future liability issues arising from advances in technology; environmental damage, and corporate governance.
Lloyd’s Chairman Lord Levene commented: “Litigation is a leveler of modern businesses. No matter what their size, location or industry, all businesses are facing increasing liability risks. Product recalls are now a daily occurrence, rising 50 percent in Europe alone in the last year. Shareholder activism is on the rise and a complex operating environment and new legislation serves to increase risks further.
“An increase in litigation and the fear of potential liability issues is impacting customers through a rise in the cost of products and services and also stifling risk taking amongst boards who are missing out on new opportunities.”
The report is the third in the series of Lloyd’s 360 Risk project, which aims to generate debate about current key risk issues and how best to manage them. It was written in conjunction with the Economist Intelligence Unit which carried out an extensive program of research including a global survey of over 180 board-level executives, supplemented by in-depth interviews, to provide a broad business perspective on the issue of liability risk management.
Issues raised in the report will be debated at a live session on Tuesday, May 20 at Lloyd’s. The panel session, hosted by Lord Levene and chaired by Clive Anderson, will explore key issues surrounding corporate liability and its impact on the business world.
Business leaders and risk experts on the panel include:
— Lord Falconer, former Lord Chancellor and Minister for Justice;
–Gerald Forlin, a leading barrister and manslaughter law expert who has acted in many high-profile cases including the Hatfield rail crash;
— The Rt. Hon The Lord Hunt of Wirral a Member of the House of Lords and chairman of the financial services division of Beachcroft LLP, and
— Amanda Stevens, President of the Association of Personal Injury Lawyers (APIL) and partner and head of the personal injury group at Charles Russell solicitors LLP.
The full report can be downloaded at: www.lloyds.com/360reports
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