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Claims & Risk Management, Insights, Senior Care
Governance – A Balancing Act of Risk and Right
Companies of all sizes, for-profit or not-for-profit, face the unique risk of management liability. The basic principles of governance do not change, however, the problems faced and the decisions to be made do change and making these decisions is the basic authority of risk taking.
The duty of care and loyalty are unique exposures, with the consumer expectation of selfless guidance for protection and wellbeing of those served. Any failure to act with well-being in mind is judged by what a reasonable person would do with the same set of circumstances.
However, most reasonable people making reasonable decisions are not faced with the duty of risk governance of discrimination and harassment-free workspace of caregivers, advertised options of caregiving, and the necessary level of risk taking when acting in the best interest of business development.
Although most business-related exposures faced are known to executive teams, new challenges are rising each day with social media creating an information overload of movements generating questions of fairness in the workplace, the increased reliance on technology and exposure of protected information, expanded use of third-party partners, and consumer knowledge and involvement.
Once a claim is filed which includes accusations of management oversight or decision making, whether it has merit or not, it will have to be legally addressed or defended. The cost to do this can often go well above the claim demand or settlement amount and there is always the possibility of large damages which bring unplanned expenses, talent resource drains and reputation interruption.
Adding to this exposure is the personal accountability liability which can be attached to the position of oversight and direction.
The stakes are high when fulfilling any risk related responsibilities, and while day-to-day prevention and control is not the duty of those who govern and oversee, they are charged with knowing if what is in place will manage the retained or elected risk. This is why a frequent review of the risk tolerance is necessary with a clear understanding of the way it is measured and evaluated.
Proper insurance coverage can provide protection and defense for allegations such as misrepresentation, fraud, mismanagement, and breaches of duty as fiduciary or contracts. However, one of the most effective ways to avoid litigation and the cost associated with these unique claims is a firm understanding of the principal areas of corporate governance. Accountability, who is responsible for the operations and the liability if something goes wrong, fairness treating all those who have a stake in success or failure the same way, and defining transparency of the organization’s operations, as well as balancing the economic and social goals.
Being a top decision maker requires a specialized focus on exposures, the responsibility of efficient use of resources and the oversight of those resources.
First things first for optimal risk governance:
- Review and update if necessary corporate bylaws and certificates of incorporation.
- Do routine assessments of the organization’s bylaws and operational agreements.
- Review routinely the procedures of the disclosure committee.
- Be cognizant of marketing approaches and materials.
- Clarify how governing committees will be informed of the new business risks.
- Do not overlook the employee practice liability exposure which has become a dynamic exposure.
- Do not underestimate the power of social media posts.
- Make sure the human resources department has kept up with the progression of risk and growth.
- Update the orientation process to ensure new and existing executive team members understand the role of accountability and responsibility.
- Use the selected resources to your advantage, complete the risk analysis and reach out if assistance is needed.
Your resources are:
Loss Control Questionnaire: Directors and Officers Liability – Private Companies: this resource offers an opportunity to complete the risk analysis and review what is in place, determine if it is functioning properly, and create an approach to revision or enhancement.
Directors and Officer Liability Loss Prevention from Chubb is an overview of basic executive duties, correlated to the business judgment rule, required legal education, and defining ethical standards pertaining to sensitive areas of conflict of interest, political contributions, and confidentiality.
If you have questions, please contact Tra Beicher at tra.beicher@propelinsurance.com.
