E-Business
Allianz: Volatile Markets, US Lawsuits, ESG Issues and SPACs Create New Risks for Managers
Board members and company executives can be held liable for an increasing range of scenarios.
Today’s market volatility, with the increased threat of asset bubbles and inflation, the prospect of a growing number of insolvencies due to the pandemic environment, together with rising scrutiny around the environmental, social and governance (ESG) performance of companies and the urgency for robust cyber resilience are key risks for Directors and Officers (D&Os) to watch in 2022.
Risk managers and their D&O insurers should also closely monitor potential exposures to US derivative actions and other forms of litigation, while also not underestimating the challenges around increasingly popular SPACs (special purpose acquisition companies), according to the latest edition of Allianz Global Corporate & Specialty (AGCS)’ annual D&O report.
“The actions and culture of organizations and their directors and officers are coming under heightened scrutiny from a wide range of stakeholders, with litigation risk a primary concern,” said Shanil Williams, global head of Financial Lines at AGCS.
“This comes against the backdrop of a stabilizing D&O marketplace, although capacity is still tight in some segments and many companies would like to buy more limits than the industry can offer. The market remediation has advanced, including our own portfolio at AGCS, and this will gradually ease the pressure that some of our clients are facing. We are adopting a cautious and disciplined underwriting approach and need to remain wary about the current volatile business environment and closely monitor loss trend patterns. However, the D&O insurance space is slowly, but surely, offering opportunities for profitable growth again in selected pockets – and we are eager to pursue these.”
Uncertain insolvency issues continue to be key topic in the D&O space
The withdrawal of support measures for companies established during the pandemic sets the stage for a gradual normalization of business insolvencies in 2022.
The Euler Hermes Global Insolvency Index is likely to post a +15% y/y rebound in 2022, after two consecutive years of decline (-6% forecast in 2021 and -12% in 2020).
While the wave of insolvencies has so far been milder than anticipated, mixed trends are expected across the world.
In less developed markets, such as Africa or Latin America, the number of insolvencies is expected to increase faster compared to more developed economies, such as France, Germany and the US, where the impact of the governmental support is expected to last for longer.
Traditionally, insolvency is a major cause of D&O claims as insolvency practitioners look to recoup losses from directors.
There are many ways that stakeholders could go after directors following insolvency, such as alleging that boards failed to prepare adequately for a pandemic or for prolonged periods of reduced income.
Market volatility, climate change and digitalization key issues
The financial services industry, but also companies from other sectors, continues to face multiple risk management challenges in the current economic climate.
Markets are likely to become more volatile with the increased risk of asset bubbles and inflation rising in different parts of the world.
At the same time, more banks and insurers are expected to assign individual responsibility for overseeing financial risks arising from climate change, while investors are paying closer attention to the adequate and timely disclosure of the risk that it poses for the company or financial instrument they invest in.
The tightening regulatory environment, the prospect of climate change litigation or ‘greenwashing’ allegations could all potentially impact D&Os.
Meanwhile, digitalization has further accelerated following Covid-19, creating enhanced cyber and IT security exposures for companies.
This requires firms’ senior management to maintain an active role in steering the ICT (information and communication technologies) risk management framework.
“IT outages and service disruptions or cyber-attacks could bring significant business interruption costs and increased operating expenses from a variety of causes including customer redress, consultancy costs, loss of income and regulatory fines. Last, but not least, brand reputation can also suffer. All this can ultimately impact a company’s stock price with management being held responsible for the level of preparedness,” said Pauline Vacher, head of Financial Lines for South Africa and France.
Heightened litigation risk in the US
Litigation risk continues to be a top D&O concern, in particular around shareholder derivative actions which are increasingly being brought on behalf of foreign companies in US courts.
“A number of new lawsuit filings, the recent openness of certain courts to extending long-arm jurisdiction, and a possibly record-breaking settlement announced in October 2021, point to heightened US litigation risk for directors and officers of non-US domiciled companies,” David Ackerman, Global Claims Key Case Management at AGCS emphasizes.
Since early 2020, a group of plaintiffs’ firms has brought more than 10 derivative lawsuits in New York state courts on behalf of shareholders of non-US companies seeking to hold directors and officers legally and financially accountable for various breaches of duty to their corporations.
The financial hurdles to bring suit in the US are significantly lower than in many other countries, while US courts and juries are considered more plaintiff-friendly than many others around the world.
The consequences to directors and officers forced to defend themselves in derivative litigation before US courts can be severe.
In what may turn out to be a record-setting settlement for a US derivative lawsuit, in October of this year defendants agreed to pay a minimum of US$300mn to settle litigation brought in a New York state court by shareholders of Renren, a social media corporation based in China, and incorporated in the Cayman Islands, after allegations of corporate misconduct.
Scrutiny over SPACs
Another emerging risk in the global D&O insurance space comes from the growth of so-called Special Purpose Acquisition Companies (SPACs), also known as ‘blank check companies’.
These represent a faster track to public markets. Advantages fueling the growth of SPACs over traditional Initial Public Offerings (IPOs) include smoother procedures, less regulatory and process burdens, easier capital sourcing and shorter timelines to complete a merger with target companies. During the first half of 2021, the number of SPAC mergers in the US, both announced and completed, more than doubled the full year total of 2020 with 359 SPAC filings, garnering a combined US$95bn raised.
The growth of SPACs in Europe may not match the scale of the US boom, but there is still a growing expectation that it will increase despite a less favorable company law environment compared to the US.
In Asia the market is slowly gaining momentum with a significant uptick in companies in China, Hong Kong and Singapore as a new route to accessing capital markets.
SPACs carry a set of specific ‘insurance-relevant’ risks, and losses are already reported to be flowing through to the D&O market as both the SPAC and the private target company typically obtain D&O coverage.
“Exposures could potentially stem from mismanagement, fraud or intentional and material misrepresentation, inaccurate or inadequate financial information or violations of rules or disclosure duties,” said David Van den Berghe, global head of Financial Institutions at AGCS.
In addition, a failure to finalize the transaction within the two-year period, insider trading during the time a SPAC goes public, a wrong selection of a target to acquire or the lack of adequate due diligence in the target company could also come into play. Post-merger the risk of the go-forward company to perform as expected or failure to comply with the new duties of being a publicly-listed company also needs to be considered.
National Information Technology Development Agency (NITDA) has issued a public alert warning Nigerians about a cybersecurity threat involving the use of Spotify to promote malicious activities.
The agency, in a public notice issued on Tuesday, disclosed that threat actors are exploiting the popular music streaming platform to advertise game hacks, pirated software, and spam links that could expose users to cyber threats.
According to NITDA, cybercriminals embed malicious promotions in playlist names and podcast descriptions on Spotify, explaining that these promotions are used to advertise game hacks for popular video games such as Fortnite, GTA, Apex, and Roblox. Additionally.
They also promote pirated software (commonly referred to as ‘cracks’), spam links, and other malicious sites.
This abuse is said to leverage Spotify’s web player results to improve the search engine visibility of these harmful websites, putting unsuspecting users at risk of malware, scams, and other cyber threats.
NITDA warned that the exploitation of Spotify could lead to exposure to scams and phishing attacks, downloading of malware that can compromise user devices and Loss of personal and financial data through interactions with malicious websites.
To manage the risks, NITDA advised users to exercise Caution with suspicious playlists and podcasts and avoid engaging with playlists or podcasts that feature unusual or suspicious text in their descriptions.
It also warned users not to click Unknown Links, and also ensure the Spotify app is updated to the latest version to minimise vulnerabilities.
The agency further advised Spotify users in Nigeria to remain vigilant and adhere to cybersecurity best practices to safeguard their personal information and devices.
According to the agency, the websites posing as OpenAI’s popular AI, ChatGPT, are tricking users into downloading malicious files or software to their devices.
Excitement is reaching a fever pitch among shoppers as the Konga Yakata Black Friday shopping fiesta enters its final week. Shoppers nationwide are gearing up for a rain of last-minute deals and irresistible offers, with the promotion set to end on Saturday, November 30, 2024.
The month-long Konga Yakata campaign, which kicked off on Friday, November 1, has delivered an unparalleled shopping experience, treating customers to incredible discounts, engaging promos, and unbeatable incentives.
In addition to massive price cuts across a wide range of products, Konga has thrilled shoppers with exciting events such as Treasure Hunts, Flash Sales, Bargain Bash, Brand Days, and specialized Black Friday packages like the Budget Store, Under 50k Store, and TGIF Epic Drop.
The highlight of the Yakata 2024 season will be this year’s Black Friday, which takes place on Friday, November 29. Thousands of customers will be able to score exclusive discounts on items including electronics, clothes, home appliances, computers, and groceries.
Reflecting on the experience so far, a satisfied anonymous shopper who snagged a TV at a discounted rate said, “Konga Yakata has been nothing short of amazing this year. The discounts are unbelievable but true, and the convenience of shopping online is unmatched.
“I’ve already made several purchases, and I’m excited to see what other deals are in store for the final week.”
Konga’s Black Friday sale has been a boon for consumers, offering respite from the economic challenges many Nigerians face. By providing access to affordable products and services, Konga has empowered shoppers to make the most of their money.
Despite the prevailing economic challenges, shoppers have embraced the Yakata season, targeting high-value deals and leveraging Konga’s tailored offerings to make significant savings. With the countdown underway, the excitement is expected to hit its peak on Friday as customers traditionally wait for that day to grab the most exclusive deals.
Speaking on the heightened anticipation, Kunle Ajani, Group Head of Marketing at Konga, stated, “We’re thrilled with the overwhelming response to Konga Yakata this year, and we’re committed to ensuring the final week delivers the biggest surprises yet.
“We are proud to offer a platform where shoppers can enjoy exceptional value, despite the economic realities.”
As the curtain closes on the 2024 Yakata season, shoppers can look forward to a flurry of last-minute deals, culminating at midnight on November 30. From tech enthusiasts to lovers of electronics and deal hunters, Konga Yakata continues to redefine the shopping experience, making it a season to remember for all Nigerians.
Take advantage of the final week of Konga Yakata. Visit Konga.com and experience the thrill of shopping at unbeatable prices.
Kashifu Inuwa CCIE, the Director General, National Information Technology Development Agency (NITDA), has reiterated the critical role of innovation in driving Nigeria’s sustainable development, economic diversification, and global competitiveness.
Inuwa made this remark while delivering a keynote address at the 8th Annual Research Fair and Exhibition of Nasarawa State University, Keffi (NSUK), where he called on academia, industry leaders, and policymakers to embrace disruptive transformational innovation as a tool for addressing the nation’s challenges and unlocking its immense potential.
Speaking on the theme, “Disruptive Transformational Innovation; Shaping the Future,” Inuwa commended NSUK for organising an event that aligns with Nigeria’s pursuit of growth through knowledge-driven solutions.
Inuwa who was represented by the Deputy Director, eGovernment and Digital Economy Development Department, Engr Ya’u Garba, applauded the university’s increasing focus on transformation, noting that such initiatives reflect an understanding of the need for impactful innovations to address real-world issues.
Inuwa emphasised that while inventions remain a cornerstone of academic inquiry, their significance lies in their ability to move beyond theoretical exploration to become practical innovations. These innovations, he explained, have the power to reshape industries, tackle societal challenges, and accelerate national progress.
He urged institutions to prioritise creativity and bold thinking, ensuring that research outputs translate into tangible benefits for society.
Explaining the concept of disruptive transformational innovation, Inuwa described it as a profound force capable of altering established systems, processes, and products in ways that redefine societal functions. Unlike incremental innovations, which focus on improving existing frameworks, disruptive innovations introduce entirely new paradigms, addressing challenges in groundbreaking and previously unimaginable ways.
He cited historical examples such as the Printing Press, the Steam Engine, and Electricity, which have significantly transformed human existence and set the foundation for modern development.
Inuwa pointed out that Nigeria’s abundant human and natural resources present a unique opportunity to harness innovation for sustainable development. He called for a collaborative approach involving academia, industries, and government to build an environment that nurtures creativity, supports bold investments, and encourages inclusive growth. Such an ecosystem, he said, is vital for fostering homegrown innovations that can propel Nigeria to the forefront of global technological and economic advancements.
He further highlighted NITDA’s dedication to fostering innovation through various initiatives, including the National Adopted Village for Smart Agriculture (NAVSA) to digitally transform the agricultural sector, the National Blockchain Adoption Strategy to enhance digital trust and transparency, and the National Artificial Intelligence Strategy aimed at building a robust AI ecosystem in the country, among other impactful projects, which are part of the Federal Government broader strategy to position Nigeria as a leader in the global knowledge economy.
Inuwa also urged NSUK to deepen its commitment to innovation by establishing hubs that support facility-led startups, fostering collaborations with industry stakeholders, and equipping students with essential technological skills. He noted that such efforts would not only empower the university community but also contribute significantly to national development.
Inuwa expressed confidence in Nigeria’s ability to not only adopt global innovations but also create groundbreaking solutions that could influence the trajectory of Africa and the world.
He called on all stakeholders in the country to embrace the transformative power of innovation in order to drive sustainable development, economic diversification, and global relevance.
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