Inflation raises risks for business leaders

High inflation is causing problems for both households and businesses. Frankfurt am Main financial lines platform Finlex now emphasizes that sharply rising prices, especially for commodities, are also increasing private liability risks for managers. Dr. Marcel Straub, Head of Legal Affairs and Head of Claims at Finlex. Now, in times of crisis, there are potential risks that business leaders need to identify.

Managing directors and board members, as the top decision makers in their companies, are liable for mistakes with their private assets if they have not exercised the care of a prudent and conscientious manager. D&O (manager liability insurance) offers protection for such cases. However, Finlex warns that the recently modified framework conditions in the markets may lead to previously unforeseen risks or claims exceeding the agreed insured sums.

“There are countless conceivable constellations in which managers can make mistakes in the current crisis situation, resulting in financial loss for their company. This includes the possible charge that a board of directors or managing director has not reacted appropriately to changing market conditions Managers are accused, for example, of buying raw materials too late or too expensive, of not developing alternative supply chains, or of not ordering materials on time, and thus production is halted. It’s not uncommon for managers to subsequently be personally sued by their companies,” says Straub. Therefore, he recommends that all decision makers obtain the fullest possible D&O protection, but also weigh all decisions and document processes. .

Increasing risks also in cybernetics

However, from Finlex’s perspective, inflation not only increases risks and costs in D&O, but also in commercial cyber insurance. Due to lack of raw materials and delivery problems, for example with computer chips, it would currently take longer than usual to restore systems and, if necessary, resume operations. However, with each day of downtime, the damage to the affected company increases.

In addition, higher costs are also to be expected here. “Currently we are seeing that some of the IT service providers and forensic experts that are urgently needed to deal with a cyber attack have already increased their hourly rates,” says Elke Seiz, Claims Advisor at Finlex. She advises checking whether the sums insured and the agreed sub-limits are still sufficient.

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