Climate change risk is moving up company boardroom agendas across the world although cyber crime remains the biggest threat, according to a survey of 250 companies. Forty per cent of the interviewees, who included company directors and in-house lawyers, said they were either ‘worried’ or ‘extremely worried’ about the potential for climate change to impact their business operations.
Concern was highest among large firms (46%), listed companies (49%), and those based in the UK (43%), compared to 32% for Australia-based respondents, according to the seventh annual Directors’ Liability report, published by Allen & Overy (A&O) and Willis Towers Watson.
However, the report identified cyber threats – fuelled by advances in artificial intelligence and machine learning - as the single biggest threat to companies ahead of regulatory, litigation and criminal exposures.
More than half (54%) the respondents reported direct experience of either a significant cyber attack or a sizeable data loss in the past 12 months, up from 44% in the previous year.
Joanna Page, head of A&O’s insurance litigation group, said: “Cyber threats, whether in the shape of artificial intelligence or data protection, continue to trouble directors globally more than any other risk. Add to this the increasing importance of getting your corporate culture right - which is rightly a key focus for regulators - and a growing awareness of climate change as a potential area of liability, and our survey points to the three 'Cs' - cyber, culture and climate change - creating an environment of heightened anxiety and exposure for directors.”
The report notes that to date no company has been found liable for climate change-related damage.
But it points to a supervisory statement by the UK’s Prudential Regulation Authority (PRA) requiring organisations to have in-house climate expertise to deal with the issue as evidence that regulators are honing in on the issue.
The report warns: ‘While climate change litigation has so far been less successful than some had predicted, it would be wrong to assume the risk is limited to obvious sectors like energy and transportation. This regulatory focus specifically on the financial risks for banks and insurers highlights that all directors are right to be concerned about the issue.’
Meanwhile, law firms have been moving to respond to the emergence of climate change as a key business risk.