D&O need to know: Some key 2025 risks
After several tumultuous years, businesses continue to navigate a volatile and ever-evolving risk landscape. While there are perennial risks, other emerging risks pose new challenges for directors and officers (D&Os).
According to Statista, the most significant risks businesses faced globally in 2024 were:
- cyber incidents (e.g. cybercrime, malware/ransomware causing system downtime, data breaches, fines, and penalties) – cited by 32% of survey respondents
- natural catastrophes (e.g. storm, flood, earthquake, wildfire, extreme weather events) – 24%
- macroeconomic developments (e.g. inflation, deflation, monetary policies, austerity programs) – 23%
- business interruption (including supply chain disruption) – 23%, and
- changes in legislation and regulation (e.g. trade wars and tariffs, economic sanctions, protectionism, Euro-zone disintegration) – 21%.
What are the key risks facing D&Os in 2025? And what role can insurance play in helping to mitigate those risks?
Digital transformation is the top concern for Australian CEOs, according to KPMG’s Keeping Us Up at Night survey. “Following a year where the key issues dominating the zeitgeist were the rise of artificial intelligence (AI) and a cost-of-living crisis that has impacted businesses – both large and small – across the country”, 53% of CEOs said how to optimise and extract organisational value from digital transformation was their top challenge.
Leaders are particularly concerned about how AI is reshaping their industries and how they can harness the power of new technology to transform how they do business while balancing ethical, governance and regulatory concerns. Integrating AI into business operations has numerous benefits but also some significant risks, including data protection, operational considerations, cyber threats, and regulatory matters.
In a similar vein to concerns over digital transformation, the KPMG survey found 39% worried about emerging technologies. Issues around new technologies, including AI, is set to be a growing concern, with 48% saying it will be a top concern in the next 3-5 years.
The Emerging and Interconnected Risks Survey also found technological developments and advancements are seen as the primary forces shaping risk in the APAC region. Cyber threats and technological disruptions were identified as the leading risks for both the near term and the next decade. AI was cited as a major driver of long-term change, reflecting its transformative potential across industries.
As boards and management are ultimately held responsible for the actions of their organisations, ensuring there is strong governance around the use of digital technologies (including AI) is paramount. With the responsibility for governance, comes the risk of liability. Talk to your EBM Account Manager about D&O insurance and how a policy may respond to a digital disaster for which you are accountable.
Falling from the top spot in 2024 to second place in 2025, was cyber risks. Some 42% of C-suite respondents to the KPMG survey cited protecting and dealing with cyber risks as a major concern.
According to the International Audit Foundation’s 2025 Risk in Focus Global Summary, 73% of respondents globally cited cybersecurity as the top risk organisations face. In APAC it was the top threat, with 64% identifying cybersecurity as their major risk. The risk is also rising, with 69% (globally) saying it will be the biggest risk they face in the next three years.
Gartner’s 2025 CIO and Technology Executive Survey found 88% of ANZ CIOs named cybersecurity as their top concern for 2025. Managing cybersecurity risk was identified by 82% of CIOs as a key priority for the year. With the Australian regulatory landscape continuing to evolve, 92% are focussed on compliance and risk management.
According to law firm Clyde & Co, cyber risks for directors are rising. It notes that the frequency of successful cyberattacks, a Federal Court decision and changing legislation are increasing the risk that company directors in Australia will be held personally accountable for cyber breaches. In addition to talking to your EBM Account Manager about D&O insurance to protect decision-makers from personal liability for cyber incidents, discuss the range of cyber insurance policies available to protect the business from cyberattack and data breaches.
Economic concerns, including stagnation and recessions, topped the list of the most critical threats over the next two years in the World Economic Forum’s Executive Opinion Survey. Inflation also remained a pressing concern as businesses grapple with rising operational costs and weakened consumer purchasing power. A slower global economy (45.7%) and inflation (25.7%) were among the top risks in the Conference Board’s C-Suite Outlook 2025.
In straightened economic times, D&Os and management teams need to protect their business’ financial position. While most efforts will be concentrated inside the business, there are also external factors to consider. One of these is the financial standing of creditors. Should a trading partner become insolvent or default on payment, there could be a risk to the stability of the business. Talk to your EBM Account Manager about trade credit insurance.
Insolvencies are also driving litigation risk, according to Allianz Commercial’s Directors and Officers Insurance Insights report for 2025. The report notes business insolvencies are expected to rise by 11% globally, with APAC accounting for a significant number of cases. Increased bankruptcies often lead to D&O claims as stakeholders seek accountability for financial mismanagement or breaches of fiduciary duty. Talk to your EBM Account Manager about D&O insurance and income and other financial exposures.
The World Economic Forum survey also pointed to the rising impact of climate risk, including the increased frequency and severity of extreme weather events. Beazley’s Risk & Resilience Predictions for 2025 found 70% of those surveyed said extreme weather is impacting their business and the perception of climate change risks is rising. According to the 2025 Risk in Focus Global Summary, 26% of APAC businesses consider climate change to be a top five risk now – and 47% expect it to be a major risk in three years. As a result of the rising risk, businesses need to ensure they adopt robust climate risk adaptation measures, prioritising investment in climate resilience.
In the face of this, D&Os must address climate change-related exposures, including regulatory scrutiny and potential litigation. Talk to your EBM Account Manager about management liability insurance, including statutory liability cover.
In addition to climate change matters, D&Os remain concerned about environmental, social and governance (ESG) issues ESG. According to Beazley’s Spotlight on Boardroom Risk 2024 report, ESG ranked as a significant risk with 24% of respondents predicting “failure to comply with new ESG related requirements” will be the biggest threat they face in 2025.
As ESG criteria gain more traction, businesses will face greater pressure from both regulators and consumers to adopt sustainable practices and ensure compliance with new laws, according to the Harvard Law School Forum on Corporate Governance.
The 2024 Global Directors and Officers Survey revealed that 55% of board members globally see climate change as an “extremely important” or “very important” risk, up from 42% in the previous year. Increased pressures from employees, investors, regulators, and society are leading boards of directors to enhance their involvement in stewardship and ESG activities.
Climate change is a critical business risk that requires management and oversight, making it an integral part of D&O duties. That management and oversight poses risks for D&Os, especially in light of regulatory scrutiny. In particular, greenwashing and green-hushing are on both the ACCC and ASIC’s radars with ASIC identifying misleading ESG claims as an enforcement priority area for 2025.
Beazley’s boardroom report found that employer risk was the biggest threat facing global leaders. While D&Os may not be involved in the day-to-day management of the business’ employees, they are in the firing line should the business breach various legal requirements. Talk to your EBM Account Manager about the options (including any limitations on cover) to protect the business including employment practices liability insurance and statutory liability cover.
Although D&Os face a number of significant risks in 2025, there is the opportunity to build resilience and position the business for a sustainable future. Proactively identifying and mitigating these diverse risks is key to successfully navigating the challenges ahead. Your EBM Account Manager is your trusted risk advisor and can work with you to find ways to effectively protect both you and your business from perennial and emerging risks.
