The Management File: Unique Risks for Privately Owned Companies

A common thought is that privately-owned companies have less risk than publicly owned companies, but Directors & Officers Insurance (D&O) lawsuits are highly common in private companies. D&O liability mostly consists of shareholder lawsuits and employment claims, but below are some unique D&O claims that private companies face.

Complying with regulations

  • The Dodd-Frank Act
  • The Foreign Corrupt Practices Act (FCPA)
  • The Sox Act (Sarbanes-Oxley)

Risks of going public

  • Lack of Confidentiality
  • Increased director and officer personal liability for violation of securities laws
  • Increased executive management responsibilities
  • Pressure to perform up to expectations and short-term profits 

Occupational fraud and ways to prevent it

  • 39% reported fraud in private companies
  • Occurs at all levels of the company
  • Educate employees with fraud training
  • Background checks on all employees

Most privately held companies do not have a chief risk officer, therefore they should at least have a risk management program in place. Private companies should be monitoring risk at all levels especially since they have fewer resources than public companies. BKS Partners is here to help your organization with an expert on our team who can evaluate your needs to ensure your D&O coverage is complete.



This material has been prepared for informational purposes only and was generated from information provided to BKS from the client and/or third-party sources. Therefore, BKS makes no warranty or representation(s) as to the accuracy or appropriateness of the data and/or the analysis herein. This information is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your tax, legal and accounting advisors for those services.

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