Rising Edge’s predicted trends for 2024
Record Litigation Related to Corporates’ Responsibilities Regarding the Climate Crisis
Previously the climate disclosures space was dominated by voluntary climate disclosure regimes, including the TCFD’s framework for helping public companies and other organisations effectively disclose climate-related risks and opportunities through their existing reporting processes.
In 2024 we will continue to see the shift from voluntary disclosures to regulatorily mandated climate related disclosure regimes. This includes the SEC’s proposed rule and the EU Corporate Sustainability Reporting Directive (ECSRD). We are awaiting publication of the final SEC rule, but this will likely happen in Q3 or 4 2024.
The first companies will have to apply the new rules for the first time in the 2024 financial year, for reports published in 2025. This will be the first time these corporates have had to interpret and apply to this rule, and therefore we see this as an area of increased risk with the potential for claims. It is important to note that a changing landscape for climate disclosures is not the only effect the climate crisis has had on directors and their duties.
We have also seen activist groups bring claims against directors for insufficient climate change action, and we expect to see more of this type of litigation in 2024.
Increased Use of AI and Emerging Technologies in the Boardroom, Coupled with Increased Cyber Exposure, will Drive D&O Claims
The use of generative AI is an increasingly important topic for directors to grapple with, as businesses look to implement efficiencies into their practices and processes. This, though, comes hand-in-hand with D&O liability risks. It is clear already that generative AI is a focus area for regulators.
Boards which rely on emerging technologies, such as AI, but fail to implement the requisite risk management frameworks or communicate associated risks to stakeholders, will be putting themselves at risk. So too will boards that overstate these technologies’ potential impact to investors.
These trends will add further pressure to CISOs/CTOs, as they grapple with a changing regulatory environment, evolving cyber exposures, new technology and increased disclosure requirements. We expect to see more regulatory enforcement actions targeting individuals on these issues in 2024.
Geopolitical Tension and an Uncertain Macroeconomic Environment will Further Complicate Directors’ Roles
We see a clear link between rising geopolitical tension and D&O liability exposure. For example, we have seen securities class action lawsuits filed in 2023 for which trade issues between the US and China were cited as a key issue. Problems for companies arising from trade rules, sanctions and supply chain issues have become commonplace.
We predict more geopolitical flashpoints in 2024, further complicating international trade, and creating a more complex environment for directors to operate in. A key challenge related to the macroeconomic environment will be the ongoing pressure that the high inflation/interest rate environment brings to balance sheets and business’ ability to continue trading.
Major Corporate Scandal Could Expose NEDs
There will be another large-scale corporate collapse or scandal in 2024. This could bring about further debate around the importance of the Non-Executive-Director (NED) role in providing independent oversight and challenging the executive. In the aftermath of such a scandal in 2024, NEDs could be targeted and scrutinised by regulators.
Unprecedented Space Debris Catastrophe with Devastating Effects Exposing Corporates
Multiple devastating space debris collisions could cause widespread satellite failures and disruptions to global communication, navigation and earth observation systems, ultimately exposing D&Os to unprecedented risks.
This is our ‘wildcard’ prediction for 2024 and we invite our readers to submit theirs!