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Managing financial and operational risks to safeguard growth

Without adequate D&O coverage, private companies face a complex array of ever-evolving risks that can threaten financial stability.

06/02/2025 · 4 minute read

In today’s turbulent economic environment, private companies face a complex array of ever-evolving risks that can threaten financial stability and could also derail expansion plans. The interconnected nature of these risks complicates decision-making, placing leadership teams in a challenging position.

And considering that financial decisions may significantly impact operations and vice versa, the importance of sound leadership capable of effectively navigating emerging and evolving challenges cannot be overstated. At the same time, missteps in judgement not only impact your organization itself; it can also expose decision-makers to claims that, without adequate directors and officers liability (D&O) coverage, may jeopardize their personal assets.

Evolving market dynamics exacerbate private companies’ risk

From changes in customer demand, to market volatility, to periods of economic uncertainty, private companies like yours face a wide range of financial risks that can impact your bottom line and also affect operations. Moreover, supply chain disruptions can lead to increased costs and diminished profit margins.

One of the most pressing concerns for private companies is the risk of insolvency or bankruptcy, especially given the heavy reliance on private equity or debt financing. This dependence can create vulnerabilities, particularly if your company faces unexpected revenue downturns or rising operational costs. Dividend recapitalizations, where private equity sponsors withdraw dividends that could otherwise bolster the company’s financial health, can create significant liabilities. If your company becomes over-leveraged, it may struggle to meet its debt obligations, potentially leading to bankruptcy. 

Further, as your organization grows and adapts to a changing risk landscape, you may need to overhaul internal processes and systems that drive your day-to-day operations. This may involve adjusting production capacity, enhancing quality control, and effectively managing supply chain challenges. 

These are among the scenarios that could have serious implications for directors and officers, who may face personal liability for decisions perceived to have contributed to the company’s financial distress.

At the same time, as you expand your operations, it is likely to encounter heightened scrutiny from regulators and other stakeholders. This is more prevalent for those in industries that are already subject to stringent regulations, such as healthcare and technology. Senior leaders must remain vigilant regarding any regulatory changes and ensure that their operations comply with legal requirements to mitigate the risk of legal action and hefty fines, which could have financial consequences.

The current geopolitical climate adds another layer of uncertainty. The implementation of tariffs and counter-tariffs, trade disputes, and shifting international relations can disrupt supply chains and impact operational costs. Decisions — for example whether to onshore production of critical supplies — will likely face increased scrutiny, especially if they lead to financial losses.  

Protecting leadership and assets

Amidst a changing risk landscape, senior leaders’ decisions may also be subject to scrutiny, and any missteps can open both the company and its leadership teams to potential claims. Considering the importance of retaining a strong leadership team to guide the organization towards success, it is important to prioritize a comprehensive D&O program that provides coverage for claims made against executives and board members, safeguarding their personal assets in the event of lawsuits related to their management decisions.

As your company grows and risks evolve, insurance programs must be reviewed to determine whether they still address concerns they were originally set out to, or if new exclusions could lead to gaps in coverage. 

To thrive in an ever-changing environment, private companies like yours must remain vigilant in identifying and addressing changing financial and operational risks. Investing in technology, streamlining operations, and implementing robust insurance programs can help you protect your financial stability and put your organization in a more favorable position for long-time success.

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Our people

Deepak Adappa

Deepak Adappa

Managing Director, FINPRO

  • United States

William Fahey

William Fahey

Private Company D&O Product Leader, FINPRO

  • United States

Ruth Kochenderfer

Ruth Kochenderfer

D&O Product Leader

  • United States

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