Minimising the effects of a regulator investigation

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Trustees can be held personally liable for their actions so it's vital that they are prepared, says Wendy Cotton, social welfare underwriter at Markel

This is a sponsored feature supplied by Markel

In a recent article, we explored how trustees can stay on the right side of the Charity Commission and the guidance made available to trustees from the commission. Best practice and preventative measures are invaluable for avoiding allegations of mismanagement, but what can charities do to minimise the effects of a worst case scenario – when an investigation is opened against one of their trustees?

Minimising the costs

Being a trustee is a significant responsibility and can be very demanding. Even with the charity’s best interests at heart, if something doesn’t go to plan, trustees can be held personally liable for their actions. Not only can it be a worrying time professionally for trustees, but the financial implications of defending the allegation only add to their problems.

A trustee liability insurance policy can minimise the financial cost of an investigation to a charity. It covers the legal liability of a trustee, including the legal costs and expenses of defending against disqualification of a trustee, investigations or extradition proceedings. This could be, for example, if a trustee is alleged to have failed in their fiduciary duty. The litigation involved in such circumstances can be lengthy and the legal bills expensive for charities regardless of their size.

Without insurance protection, charities and trustees can be exposed to the costs of the claim that they might have to pay out of their own personal funds.

Minimising reputational damage

An investigation into mismanagement doesn’t just affect trustees. If it is picked up by the press, they might approach the charity for comment.

Trustees can be subjected to handling tricky questions from the media without formal training, all in addition to the stress and pressure of the investigation itself. Putting one foot wrong in a statement or press conference can lead to disaster for the organisation – should the press portray the charity in a negative light, it can cause irreversible reputational damage.

There are ways to manage the press in such situations. Engaging a PR expert experienced in handling sensitive situations can help your charity protect its reputation. In certain instances, this kind of expertise might be covered by your charity’s insurance. At Markel, we provide a public relations crisis management service as part of our trustee liability insurance policy, which helps charities deal with adverse press following an allegation of wrongdoing by a trustee.

For more guidance on handling the press, watch our video on managing reputational risk in a charity crisis

Wendy Cotton is a social welfare underwriter at Markel

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