Signals of a lighter regulatory touch shouldn’t be mistaken as a green light to materially scale back your disclosures and compliance controls. Certainly D&O insurance underwriters will continue to closely evaluate the strength of a company’s governance, compliance culture, and disclosure practices when assessing D&O risk.

A well-structured governance framework, as well as consistent and transparent disclosures, can lead to more favorable policy terms, including lower premiums and reduced self-insured retentions. On the other hand, perceived weaknesses or sudden shifts in governance practices may raise red flags, trigger additional underwriter scrutiny, and result in less favorable terms or exclusions.

Perhaps more importantly, a strong disclosure and compliance posture helps to serve as the first line of defense in the face of litigation. Plaintiffs’ firms will often scrutinize public filings, statements, and other disclosures for any inconsistencies, omissions, or vague language, particularly in the case of a significant drop in your company’s stock price. As a result, the best course in most cases, especially when navigating the winds of regulatory change, will be to maintain disclosure and compliance discipline.

Ultimately, while this environment does present an opportunity to refine and streamline processes, any rollbacks should be well-reasoned, documented, and defensible.