An emerging pattern
Rising Professional Indemnity (PI) claims highlight a pressing vulnerability: poor due diligence during vendor onboarding.
Without consistent oversight, this gap continues to expose businesses to significant risk. This can also be exacerbated by lack of ongoing reviews.
Risk is now front and centre in a world defined by global volatility, complex supply chains, stringent regulations, and the growing impact of US tariffs on Australian businesses.
This one PI insight presents business leaders with a clear opportunity to control and mitigate their risk.
Poor due diligence can increase your organisation's potential PI exposure, the consequences of which can be costly. From reputational damage, financial and operational costs, and even legal expenses.
Do you really know who you're doing business with?
Risk starts at the gate: the importance of onboarding
Too many businesses view onboarding as an administrative formality but executives who treat it as a strategic control point understand its value.
Yet the reality is stark, many businesses either don't check deeply enough or only do it once.
In a fast-changing world, today's safe partner may be tomorrow's liability.
Due diligence is not a one-off exercise
In an article by EY (opens a new window), they highlight ‘while outsourcing is still very prevalent, businesses cannot outsource liability. It is up to the companies to manage their risk profiles.’
Financial health, leadership changes, regulatory updates and other factors continuously evolve.
That's why best-in-class risk mitigation strategies include scheduled reviews, regular communication, thorough reporting and keeping up to date with the latest regulatory expectations.
A single red flag picked up during a routine review can help to prevent a costly PI claim and months of operational disruption.
Key questions for your next board meeting
Are we confident in our onboarding procedures across all partners, suppliers, and clients?
Do we conduct periodic rechecks on financial and compliance health?
Is our insurance broker actively helping us review these procedures and recommending improvements?
Are we treating risk as a reactive cost or as a proactive strategy?
Strategic risk is smart business
PI claims too often result from a lack of due diligence on a third or fourth-party organisation or partnership.
In high-performing businesses, risk is treated as a lever for competitive advantage.
This doesn't just help to safeguard your balance sheet, it builds trust with clients, attracts investors, and opens doors to more sophisticated markets.
Modern risk management starts well before a policy is triggered. With the right due diligence and the right partners, risk mitigation transforms from an obligation into a strategic tool for sustainable growth.
Experienced PI insurers will always advise that the route cause of PI claims is doing business with people you shouldn’t!
Contact us
For more information about due diligence and your organisation’s PI risk exposure, speak to our Professional & Executive Risk team.
The contents of this publication are provided for general information only. Lockton arranges the insurance and is not the insurer. While the content contributors have taken reasonable care in compiling the information presented, we do not warrant that the information is correct. The contents of this publication are not intended as a legal commentary or advice and should not be relied on in that way. It is not intended to be interpreted as advice on which you should rely, and may not necessarily be suitable for you. You must obtain professional or specialist advice before taking, or refraining from, any action based on the content in this publication.
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