Management decisions on trade and supply chains are coming under increased scrutiny as uncertainty around the Canada‑United States‑Mexico Agreement (CUSMA) raises the stakes for directors and officers, according to a professional risk specialist.
Alex Ilkos (pictured), a client executive in the professional services unit at Purves Redmond Limited, said CUSMA negotiations are unlikely to directly alter professional liability wordings, but they are sharpening the focus on board‑level decision‑making and potential management liability.
“If there is one area of insurance that’s probably going to be hit directly, it’s not professional liability, but the directors and officers or management liability,” he said.
Ilkos drew a distinction between traditional errors and omissions (E&O) coverage for professionals such as engineers, lawyers and accountants, and directors’ and officers’ (D&O) policies that respond to alleged mismanagement, breach of duty or poor strategic decisions.
“A lot of people put them hand in hand, but they are two very different things,” he said. “The management liability or the D&O exposure, that’s probably the most direct, if any.”
Questions around so‑called “tariff washing” – where companies present themselves as more resilient to tariffs than they actually are – form one strand of that exposure, he noted. If boards promote a business model as relatively insulated from trade shocks and that thesis fails when policy shifts or CUSMA talks go in an unexpected direction, they could face claims from investors or other stakeholders.
“That is one component of the overall D&O exposure,” he said. “Management’s going to make decisions based on how these negotiations go.”
Ilkos said those decisions range from where to source components and raw materials to how aggressively to pursue U.S. sales and what terms to offer customers on either side of the border. In many cases, boards must commit capital and sign contracts before the ultimate shape of trade rules is known.
“Maybe it’s the board of a manufacturing company and they’re going to decide to import more parts from overseas,” he said. “But then the CUSMA negotiations go incredibly well, and now the management team is under clear scrutiny with their decision-making in this process.”
In that scenario, firms may find themselves locked into less competitive cost structures or unable to market themselves as local suppliers, he said. If those choices erode margins, slow growth or weaken a company’s position, directors could be challenged on whether they misjudged the trade environment or failed to adapt.
“You, as a management board, have made a decision based on these negotiations that has hampered the business or negatively affected the business,” he said.
The exposure is not limited to listed or very large companies, Ilkos added. Smaller enterprises with U.S. exposure, or that depend on cross‑border supply chains, may also be vulnerable if trade developments undermine their business plans.
“If these negotiations go wrong, there’s potential [for] a significant amount of small businesses that would go just completely insolvent because they can’t afford the cost,” he said. That outcome may be especially likely, he added, where firms are “not prepared to take on alternative supply chain structure.”
Insolvency itself can be a trigger for D&O claims as creditors, investors or other parties examine past decisions and seek to recover losses, Ilkos noted. Even outside a formal bankruptcy, sustained earnings pressure and balance sheet strain can draw attention to strategic calls around markets and sourcing.
“Even if you knew for sure that your company is going to thrive and you’re able to find a way to do it, you could be losing a lot of money,” he said. “Revenues, margins could be down, and then… when you talk about insolvency or companies going bankrupt, it becomes a D&O risk.”
Ilkos said the link between CUSMA negotiations and increased management liability risk is indirect, operating through business judgments made under uncertainty rather than any explicit changes to policy wording. However, he said the environment increases the odds that those judgments will be tested.
“The management decision‑making is going to be under a microscope for any company that has even a small amount of U.S. exposure,” he said.
