Trouble on the High Street 6th November 2018The high street has been under constant attack for well over a decade. It seems we can’t go a week without reading press reports on the death of the high street. House of Fraser recently went into administration after approximately 169 years of trading, before being rescued by Mike Ashley, retail billionaire and CEO of Sports Direct. Debenhams is now also under threat and reportedly closing stores.It seems, these companies are struggling mainly because they aren’t able to adapt and reinvent themselves quick enough. The huge chains we’ve all come to depend upon, have stuck with tradition. Although they may have moved to a combination of ‘bricks and mortar as well as online shops, they aren’t necessarily successfully meeting the needs of the consumer. And, are essentially, failing to do either element well.Online stores, such as ASOS, have become known for being nimble and reacting quickly to their audiences’ needs. They are leaner in terms of margins and overheads. And, by sticking to what they do well, they are able to constantly improve and adapt. This is illustrated by the huge difference in employee numbers when comparing online only retailers to traditional ‘bricks and mortar’ operations. Marks & Spencer, for example, has 18 times more employees than ASOS and yet, their relative stock market values are roughly the sameDirectors of these high street companies are under huge pressures to make them profitable. If not, they are responsible for the collapse of the business, employees losing their jobs, shareholders losing their investment and of course customers feeling the loss of their much-loved brand. I still haven’t recovered from the loss of Woolworths ‘pick ‘n’ mix’ counter and that was almost 10 years ago!Directors & Officers therefore, face an extremely difficult task; with the complexities of running a profitable business, including its legal and regulatory responsibilities , in a trading environment that is as tough as it’s ever been. Potential claimants can come from shareholders, suppliers, disgruntled employees, creditors and regulators, including the pension regulator. The collapse of BHS, and subsequent contribution of some of the pension deficit by Sir Philip Green, is a high-profile example of regulatory intervention.Along with the rise of online trading, our high street brands are having to contend with the fact that consumer confidence and wage growth are both at rock bottom. No doubt, this has had a knock-on impact on the casual dining sector; with well-publicised difficulties at Gaucho, Gourmet Burger Kitchen, Jamie’s Italian and Prezzo.Yet, all of the chains mentioned, cannot be looked at in isolation. The bigger picture for the retail sector is assessing how competitors are faring and what the industry predicts in the mid to long term.As an underwriter, the evaluation of D&O risks generally involves a retrospective review of historical information, which deals with actuality. However, increasingly and particularly around retail, we are also seeing an element of educated crystal ball gazing. But, it’s important we do not rely upon this in isolation, especially when establishing the financial security and continued viability of a large chain.The ongoing press coverage has certainly called the retail sector to our attention when looking at the Management Liability risks presented to us. And, more now than ever, D&O should form part of a retailers insurance portfolio.