In an era of heightened investor expectations, complex fund structures, and tightening regulatory scrutiny, governance failures at financial institutions no longer unfold quietly. Whether it’s a mismanaged investment vehicle, poor disclosure practices, or executive overreach, the consequences are swift—and often catastrophic. The collapse of trust often begins with governance failures at financial institutions that go unchecked for years.
From venture capital firms to private equity funds and asset managers, the risks are not just reputational. They’re legal, financial, and systemic. Yet, many firms still operate with outdated governance frameworks and insurance programs that fall dangerously short of real-world exposure. To mitigate governance failures at financial institutions, a tailored risk and insurance strategy is essential.
The High Stakes of Governance Missteps
Financial institutions manage billions in assets, investor trust, and systemic responsibility. A single lapse in governance—be it undisclosed conflicts of interest, failed fiduciary oversight, or executive misconduct—can trigger investor lawsuits, regulatory action, and irreversible damage to market credibility.
Recent cases across APAC and beyond have revealed a troubling pattern: governance gaps are often not due to a lack of rules but a failure to anticipate how emerging risks—digital infrastructure, cross-border operations, decentralized investment models—interact with old playbooks.
Common Policy Gaps
Directors & Officers (D&O) Insurance Misalignment
Many financial institutions carry D&O policies that were designed years ago, with little adjustment for today’s realities. Cross-jurisdictional risks, ESG-related litigation, and investor activism demand bespoke protection that reflects the institution’s risk profile—not boilerplate coverage.
Professional Indemnity (PI) Exclusions
Errors in financial advice, misrepresentation, or operational failure can all trigger client lawsuits. Yet many PI policies include narrow definitions or outdated exclusions that fail to reflect the institution’s current service offerings, especially in digital asset or algorithm-based models.
Cyber & Operational Risk Blind Spots
Increasing reliance on cloud infrastructure, third-party vendors, and digital platforms means institutions are only as secure as their weakest link. But few align cyber insurance with their actual tech exposure—leaving critical systems uninsured or underinsured.
Lack of Crime & Fidelity Coverage
Internal fraud, rogue employees, and vendor collusion continue to represent substantial threats—particularly in firms with decentralized teams or rapid deal flow. Crime insurance is often treated as an afterthought despite its relevance in both front-office and back-office operations.
Real-World Example: Internal Governance Failures at Saigon Joint Stock Commercial Bank
Between 2012 and 2022, Saigon Joint Stock Commercial Bank (SCB) in Vietnam became the epicenter of one of Southeast Asia’s most significant financial scandals, primarily due to internal governance failures. Truong My Lan, a prominent real estate tycoon, clandestinely gained control over SCB through a network of proxies and shell companies. Over this period, she orchestrated the embezzlement of approximately $12.5 billion from the bank by approving over 2,500 fraudulent loans to entities under her control.
This massive internal fraud was facilitated by a lack of effective oversight within SCB. Key executives and board members failed to implement robust risk management practices, allowing Lan to manipulate the bank’s operations extensively. The bank’s internal audit and compliance mechanisms were either ineffective or complicit, failing to detect or report the irregularities over a decade.
The consequences were severe: SCB faced a liquidity crisis, leading to a loss of customer confidence and significant financial instability. The scandal not only tarnished the bank’s reputation but also raised concerns about the robustness of internal governance frameworks within financial institutions in the region.
This case underscores the critical importance of strong internal governance structures, including independent oversight, effective risk management, and a culture of accountability, to prevent such catastrophic failures.
The Continuum Approach
At Continuum, we work with financial institutions to close these policy gaps—before they become liabilities.
Our approach includes:
Crime Insurance that aligns with operational infrastructure and addresses insider threats.
D&O Coverage that reflects current regulatory realities, shareholder activism trends, and global exposures.
Modernized PI Policies tailored for firms offering complex or cross-border financial services.
Cyber Insurance that aligns with the use of third-party vendors and decentralised IT operations to address unknown external and threats.
We believe risk management should evolve with innovation. Because in a fast-moving financial landscape, governance isn’t just about compliance—it’s about resilience.
