Future of Risk: How Demographics AI & RTO Effect Executive Liability

Editor’s note: This article is the fourth installment in the 2025 Future of Risk series, which explores the rise of systemic risks — threats that are difficult to predict, span industries, and carry the potential for widespread disruption. This piece examines how evolving workforce dynamics, from demographic shifts to AI usage, are reshaping executive liability and introducing new exposures across the C-suite.

As companies navigate changing demographics, remote work debates, and rapid AI adoption, the risk landscape is expanding in ways that directly impact the C-suite. Workforce shifts once limited to HR are now triggering boardroom scrutiny, putting executive decisions under legal and reputational lenses.

What starts as a policy change can end in a regulatory or legal challenge, and the absence of documentation or consistent oversight often becomes the focal point in shareholder suits or compliance reviews. These pressures expose risks in succession, AI governance, and workplace policies, prompting executives to reassess how they identify, communicate, and insure risk.

Succession planning risks: Managing an aging workforce in 2025

U.S. labor demographics are trending older. By 2031, one in four U.S. workers will be 55 or older, up from one in five in 2011. Retirements outpace mid-level and senior talent development in sectors like insurance, financial services, and healthcare.

The implications are broad:

• Loss of institutional knowledge can hinder operational continuity
• Limited backfill planning may delay key projects or prevent smooth handoffs when someone retires
• Higher compensation pressure (leading to wage inflation) may arise when filling roles externally and could have a material financial impact on a company

Unplanned or poorly handled departures of older employees can lead to age discrimination claims and erode team morale. Executive teams increasingly face questions about how they approach these exits, develop successors, and ensure fair treatment across age groups.

At the same time, the rise of AI and automation is compounding these challenges. Incorporating AI to improve business efficiencies is creating new risk management exposures.

AI governance risks: Legal and compliance pitfalls for executives

In McKinsey’s latest Global Survey on AI, 78% of responding organizations now use AI “in at least one business function.” While automation brings clear benefits, its use in hiring, employee monitoring, benefits, and financial operations introduces complex legal and reputational risks, many of which reach the C-suite. Concerns include:

• Bias or error in automated decision-making, especially in hiring or promotions
• Reduced need for entry-level workers, creating a gap in the talent pipeline
• Elimination of job functions and associated decisions around reskilling displaced individuals
• Fiduciary risk from AI tools used to recommend health plans or retirement options

In regulated sectors like healthcare and finance, inaccurate outputs from AI models can trigger lawsuits tied to professional negligence or breach of fiduciary duty. These incidents often raise questions about executive oversight, especially when tools aren’t fully understood or documented.

Insurers also are taking a closer look, asking how AI tools are governed, if human oversight is involved, and how decisions are recorded. Regulators, insurers, and investors are scrutinizing executives for AI-driven decisions, both recent and past, as more legal and ethical questions emerge.

AI-related claims can take 12 to 18 months or more to emerge. Underwriters are fully cognizant of this delay and will factor it into their pricing. Leaders who have not prioritized governance and documentation may face coverage limitations, higher premiums, or both.

Remote work and hybrid policy risks: Legal and DEI challenges

As organizations rethink post-pandemic flexibility, hybrid and return-to-office (RTO) policies are drawing greater attention and scrutiny. According to SHRM, nearly 60% of U.S. workplaces are now hybrid, while just 20% are fully in-office. Rolling back remote policies brings risk, including:

• Inconsistent enforcement across departments or roles
• Pushback from employees with prior remote agreements
• Attrition, disengagement, or discrimination claims among groups disproportionately affected
• Reduced diversity and associated implications for innovation and decision-making

Uneven enforcement of written policies leads to risk. Managers making ad hoc decisions without consistency or documentation can expose companies to liability. Legal concerns are also rising around DEI initiatives and promotion practices. Recent court decisions have made reverse-discrimination claims more viable, especially when documentation of exceptions is weak.

Insurers now ask:

• Who approves exceptions?
• How is your organization communicating changes?
• What process do you use for documenting decisions?

The answers are shaping underwriting decisions on coverage, exclusions, and pricing.

How to build a resilient executive risk strategy

Managing executive liability today requires more than traditional insurance. It involves proactive collaboration across HR, risk, compliance, and legal teams. Leading organizations are:

• Involving risk and legal teams early in workforce planning
• Auditing employment and benefit systems before automating tasks
• Reviewing AI vendor terms and liability limitations
• Documenting RTO and DEI changes with legal input
• Setting regular check-ins between HR, legal, and executive leadership

Coverage questions are evolving, too. Claims involving productivity monitoring or hybrid work enforcement often blur the lines between EPLI, cyber, and professional liability. Many companies are revisiting how these policies overlap and where gaps may remain.

Future-proofing workforce decisions

Talent strategy, workplace design, and automation are evolving in parallel. These changes introduce legal and reputational challenges that stretch beyond HR and deep into the boardroom.

Boards are shifting their focus, from reviewing policies on paper to examining real-world impacts.

They want to know:

• Who will this change affect?
• What are the risks — and your mitigation strategy?
• Is the proposed course of action equitable?
• How will you communicate the new policy?

The organizations navigating this landscape most effectively aren’t just chasing efficiency. They're building resilience into how they make workforce decisions. That means prioritizing transparency, accountability, and long-term risk awareness from the start.