When inaction becomes the risk

FOR corporate directors, managing risk is becoming more complex as cross-border regulatory demands shift. High-profile cases like Australia’s Star Entertainment Group (Star) prove that boards can no longer rely on passive oversight in a rapidly tightening global enforcement environment.

In March 2026, the Australian Securities and Investments Commission brought civil penalty proceedings against all non-executive directors (NEDs) and management of Star for neglecting their duties by failing to properly confront the risk that junket operators were laundering money within the casino operator.

At the heart of the regulator’s claims was that major governance failures arose when those in positions of responsibility, with a fiduciary duty to protect the interests of shareholders, failed to act.

When silence becomes a decision

The judgement found the CEO and General Counsel of Star had failed to inform the board of key matters and neglected to obtain further information. While no contraventions were found against the NEDs, the court singled out the conduct of the board for criticism.

The court recognised the tension between management’s duty to inform and the board’s duty to inquire, noting that NEDs were misinformed because of management’s failures.

However, the court strongly reiterated that passive attendance or a complete lack of critical engagement with risk reporting will not meet the standard of care.

The ruling also highlighted that directors operating in regulated sectors are held to higher standards when balancing risks of harm against corporate benefits. It clarified the limits of relying on management and established a precedent for heightened oversight expectations in modern regulatory environments.

For directors, this reframes the nature of oversight. Governance is no longer simply about ensuring that systems and processes (compliance frameworks, risk committees, reporting lines) exist. It is about whether those systems lead to real and genuine engagement.

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Singapore courts frequently draw on Australian jurisprudence regarding director duties, so NEDs in Singapore should view this case as confirmation that they must vigorously interrogate management, challenge assumptions, and ensure robust risk-escalation frameworks are in place.

Directors must test the information provided by management and call out discrepancies and red flags, particularly when it becomes apparent that management is not being frank or candid.

Calibrated scrutiny

In the 2025 Singapore case of Goh Jin Hian v Inter-Pacific Petroleum, a former director was found by the High Court liable for about US$146 million (S$186 million) for ignorance of the core business and ignoring “red flags”. The ruling drew significant attention because it signalled substantial personal exposure for oversight failures. On appeal, however, the damages award was overturned.

While the court held that he had breached his duty of care by being unaware of a significant line of the company’s business, it rejected the argument that various alleged warning signs should have led him to uncover a deep-seated fraud. Crucially, the company failed to prove that, had he acted differently, the losses would have been avoided. The court recognised that directors must exercise real oversight, but are not expected to uncover concealed fraud where no clear warning signs exist.

This balance is important. Singapore law does not treat directors as guarantors of corporate success. Nor does it impose liability simply because risks materialise. The courts continue to recognise that business decisions involve uncertainty, and that directors are entitled to rely on reasonable processes and information.

But that restraint has limits. Where risks are clear and responses are inadequate, the courts have said that they would be willing to intervene.

From compliance to active engagement

Both the Australian and Singapore cases cited here show the shift in emphasis from compliance to active engagement with risk. For boards, this has practical implications that go beyond legal doctrine.

First, risk reporting must be treated as a starting point, not an endpoint. The presence of reports and dashboards is not sufficient if they are not interrogated. Directors must ask whether the issues identified are isolated or systemic, and whether management responses are proportionate.

Second, patterns matter. A single issue may not trigger concern. But repeated issues, even if individually manageable, may collectively signal deeper problems. Boards must be alert to this accumulation of risk.

Third, governance processes must demonstrate substance. Minutes and board papers should reflect that matters were discussed and critically examined. In a dispute, the question will not simply be what was decided, but how that decision was reached.

Lessons for Singapore boards

The significance of the Star case lies in how it reframes responsibility. The directors’ duty of care is highly contextual. Where heightened risks are inherent to a regulated business – such as anti-money laundering risks for a casino – courts will expect boards to be hyper-vigilant regarding compliance and regulatory red flags, and directors are expected to deeply understand those acute risks and exercise sustained oversight.

The central question is no longer whether directors acted improperly in a narrow sense.

It is whether they did enough when the risks were already apparent.

For boards, the message is clear. Doing nothing is no longer the safest course. It may be the most difficult one to justify.

The writer is a member of the Accreditation and Professional Development Committe eat the Singapore Institute of Directors.