What is one risk associated with the diversion of business to a director-controlled company?

One significant risk associated with the diversion of business to a director-controlled company is the potential for conflicts of interest. When directors have control over a company, they may prioritize their personal interests or the interests of their particular company over those of the shareholders or the broader organization. This situation can create ethical dilemmas and lead to decisions that are not in the best interest of all stakeholders involved. For instance, a director might direct business to companies they own or have financial interests in, even if that choice is not the most beneficial for the original company or its shareholders. Such conflicts can undermine trust, lead to legal ramifications, and affect the overall performance and integrity of the business.

The other options do not represent inherent risks; rather, they suggest potential benefits or improvements that may arise in a different context. Thus, understanding the implications of conflicts of interest is crucial for recognizing the risks in a director-controlled business scenario.