Mood of the Boardroom 2012: Disruptive change forces pace

By Fran O'Sullivan

The Christchurch earthquake has forced many firms to reassess the seismic soundness of their buildings. Photo / File
The Christchurch earthquake has forced many firms to reassess the seismic soundness of their buildings. Photo / File

Big technological, financial and natural impacts are forcing business to reinvent themselves

Disruptive technologies are forcing New Zealand companies to rethink the way they do business.

Nearly two-thirds of CEO respondents to the 2012 Herald Mood of the Boardroom Survey say their companies have been impacted by major technological changes.

"Digital media is core to what we do," says Porter Novelli's Jane Sweeney. "Content is only partially king these days. The way you disseminate it and get noticed is critical and equally important."

APN - which publishes the Herald - is also making major changes.

But it is not just the impact of disruptive technologies which are causing companies to reinvent or re-engineer their businesses.

Ninety-three per cent of chief executives have made contingency plans to deal with disruptive events like earthquakes, cyber-attacks and energy supply failures.

Jacki Johnson, chief executive of IAG and chair of the Insurance Council, said that as well as facing higher premiums after the Christchurch earthquakes, businesses were having to take more risk on to their own balance sheets, in the form of higher deductibles (akin to the excess on a homeowner's policy).

The earthquakes were likely to mean tougher building codes with respect to seismic risk. Thirty-seven per cent of CEOs said they were strengthening some of their properties to bring them up to the expected standards.

Chief executives face other pressures.

Deutsche Bank's Brett Shepherd says though the economic outlook for New Zealand looks more positive, the regional slowdown and the lack of sustained performance in the United States make the global outlook less optimistic."Within the global banking industry, regulatory changes and increased capital requirements will create further headwinds."

Another banking player said global funding costs would remain high and the Barclays Libor scandal had not helped this issue either.

The upshot is the potential for dislocation in global capital markets and resulting impacts on credit availability, the cost of wholesale funds and demand in the medium term.

Leading bankers like Westpac's David McLean report New Zealand companies are still relatively risk-adverse.

Minter Ellison chief executive Cathy Quinn said she had a feeling like New Zealand was back at the beginning of the Global Financial Crisis.

"People are being very cautious. Those that have survived so far are needing to dig deep to get through.

"We all now realise its going to be a long and slow recovery. We will spend less on capex and IT as we had big projects completing at the end of 2011 and in the first half of 2012."

Many chief executives believed New Zealand was in a relatively sweet spot compared to some OECD countries, and that the Government should leverage opportunities.

Kordia's Geoff Hunt said the Government needed to create the equivalent of a business 5-10 year plan to grow the economy.

"For example to ensure government ICT spend not only delivers the required outcomes but also enables more New Zealand ICT companies to gain scale to compete internationally".

NZX chairman Andrew Harmos believes New Zealand is extremely well placed given the nature, stability and quality of our prime export earning industries.

"The country is well placed both absolutely and comparatively. Mixed ownership model (MoM) and trading among farmers (TAF ) passing recent hurdles are both potentially transformative for the country.

"With TAF having been approved by Fonterra's owners, the direct benefits for Fonterra and its shareholder farmers, and the secondary benefits for the country - including employment creation - are very material. Same for MoM: it will create hundreds of extra high quality jobs in coming years.

"Europe and the US have major issues - interestingly, having just returned from Europe, Fonterra and the New Zealand dairy sector generally are held in the highest regard by the dairy sectors there, which again reflects well on New Zealand - Australia also has a number of issues weighing on it - while all these factors impact on us to a degree (core markets for us) they also highlight our strengths and provide a real opportunity to focus on growth and catch up."

Auckland International Airport's chief executive, Simon Moutter, wants the leadership mandate strengthened for Government and industry.

"Government needs a longer term and a clearer mandate to lead than is enabled by the current MMP systems. Industries need the mandate and regulatory support to work better together to compete internationally rather than being overly focused on competing domestically."

Harmos adds that most of the larger multinationals doing business in New Zealand visit Government Ministers from time to time - and so they should - they are big contributors to employment and pay taxes here

"I'd like to see more of them encouraged by Government and officials to partially list their local operations - like Fairfax has so successfully with Trade Me. This would create a number of positive second order effects, including more head offices, jobs and people and systems infrastructure - and increase the tax base.

"I'm not an advocate of compulsion like some other countries - but interesting that a large number of bigger companies like 3M, Oracle, Gillette, Alfa Laval have local operations listed in India for example.

First Capital's Scott St John warned New Zealand must continue to transition the broader population away from an entitlement culture that has an unaffordable proportion of the population dependent on the state. "At some point this needs to change, or alternatively something will break."

- NZ Herald

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