Positive outlook from directors

ASB Bank chief economist Nick Tuffley.

But disruption, labour shortage are clouds on the horizon.

Directors are more positive than previous years about the future of business and New Zealand's economy in the coming 12 months.

Almost 95 per cent of directors expect New Zealand's economic performance to stay the same or improve in the coming year, according to the third annual Director Sentiment Survey from the Institute of Directors (IoD) and ASB.

The survey collected responses from almost 900 directors across New Zealand with the results highlighting technological disruption, labour shortage and red tape as the main issues directors were concerned about.

ASB Bank chief economist Nick Tuffley said the results were positive.

"Increased confidence comes on the back of a strong economic performance; one that most directors feel can be sustained or improved on.

"As a result of this economic strength, the labour market has tightened."

Tuffley said the results reinforced the view that NZs economic environment was a strong one, and although there was a slowing in the first half of the year, this had rebounded strongly.

"One of the more interesting results was what directors viewed as the biggest impediments to economic performance," Tuffley said.

"Concentration risk was very low so directors don't seem to be of a view that we're overly exposed to any one given industry.

"I think if we look at how well the economy has done when one of our most important industries, the dairy industry, has been having some tough times; what a testament to the fact that there are quite a few other strong engines of growth in the economy whether domestic or export-focused."

Technological disruption was ranked one of the most concerning issues with 47 per cent of directors expecting their organisation to be affected by disruptive change and just 35 per cent saying they had the capability to deal with their organisations' digital future.

Cyber-security was also a major concern with the report highlighting t that because most businesses rely on technology to operate, security should be a high priority. Felicity Caird, IoD manager at governance leadership centre, said being prepared for the digital future was critical for business success.

"Technology continues to be a strong theme when it comes to internal risks so developing board and organisational capability must be areas of focus for directors to ensure organisations are resilient," Caird said.

"In 2015 we said just 27 per cent of boards regularly discussed cyber-risk and were confident about their company's capacity to respond to an attack, although this increased to 32 per cent, this is still very low and remains a concern."

Regulations and red tape was ranked the second highest concern in relation to the economy (33 per cent) and business performance (34 per cent). Time spent on compliance activities has increased with 80 per cent of directors saying this had jumped in the past 12 months compared with 78 per cent the year before.

Most boards, 86 per cent in total and 97 per cent of publicly listed companies, said stakeholder interests were very important to their business, with 97 per cent of publicly listed companies saying this.

"It was pleasing to see diversity remains a key consideration when making board appointments at 70 per cent, up from 60 per cent last year."

The number of boards complying with the new Health and Safety at Work Act has also continued to increase from 51 per cent in 2014 and 60 per cent last year to 68 per cent this year.