A new survey has revealed businesses on both sides of the Tasman expect technological change and an ageing population to have more impact on their operations than globalisation and the rise of Asia.

A new survey has revealed businesses on both sides of the Tasman expect technological change and an ageing population to have more impact on their operations than globalisation and the rise of Asia.

Of the nine ‘global megatrends’ identified in the Chartered Accountants Australia and New Zealand (CA ANZ) survey of Australian and New Zealand business leaders, nearly a quarter rated technology as having the biggest effect. At the other end of the scale, climate change was picked to have the least impact.

The ageing population (17 percent in Australia, 16 per cent in New Zealand) also was on many business leaders’ minds. Like climate change, resource scarcity and growth in Asia were low down on the list.

Geraldine Magarey, CA ANZ’s Leader Policy and Thought Leadership said the survey for the Future of Business report shows greater concern over local forces than global ones.

“Businesses in both Australia and New Zealand are very focused on the here and now – what’s happening directly with their businesses, and with the local economy, rather than the ‘big’ issues such as globalisation which policy makers and commentators sometimes emphasise.

“That’s perfectly logical, but businesses need to remember that they are not immune from global forces.

“At some stage they will have an impact.”

The survey asked businesses in Australia and New Zealand about their views on the future in the face of unprecedented levels of uncertainty and competition.

The results found that 55 per cent of Trans-Tasman businesses that reported being above-average in terms of agility are also experiencing above-average revenue growth – a clear sign that adapting to changing conditions helps businesses prosper.

Magarey said the report shows there is a lot businesses can do to reach their financial goals in the midst of constant change and the next wave of technology.

“The size of a business can affect its agility, and the biggest issue today is leanness, with more than two in five businesses in Australia and New Zealand saying they have underutilised resources.

“Pleasingly, many businesses know they need to be more proactive in considering these issues, with two in five planning to review their business model more frequently in the future.

“What businesses are focusing on is dependent on their size. Large businesses are prioritising increasing customer satisfaction and investing in digital, while small businesses are focused on improving cash flow and marketing methods.”

More than half of surveyed businesses are not currently using any exponential technologies, which include artificial intelligence, robotics, drones, 3D printing, blockchain and autonomous vehicles. However three in five are expecting to take up at least one of them in five years’ time.

“While all exponential technologies won’t apply to every business, those who fail to embrace new opportunities risk missing out,” said Magarey.

The research shows that in Australia and New Zealand larger firms are more likely to have taken up exponential technologies, and to say that they will adopt them in the future, which may be due to either greater awareness or more capital to invest.

Firms with a digital focus perform better than others, which is why the digital wave is one of five trends that will define the successful enterprises of tomorrow, according to a new CA ANZ survey of business leaders.

IN BRIEF

By Alexandra Johnson.

The business world is changing rapidly. Businesses are facing unprecedented levels of uncertainty and competition because of a myriad of factors, from climate change and technology to community expectations. 

Chartered Accountants Australia and New Zealand (CA ANZ) conducted a trans-Tasman survey of more than 1500 business leaders to understand their aspirations, views on the future, and how they anticipate and respond to challenges and opportunities. 

New research by CA ANZ confirms that agile businesses are enjoying superior revenue growth.

Here are five trends identified by the report that define business of the future and what successful enterprises will look like.

1.Digital transformation boosts revenue

Businesses nominate technological change as the most important of the megatrends. Across a range of metrics, digitally advanced businesses perform better, with the benefits including more revenue and increased engagement with customers.

Digitally engaged small businesses perform better financially, according to Deloitte Access Economics. In 2017, small-to-medium sized businesses with advanced levels of digital engagement were 50% more likely to be growing their revenue, and they earned 60% more revenue per employee relative to businesses with lower levels of digital engagement.

In the CA ANZ survey, more than four in every five (86%) businesses say they already use at least one digital tool to engage with their customers – such as email, social media, blogs or search engines – up from 77% five years ago.

But how do you embark on a digital business transformation to fully take advantage of market opportunities? One Big Four bank that is investing heavily in digital and technology staff is NAB. It is creating up to 2000 jobs by 2020, most of which are in the technology and digital areas, as part of a A$4.5 billion digital transformation.

Sydney-based Mark Nielsen, CEO of Talent, a leading technology and digital recruitment agency, says that in general terms, investment in digital assets and talent is hugely important.

“Often a digital transformation is the largest project a business will undertake, therefore engaging people who have done this before will save a significant amount of money and greatly improve the chances of success.”

But he sounds a note of caution, adding that many businesses can make the mistake of building out technology before constructing their business model.

He says the first step is to engage a business analyst to define the business model, “and understand the key drivers and how you are going to ultimately add value from a monetisation point of view. Once you’ve done that – the business analyst can do the process flows – what is my current system and what is it going to look like afterwards?”

From there, the right technology and experts can be selected to help leverage and scale a business. Nielsen says many transformations are driven by the increasing use of mobile devices. “Now people want everything mobile driven, and for that there are niche skills required such as UR and UX developers to make sure the interface between users is exactly what they are after.”

Nielsen says Talent has just launched an innovative digital platform, Talent Engage, which revolutionises communications in the recruitment industry. It streamlines payroll processes, allows employers to contact their ideal contractors and offers professional development. “There is also a rewards program and a whole interface where contractors can be part of a community, effectively like a live hub.”

2. Social responsibility is the new normal

According to the CA ANZ report, 87% of businesses are involved in at least one action to build their social responsibility profile, and in five years’ time, this is expected to grow to 94%.

Karen McWilliams, CA ANZ Ethics and Sustainability Leader, says social responsibility is becoming an expectation from both customers and employees. “There is a change in public perception that businesses can’t just make big dollars at the expense of everything else.”

In the past, while impacts on the wider environment were not being appropriately priced and were therefore not being taken into the decision-making process, things are now shifting.

While millennials are certainly part of this push, larger organisations are also starting to think long term, “so they are still giving value back to shareholders and customers in 10 years’ time”.

Additionally, there is a lot more focus now on how organisations maintain their brand and reputation. “Social media and our 24-hour news cycle mean that businesses need to be more responsive. Disgruntled voices have far more clout than they used to.” 

3.  Fast thinkers are top performers

Businesses need to also prioritise agility and adaptability – not just in products and processes, but in business models, too.

A recent McKinsey survey of 165 companies around the world found that the most agile organisations are also the most healthy and profitable.  This was confirmed in the CA ANZ survey, as 55% of businesses that reported above average agility also had above-average revenue growth. But in practical terms, how is agility achieved? The report defines five qualities successful businesses need, including leanness and responsiveness to the changing environment.

4.  Plan now for the changing face of work

Most business heads still expect that more than 80% of their workforces are traditional employees and do not yet predict an increase in the use of contractors or robotic workers.

But as this and many other reports suggest, sweeping changes to employment are on the horizon, with the rise of part-time workers, collaborative platforms, and estimates that automation will change the nature of more than 60% of jobs.

The report recommends that businesses consider other ways to employ people and use technology to be competitive and efficient. “Businesses that have not yet considered and planned for the changing face of work could face a significant transition,” the report says.

5.  Location, location

While many global challenges are affecting businesses, one of the greatest concerns in Australia and New Zealand for both large and small businesses is the level of government regulation and compliance.

However, Australia and New Zealand still appear to be favourable locations for doing business. New Zealand ranks first in the world in the World Bank’s Ease of Doing Business index and Australia ranks 14th out of 190 countries. In particular, starting a business, dealing with construction permits and getting credit are simpler in both Australia and New Zealand than in most other countries.

“…realistically, the business environment in Australia and New Zealand is in good shape by global standards,” the report points out.

Discusses what companies can do to survive our changing society. Looks at five game-changing technologies such as blockchain, AI, and 3D printing. Suggests finance executives play a critical role in these disruptive changes.

Alexandra Johnson is a freelance writer based in Wellington. 

Source: Chartered Accountants Australia New Zealand

IN BRIEF

When 6,000 accountants step through the doors of Sydney’s International Convention Centre in November 2018, they will be part of a global mission to sketch out the future of the accounting profession. The World Congress of Accountants (WCOA) comes at a time of extraordinary change within the global workforce, with technology disrupting jobs, careers, and business models.

This is driving demand for new skill sets, which accountants will need if they are to remain relevant. In a recent Chartered Accountants ANZ survey, more than 1,200 business leaders were asked to name the most valuable skills accounting professionals would need in the future. “Collaboration” and “the ability to work with data and the latest technology and systems” both rank near the top.

Yet accounting leaders do not rate themselves highly at recruiting and retaining professionals with those skills.

Chartered Accountants ANZ and CPA Australia are presenting WCOA 2018: Global Challenges, Global Leaders in Sydney, 5 – 8 November 2018. 

“These results offer an insight for accountants as to the skills they need to develop to remain in demand with employers,” says Geraldine Magarey FCA, Leader of Policy and Thought Leadership at Chartered Accountants ANZ. “Some accountants already operate at the cutting edge of technology, while others do have strong collaboration skills. But our survey suggests that accounting leaders struggle to find enough of them.”

Collaboration

The results of the survey informed a new Chartered Accountants ANZ thought leadership paper, The Future Of Talent. At its launch in Canberra, futurist and researcher Mark Pesce told an audience of accountants and government leaders that collaboration skills would be vital in a fast-changing economy.

“Collaboration doesn’t just happen in the office of the accountant,” says Pesce. “It’s also when you’re with the client. The client is teaching you about their business, how you work in their business, how their processes work – and at the same time you’re teaching them.”

Mark Pesce discusses the future of money and accounting with Andy McLean.

The same applies for in-house accountants, according to Magarey. “Business leaders in our survey want to make their organisations more agile … Accountants in finance departments are ideally placed to help make that happen because they touch every part of the organisations they serve.

“As businesses flex and change, accountants must guide senior management on how alternative strategies affect the bottom line. They must also coach and consult with colleagues across the business.” 

The rate of change in the marketplace is throwing up lots of opportunities for accountants to demonstrate their ability to collaborate, says Magarey. “Business transformation projects are occurring everywhere nowadays and you’ll typically find those being led by a project team combining specialists from different disciplines.”

Technology

Embracing disruptive technologies will be discussed at length by accountants at the WCOA event in November. That’s no surprise, given the findings of The Future Of Talent survey, where business leaders indicated they needed more accountants who could harness data and technology systems.

At the Future of Talent launch, futurist Chris Riddell spoke about preparing for the future workforce. His advice for accountants is clear: “Become a technology adviser.”

Half the businesses surveyed say they aren’t sufficiently keeping up with technology. “Clients are confused by technology and don’t know which direction to take,” says Riddell. “But they trust their accountants because they know their business better than anyone.

Chris Riddell tells Andy McLean why accountants must become technology advisors.

“Accountants will be some of the most valuable people when it comes to using the technology to help businesses grow. Having a trusted authority who is tech-savvy will be crucial.”

Mark Pesce agrees. “Some accountants will probably remember when spreadsheets first came along. A spreadsheet is not just a computer program, it can run programs and you can create formulas and cells. So accountants are actually already doing all sorts of programming.”

Accountants should seize every opportunity to work with new and emerging technologies, says Pesce: “We just need to think: In the future, we are going to get new tools that will be important to our work. We’ll master them. We’ll use them for our clients.”

Collaborating with technology

The skillsets of collaboration and technology are increasingly going to overlap in the future, according to Pesce. He recommends opening up finance teams and accounting firms to collaborate better not just among themselves and their colleagues, but also to collaborate with technology itself. 

New research by CA ANZ confirms that agile businesses are enjoying superior revenue growth.

IN BRIEF

• In a rapidly evolving environment, businesses need to prepare for change.
• 55% of businesses who report above-average agility are experiencing above-average revenue growth.
• More than half surveyed businesses are not currently using exponential technologies.

The latest future[inc] report – The Future of Business, commissioned by Chartered Accountants Australia and New Zealand, confirms that today’s rapidly evolving commercial environment calls for businesses to be increasing agile.

Rick Ellis, CEO of CA ANZ, notes that, “Agility is a word that is bandied about a lot these days”. Nonetheless, the report, based on 1,500 responses from business leaders on both sides of the Tasman, found 55% of businesses that report being above-average in terms of agility were also experiencing above-average revenue growth. It makes agility a new metric to work towards.

Business agility is often conflated with business size. There is a prevailing perception that large businesses are too weighed down by bureaucratic systems to respond to change, while small businesses are free from such processes, making them agile and innovative. In reality, agility is far more complex than this dichotomy, and The Future of Business highlights that agility is a characteristic that business leaders cannot afford to overlook.

To allow businesses to think in a more tangible way about how agility affects their performance, The Future of Business breaks the concept of agility down into five separate elements: flexibility, speed, leanness, learning and responsiveness. According to Ellis, “The biggest issue today is leanness, with more than two in five businesses saying they have underutilised resources.”

Ellis notes that many businesses are aware of the need to more proactively and holistically consider these issues. Nonetheless, he adds, “What businesses are focusing on is dependent on their size. Large business are prioritising increasing customer satisfaction and investing in digital, while small business is focused on improving cash flows and marketing methods.”

Digital innovation underpins improved metrics

The tools to support business agility are changing rapidly. Importantly, The Future of Business found that digitally advanced businesses perform better on a range of metrics including revenue growth, profit margins, innovation and talent attraction.

“More than half of surveyed businesses (58%) are not currently using any exponential technologies, which include robotics, drones, 3D printing, blockchain, autonomous vehicles and artificial intelligence, says Ellis. “But three in five are expecting to take up at least one of them in five years’ time.”

Ellis sums up the situation, cautioning, “While all exponential technologies won’t apply to every business, those who fail to embrace new opportunities risk missing out.”

Of course, not everything in a business should change. The Future of Business notes that the most successful businesses have designed their organisations with a base of stable elements, while still leaving room for innovation and a dynamic response to change. And it seems businesses in both Australia and New Zealand are preparing for change. Among those surveyed businesses that have a business model plan in place, 39% expect to review the organisation’s plan more frequently in the future. Close to one in two (47%) will be reviewing both their marketing and customer engagement methods more often.

Globalisation of markets and technological progression mean that big shifts are happening more quickly than ever before. As The Future of Businesswarns, businesses will not have long to respond. Agility may come more naturally to small businesses, however large businesses tend to have bigger buffers, allowing them to be more resilient and better able to maintain order when faced with change. The bottom line is that all businesses will have to work at balancing the dynamic and stable elements of their organisation to respond to the changing environment.

Will your organisation meet the challenge?

Understand why agility is so critical in today’s fast-changing commercial environment

The latest future[inc] report – The Future of Business

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Source: Chartered Accountants Australia New Zealand

Practical steps small business can take to prevent cyber crime.

IN BRIEF

• Small businesses are most at risk when it comes to suffering a cyber security breach.
• Security measures should include cyber plans on risk management, mitigation, response and recovery.
• Small business can take several practical steps to prevent cyber attacks.

Small businesses are especially vulnerable to cyber crime and the impact of a cyber attack can be catastrophic. According to Australian Federal Police statistics, 71% of cyber attacks occur in businesses with fewer than 100 employees. And 60% of SMEs close down within six months of an attack, according to the National Cyber Security Alliance.

“What this means is that cyber security is an issue for all SMEs,” says Geraldine Magarey FCA from Chartered Accountants Australia and New Zealand. “Anytime you use the internet on a business device, you become a possible target. Attacks are so common that you should assume your business will be targeted at some point in the future. The best way to protect against a security breach is to be vigilant and proactive and to have a series of cyber plans.”

Four plans are recommended by Magarey: a risk management plan to minimise the threat of cyber crime; a mitigation plan to limit the impact of any cyber attack on your business; a response plan so you know exactly what to do (and not to do); and a data recovery plan to ensure your business is up and running again as soon as possible. 

If establishing four separate plans sounds like overkill for your small business, consider this. The federal government estimates that cybercrime costs Australians around $17 billion per year and says the average cost of a cyber attack to a business is $276,323. Possible impacts include compromised confidentiality of client data, reputational damage, regulatory fines and legal fees, damage to your credit and inability to secure bank loans, not to mention extraordinary inconvenience and decreased productivity.

Magarey and her colleagues at Chartered Accountants ANZ have published a detailed guide for SMEs and practitioners, explaining the four plans that every small business should have in place. 

Prepare yourself — a new breed of email scam is hurting finance teams and costing companies money.

Checklist to mitigate cyber attacks

This Acuity article provides a checklist of cyber security measures to help small business owners start a mitigation plan:

1. Passwords

Always change your default passwords for all systems to something new that cannot be easily guessed and make sure you use unique passwords for each of your systems.

2. Security software

Security software helps protect your business against malicious or otherwise unauthorised network traffic. 

3. Staff

Tempting someone to access malicious attachments and websites is a common technique to install malicious code onto a computer and compromise a network. Educate your staff to be wary of unsolicited emails and attachments.

4. Responsibility

Many small businesses do not have a dedicated IT manager. Where this is the case, appointing a person with day-to-day responsibility for cyber security is highly recommended.

5. Software patches

Keep software patches up-to-date and use supported versions of software. This is important to guard against malware infiltrating computers. Every time you leave any program unpatched, you’re leaving the door ajar for a cyber attack.

The best way to protect against a security breach is to be vigilant and proactive and to have a series of cyber plans

 – Geraldine Magarey FCA Policy and Thought Leadership Chartered Accountants Australia and New Zealand

6. Backup

Make sure you backup your critical data on a regular basis (daily, weekly or monthly) with both offline copies as well as offsite storage of at least the weekly backup data. This ensures you have access to your information in the event a cyber security incident.

7. Non-administrator accounts

Administrator level accounts are targeted by attackers because they provide potentially full access to your system. By creating non-administrator level accounts and using them for day-to-day activities, you reduce the risk of network compromise.

8. Remote access

Staff with remote access can be targeted by attackers attempting to gain access to your network. To make remote access more secure, use ‘IP whitelisting’ and strong passwords. Also secure other public-facing services such as your web server, through activities such as independent website testing for vulnerabilities.

9. Critical information

Controlling physical access to data minimises the risk of theft, destruction or tampering. So does using encryption when this information is stored on portable devices or removable media.

10. Logs

Malicious behaviour is more likely to be detected if you automatically log information relating to network activities and computer events. Best practice is to retain these logs and regularly review them for changes to normal behaviour.

(To read full details, resources and further guidance on the above checklist, visit the Computer Emergency Response Team Australia’s website.)

Chartered Accountants ANZ has published an extensive guide to cyber security, as part of the future[inc] thought leadership series. Protecting Our Cyber Future includes an appraisal of the cyber landscape, the impact upon boards and executives, how organisations should prepare and the role of regulators.

Finding a fix for the broken relationship between productivity and wage growth is a key challenge for Australian and New Zealand policymakers.

Productivity is up, why not wages: In Brief –

• Wages growth is unusually low, even in countries with unemployment rates at 5% and below, which traditionally signals full employment.
• Since 2000 in Australia, labour productivity has risen by almost 26%, but real wages by just 13%. In New Zealand, productivity has risen by 23% and real wages have remained unchanged.
• Saul Eslake says we need to find a way to better share the rewards of productivity growth between employers and employees, or risk the rise of extremist populist politics.

By Saul Eslake

One of the more important challenges currently confronting both economic policymakers and political leaders across almost all ‘advanced’ economies is the unusually slow growth in both nominal and real wages, despite continued economic growth and declining unemployment.

During and immediately after the global financial crisis (GFC), when unemployment in most advanced economies was at its highest level since the early 1980s – if not the Great Depression – it was no surprise that wages growth slowed sharply.

What has been surprising is wage growth has been at historically low levels since then, despite the gradual but ongoing economic recovery of the past decade. In particular, wages growth has remained unusually low even in countries where the unemployment rate is currently well below what’s traditionally regarded as signalling full employment, such as the US, UK, Japan and Germany.

Wages and productivity unlinked

With the benefit of hindsight, it’s obvious that the historical relationship between wages growth and the state of the labour market in advanced economies had begun to change well before the global financial crisis.

Australian workers were to some extent shielded from these developments by the resources boom of 2005-2013, which saw employers in the resources sector bidding up wages to attract people to work in remote and challenging locations. This, in turn, forced employers in other sectors to raise wages in order to retain their own staff.

During this period, unemployment in Australia remained lower than in most other advanced economies. But once the resources boom began to fade, and unemployment and under-employment began to rise, wages growth in Australia slowed to a rate similar to other advanced economies.

In contrast to Australia, New Zealand experienced a recession during and after the GFC; unemployment rose sharply, and wages growth greatly slowed. Since 2013, unemployment in New Zealand has been declining steadily, and has been below the 5% level usually regarded as commensurate with full employment since the beginning of 2017. Despite this, wages growth in New Zealand has remained below 2%.

“The divergence between real wages and labour productivity… is at variance with one of the most widely accepted propositions of conventional economic theory.”

What’s been particularly striking has been the divergence between real wages and labour productivity, which is at variance with one of the most widely accepted propositions of conventional economic theory.

In Australia, labour productivity has risen at an average annual rate of 1.3% since the turn of the century – or by almost 26% in total (Chart 1). But real wages, measured from the standpoint of employees (deflating nominal wages by consumer prices), have risen at an average annual rate of only 0.7% (or by 13% in total); and measured from the perspective of employers (deflating by the price deflator of GDP), at an average annual rate of 0.4% (or just 8% in total).
Chart 1: Labour productivity and real wages in Australia (Click image to enlarge) Note: the real consumer wage is the wage cost index deflated by the CPI; the real producer wage is the wage cost index deflated by the implicit price deflator of non-farm GDP. Sources: Australian Bureau of Statistics and author’s calculations.Chart 2: Labour productivity and real wages in New Zealand (Click image to enlarge) Note: the real consumer wage is the labour cost index deflated by the CPI; the real producer wage is the labour cost index deflated by the implicit price deflator of GDP. Data is only available for March years.
Sources: Statistics NZ and author’s calculations.

Real wages fall in NZ

In New Zealand, labour productivity has risen at an average annual rate of 1.2% so far this century, or by 23% in total – only a little less than in Australia. But real wages, from employees’ perspective, have been unchanged; while from an employers’ perspective, they have actually fallen by 2% over the past 17 years (Chart 2).

The experience in both countries suggests that boosting productivity growth – desirable though that would be on many grounds – would not necessarily result in faster growth in real wages.
Ironically, the fact that real wages have grown by less than labour productivity on both sides of the Tasman has probably facilitated faster growth in employment by encouraging employers to substitute labour for capital. But that substitution of labour for capital is one reason why labour productivity, in both countries, has grown more slowly since 2000 than during the 1990s. And that, in turn, is a major reason why growth in real per capita GDP has been significantly slower over the past 18 years than it was during the 1990s (Chart 3).
Chart 3: Real per capita GDP growth, Australia and New Zealand, 1991-2018 (Click image to enlarge)
Sources: Australian Bureau of Statistics, Statistics NZ.

So although the profits share of national income in Australia and New Zealand has been well above its long-run average in recent years, both the level and the growth rate of profits – the principal yardsticks by which shareholders and analysts measure business performance – had been lower than they would have if both countries’ overall economic performance been stronger.

NZ households now spend more than they earn

In Australia, households have sought to maintain their spending in the face of a steady decline in real household disposable income by setting aside less of their income in savings – to the lowest level since before the GFC – and taking on record amounts of debt. But now that property prices have begun to decline almost everywhere in Australia, households are probably less likely to keep doing that.

In New Zealand, the household saving rate has been negative – that is, households have, in aggregate, been spending more than they’ve been earning – since 2015, something which surely can’t continue indefinitely.

On both sides of the Tasman, maintaining – let alone improving – the rates of economic growth will also require finding ways to ensure that the rewards of productivity growth are fairly shared between employers and employees. A failure to do so would probably see a more marked swing towards the more populist politics now evident in the US and Europe, which so far have been less apparent in Australia and New Zealand.

Saul Eslake is an independent economist, speaker, company director and Vice-Chancellor’s Fellow at the University of Tasmania.

Article source:  Chartered Accountants Australia and New Zealand.