Tech disruption is new entrant to top 10 risks for NZ directors

Directors are spending more time on risk than a year ago, says Institute of Directors CEO Simon Arcus.

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Simon Arcus: 'Disruption will happen, it’s not a case of if but when, and directors being involved in the conversation is good news.'

Technological disruption has gained prominence as a business risk, and is a new entrant to the top 10 risks for New Zealand directors.

Despite that, just 27 per cent of boards regularly discuss cyber risk and are confident about their company’s capacity to respond to an attack or incident, according to the Institute of Directors.

The latest IoD NZIER Director Sentiment Survey, notes technological and business disruption, and the time spent on risk oversight are key challenges for directors.

“Most businesses use or rely on technology to operate – cyber risk is a reality of our times – so the ability of boards to consider it as part of enterprise risk is critical in ensuring directors are confident about business resilience,” says IoD CEO Simon Arcus.

Technological advances are disrupting many traditional business models, forcing businesses to find ways to adapt to the rapidly changing environment. “How they deal with disruption is going to be a big question for the future,” says Arcus.

The survey, now on its second year, was conducted in October and covered 820 IoD members.

Technology disruption is number 6 in this year's top 10 risks for Boards.

Cyber risk is a reality of our times – so the ability of boards to consider it as part of enterprise risk is critical in ensuring directors are confident about business resilience.'

Simon Arcus, NZ Institute of Directors

The survey finds most directors (73 per cent) are spending more time on risk than a year ago yet only half say they have the capacity to deal with increasing business complexity – and 47 per cent expect to face major disruption within the next two years.

It’s critical that in a volatile and changing world, boards regularly consider the long -term sustainability of their business models – and most boards (79 per cent) are doing this, according to the IoD report.

Arcus says disruption will happen, it’s not a case of if but when, and directors being involved in the conversation is good news.

“Developing board and organisational capability are areas of focus for directors to ensure organisations are resilient, so it is pleasing to see that 60 per cent of boards agree diversity is a key consideration and 62 per cent regularly discuss composition for the future,” says Arcus.

“Diversity of thought and experience brings a broad range of perspectives to the boardroom and increases the potential for successful and effective risk oversight.”

Directors are somewhat less optimistic about economic performance than a year ago but are still buoyant about business performance.

They see global growth, labour quality and red tape as the main barriers to business and economic performance.

The results show 67 per cent expect the performance of their company to improve, down from 71 per cent in 2014, while 35 per centexpect the New Zealand economy to improve, down from 47 per centin 2014.

Laurence Kubiak, CEO of the New Zealand Institute of Economic Research (NZIER), highlights concern shown by many directors about the global economy. “There have been increasing concerns about the growth outlook of China, which is a key market for many of our businesses.”

Nonetheless, directors were more positive about the New Zealand economy than businesses surveyed in NZIER’s latest Quarterly Survey of Business Opinion. “More recent developments show an improvement in economic conditions, and that has likely improved directors’ confidence about the economy.”

The IoD says it is pleased to see the improvement in health and safety leadership, with 60 per cent saying they have the capability to comply with the new legislation, up from 51 per cent in 2014. Just 8 per cent say they are not ready.