The 2017 update saw Graham Bradley AM FAICD and Stephen Walters GAICD explore global risks, international governance, business and regulatory changes, and what the year ahead holds for the director community.
The IEDU opened with good news for global GDP growth. While GDP growth over the past five years has been below the long-term average, the OECD is forecasting solid growth over the next two years. This growth is broad-based and will exist in developed economies such as the U.S. and Japan, as well as developing economies such as China and India.
The World Economic Forum Global Risks Report for 2017, with contribution from the AICD, highlighted the most significant long-term risks worldwide. Risks identified included extreme weather events, terrorist attacks, cyber-attacks, interstate conflict and failure of national governance.
Other macroeconomic risks identified by Stephen Walters included geo-political tensions in North Korea and the Middle East and the impact of the Trump Administration policies within the U.S.
Stephen also touched on China’s GDP growth. Although it has halved over the last decade, there is still solid growth at 6.5% in an economy that is doubling every 6 to 7 years. Solid GDP growth is particularly significant to Australia as China takes is Australia’s biggest exporter, as well as the largest source of inbound tourists.
Stephen mentioned that there are imbalances in China’s economy, however, because of the additional stimulus put into the economy over the last decade. This stimulus resulted in China’s debt burdens, which are widely believed to be the largest in the world.
Graham Bradley highlighted how foreign bribery was in the spotlight in 2017, in the wake of public allegations of foreign bribery particularly by Australian mining companies in Africa. Attention has been drawn by legislators on whether Australia’s bribery laws, which have long been criticised by the OECD, are sufficiently strong. The U.K. Anti-Bribery Act 2010 extended its reach globally to the operations of U.K. companies and the Australian government is now considering similar amendments to its laws. The proposed changes include a new corporate offence of failing to prevent foreign bribery, a new offence based on a fault element of “recklessness”, and a new legal test for foreign bribery offences.
Cybersecurity continues to attract global interest, and regulators around the world are active in formulating cybersecurity policies. The recent worldwide WannaCry ransomware attack and the Equifax Data Breach in the U.S. affected more than 400,000 and 145 million people respectively, and highlighted the fact that attacks are inevitable. Graham suggested that in 2018, the focus of boards should shift to ensuring preparedness in responding to an attack. He said that boards and directors need to ensure reasonable and cost-effective methods are in place to combat vulnerability.
The Top 5 global issues for 2018
- Corporate culture, reputation and social licence to operate
How well is your board monitoring/directing culture?
- Free trade in the era of Trump and Brexit
How will your company fare if global trade becomes less free?
- Global public policy uncertainty/populism
How can directors have a more effective voice with legislators on key policy?
How well-prepared are companies?
- Response to digital technology
How should boards balance the competing forces of innovation and disruption; and social licence to operate?