The first AICD Listed Sector Forum was held in Sydney earlier this week and featured pre-eminent practitioners, including former Macquarie Group Chairman Kevin McCann AM FAICD, Commonwealth Bank director Wendy Stops GAICD and Mayne Pharma Group Chairman Roger Corbett AO FAICD. The speakers discussed megatrends coming down the pipe for listed businesses, how listed directors should approach innovation and how to avoid corporate disasters.
Megatrends Impacting Listed Companies
Wendy Stops GAICD, Non-Executive Director, Commonwealth Bank of Australia
Jane Eccleston, Senior Executive Leader, ASIC
Tim Trumper MAICD, Advisor, Quantium
What are the key global megatrends?
The significance of technology as a strategic enabler is rapidly increasing. It’s no longer something in the background. Boards must consider how they can make ‘digital’ part of the core DNA of the organisation.
Digital disruption is a key aspect of this. Business models are being turned on their head and companies that traditionally operated in one industry are branching out into others.
Rate of change
In 1960, the average time a company spent in the S&P 500 was 60-70 years. Today it’s 18 and is moving very quickly towards 12 or so. By the simple maths, something like 75% of companies that are in the S&P 500 today will fall out by 2030.
Most companies will not make it through this period of change.
Community and investor expectations
We are in a world where expectations are changing for listed companies. The community and investors have expectations of companies’ operations that are not just about maximising profit.
This broadening of expectations ties into the risks for listed companies. There are issues like customers boycotting over the ethics of a supply chain.
Long-term investors in particular are also looking for things like reporting of ethical and environmental issues.
Cybersecurity – The latest insights for your boardroom
Alastair MacGibbon, Special Adviser to the Prime Minister on Cyber Security
What can Australian companies do to prepare for future cyber-attacks if and when they occur?
Threat sharing and communication
Maturity on cybersecurity comes through full disclosure and continuous discussion. The wider business community and our customers appreciate a policy of open disclosure – particularly about something that attacks our interconnectedness; because there is no doubt that we are more interconnected than ever before.
Good mechanisms for communication and information sharing about cyber-threats and cyber-incidents are beginning to emerge. Part of the government’s Cyber Security Strategy is grounded in increasing the frequency, quality and sophistication of threat sharing between business and government; this has been seen specifically with the publishing of the Australian Cyber Security Centre Threat Report.
Organisations should begin to look at practicing for and simulating a cyber-incident with the same discipline that conducting regular fire drills receives.
Government currently carries out cyber-incident simulations to test its policies and procedures and will need to start to partner with businesses in the future to conduct similar crisis simulations; there is no point in government acting alone in this area.
This can involve simulating ‘black swan’ cyber-incidents that engage the entire workforce, including board and management to respond to the incident, or red teaming to help detect any network and system vulnerabilities.
Achieving innovation in big business
Colette Grgic, General Manager for Innovation, BlueChilli
Kevin McCann AM FAICD, Chairman, Citadel Group
Sandra Hook, Non-executive Director, RXP Services
Brian Ruddle GAICD, Managing Director, Impact Innovation Group
How do big companies encourage innovation (in 140 characters or less)?
“If you’ve got an innovation program without an innovation strategy, be concerned!”
“Don’t just invest in the product, invest in the process.”
“What can disrupt us? What should we be doing to innovate? That challenges management and challenges the board.”
“Ask: what if?”
Contemporary governance failures revisited – what can we learn?
Roger Corbett AO FAICD, Chairman, Mayne Pharma Group
Kathryn Greiner AO MAICD, Executive Director, Gabane
Kathy Hirchfeld FAICD, Non-executive Director, Energy Queensland
How do directors avoid disasters?
Get out of the boardroom
Directors need to get out of the boardroom, talk to the employees and get a feel for how the business is going. You can’t overview safety sitting in the boardroom and that goes for all aspects of the business. Directors have to test what management are telling you in the boardroom.
Directors need to remember why they’re there
Directors need to always question what they’re doing there in the first place. Is this job just the next stage in your career? That’s not enough.
Fundamentally, directors have to represent the interests of the owners of the business. Directors should be asking, “If I owned this business entirely, what would I do?”
Understand the risk profile of the cash flows
To make money, a business needs to take risks. Directors must remember that they can’t completely de-risk a business.
But they do have to understand the risk profile of the company’s cash flows. Directors have to closely scrutinise the cash flows and understand the assumptions that have been made in making projections.