Stress test

The AICD is committed to assisting our members with the information, tools and resources they need to steward their organisations through these challenging times.

The rapid spread of the Omicron variant has disrupted the start to the year for many organisations and society generally. The rise in cases has put a heavy strain on health systems, disrupted family gatherings and caused workforce shortages for many businesses. Even without government-imposed lockdowns, consumer spending in January in Australia’s two largest cities fell to lockdown levels, or lower, as people stayed home, according to ANZ data. Goldman Sachs estimated that between 24 and 76 million hours were lost in January due to workers isolating. It is a truism by now that we have to live with the virus. This does not mean a fixed set of policies — for government, business or individuals — to respond to COVID-19. How we protect the health and wellbeing of our employees, customers and stakeholders will evolve as data comes in and our knowledge develops. As economist Steven Hamilton has noted, COVID-19 management is no longer a binary choice between “let it rip” and “lock it down”.

Risk factor

The Omicron situation highlights the complex risk environment directors will navigate in the coming year. While directors were generally upbeat on the outlook for the Australian economy in the latest Director Sentiment Index (DSI) released in December, they identified several key challenges for the post-pandemic recovery. Cybersecurity was the top-rated issue keeping directors awake at night, according to the DSI, and the number of cybersecurity incidents continues to rise. Over 2020–21, the Australian Cyber Security Centre received more than 67,500 cyber crime reports, an increase of nearly 13 per cent from the previous financial year.

Omicron has exacerbated existing labour shortages and supply chain fragility. Combined with rising energy costs, we are seeing persistent inflationary pressure across the world. Market pricing suggests that interest rate rises might come sooner than the Reserve Bank is anticipating. This will test the Australian economy given high levels of household debt.

The geopolitical environment is also uncertain. The unrest in Kazakhstan and the potential conflict in the Ukraine has raised the temperature in Russia- NATO relations and our relationship with China remains at a low ebb.

Australian Governance Summit

The AICD is committed to assisting our members with the information, tools and resources they need to steward their organisations through these challenging times. On 2–3 March, we will host the Australian Governance Summit. This is a milestone event in the annual governance calendar, which we are excited to bring to as wide an audience as possible.

This year’s program — which is based around the theme NEXT — will consider the roles of directors and boards in preparing their organisations for the next set of challenges, opportunities and technologies to propel the next phase of Australian growth. With more than 40 prominent directors and experts confirmed, the summit will be a chance for the director community to share what they have learned over the past two years and lead the conversation on where to from here.

I look forward to having that discussion at the summit and to setting out the path for 2022 and beyond.