Biggest challenge for NZ directors: Disruption

Disruption is proving to be one of the biggest challenges for directors throughout New Zealand, with many businesses (73%) spending more time on risk than a year ago.

On top of this, only half of all directors say they have the capacity to deal with increasing business complexity, and 47% expect to face major disruption within the next two years.

The latest IoD NZIER Director Sentiment Survey, designed to take stock of the director community, highlights that technological and business disruption, and the time spent on risk oversight, are key challenges for directors.

Simon Arcus, IoD chief executive, 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% of boards agree diversity is a key consideration and 62% regularly discuss composition for the future," Arcus says.

"Diversity of thought and experience brings a broad range of perspectives to the boardroom and increases the potential for successful and effective risk oversight," he says.

The survey shows 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% expect the performance of their company to improve, down from 71% in 2014, while 35% expect the New Zealand economy to improve, down from 47% in 2014.

Laurence Kubiak, NZIER chief executive, 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," he says.

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," he says.

Technological disruption has gained prominence as a business risk, and is a new entrant to the top ten risks.

Despite that just 27% of boards regularly discuss cyber risk and are confident about their company's capacity to respond to an attack or incident.

"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," Arcus says.

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

The survey was conducted in October 2015 by the IoD and involved 820 members of the Institute of Directors.