All articles in Volume 12 Issue 19

Slow reform could stifle Australian start-ups

3 oCT IMAGE

Australia is at risk of falling behind the rest of world should reform governing equity crowdfunding be delayed.

Reports that the Crowd Sourced Equity Funding (CSEF) scheme may not come into play until 2015 or 2016, places Australia at risk of becoming one of the last developed markets in the world to support equity crowdfunding. This could lead to more businesses going offshore and stifling the start-up environment at home.


Australia is already behind New Zealand, the US, the UK and Italy in approving rules governing the sector by opening up the market to retail investors ─ acceptance of which is widely thought to be paramount for the digital and small business economies.

Currently, CSEF in Australia is only available to wholesale investors with more than $2.5 million in investable assets or annual earnings of around $250,000. This accounts for just 200,000 individuals.

In a report presented to government earlier this year, the Corporations and Markets Advisory Committee said promoting crowd-sourced equity funding would encourage productivity and economic growth, as well as help keep entrepreneurs in Australia who might otherwise choose to establish their businesses in other markets.

However, the uncertainty of when the new regime would come into play has already had an impact, with Australian equity crowdfunding platform Equitise set to launch in New Zealand, rather than Australia, in November.

Writing about a recent meeting with government on the company’s blog, Equitise founder Chris Gilbert said key stakeholders in the CSEF space should band together to grow the number of voices in this space. “Government is well aware and very supportive of CSEF; however what we are lacking is absolute urgency to get it pushed along faster.”

The full details can be found on Chris Gilbert’s blog.


NFPs look to social enterprise model

The Australian not-for-profit (NFP) sector is transitioning towards a social enterprise model driven by funding and cost pressures.

A study of applications to the Westpac Foundation's Catalyst Grant Program by Dr Danielle Logue, researcher at UTS Business School and co-author Dr Gianni Zappala, has found that 70 per cent of organisations have a three or five-year plan to become more commercial.

This has been driven primarily by a strain on resources and a desire to fill the funding gap between government and philanthropic support as well as cover the growing costs associated with increased demand for their services.

The study identified the emergence of new types of organisations and financial products, namely impact investing, socially responsible investment and social enterprises. These are forming to create a “social economy”, the report said, with NFP structures now one model within this broader ecology.

Social enterprise is an alternative model to traditional NFPs and charities whose operation is reliant on external funding. It focuses on ways to generate revenue while the organisational mission remains focused on social benefit, Dr Logue said.

The study identified that of the 132 grant applicants sampled, nearly 60 per cent reported financial challenges, including the rising cost of operations. One in four organisations reported challenges related to decreased government funding and support, while one in five also regarded staff retention and training as issues.

However, while NFPs are looking at more effective and sustained methods of operation, the report also uncovered challenges organisations face in integrating “customers” and “beneficiaries” into one business model.

The full report can be accessed here.


The “Aussie way”

Forty per cent of Australian executives rely on their own gut instinct or that of a trusted colleague (28 per cent) over data analytics when making strategic business decisions, a report by the Economist Intelligence Unit has revealed.

The survey of 1,135 c-suite and board level executives revealed that, this is also common practice globally, with 58 per cent of executives adopting a similar approach to decision-making; 30 per cent relying on gut instinct and 28 per cent on the experience of others.

In contrast, just 29 per cent of executives globally, and only 22 per cent of those located in Australia, said they placed the biggest reliance on data and analytics in making their latest big decision.

The survey found that while highly data-driven companies are three times more likely to report significant improvement in making big decisions, only one in three executives say their organisation is highly data-driven.

Instead, more big decisions are made opportunistically than deliberately, the survey found, with many executives sceptical or frustrated by the practical application of data and analytics when making big decisions, particularly in emerging markets.

However, despite executives' comfort in relying on gut instinct, nearly two-thirds (64 per cent) said the use of data has changed how their company makes decisions and they expect it to have more impact in the future.

The top three changes executives plan in decision-making include the number of people involved in making a decision, greater use of specialised and enhanced analytics and data analysis, and the use of dedicated data teams to inform strategic decisions.

A full copy of the report can be found here.


Achieving strategy though advisory boards

The role of an advisory board is to ask questions that would not normally be considered or asked by a business and open up the conversation so that a company can be more strategic. Yet advisory boards are a much under-utilised resource that are often not well understood, claims Steven Bowman FAICD, managing director of Conscious Governance.

Bowman estimates that only 10 per cent of businesses have an advisory board and, of those, only half are effective.

However, he says that for those businesses looking to grow, thrive and change, advisory boards can be an effective tool for strategic growth, particularly for family-owned or entrepreneurial businesses looking for a small group of people to advise in areas they would otherwise not receive advice.

Bowman adds that advisory boards do not need to be significant in size, but can instead be made up of just two to three people, meet a handful of times a year possibly for just two or three years and then be refreshed with new people or disbanded all together.

He stresses that it is important to acknowledge that members of an advisory board are not formal directors of a company, nor are they there to tell people how to run a business and making this clear from the outset is imperative.

In order to create a high-performing advisory board, Bowman suggests incorporating these four points:

  • People from industries different to your business
  • People with experience based on the direction your business wants to go
  • Someone experienced with larger businesses and greater revenue
  • People who are willing to ask questions – not those who will tell you how to do things

Sustainability’s strategic worth

Company leaders are rallying behind sustainability and the majority of executives believe the issue is increasingly important to their companies’ strategy. However, as it continues to grow into a core business issue, challenges to capturing its full value lie ahead.

These findings come from a McKinsey survey, which asked respondents about the actions their companies are taking to address environmental, social, or governance issues, the practices they use to manage sustainability, and the value at stake.

According to the executives surveyed, sustainability is becoming a more strategic and integral part of their businesses, with 43 per cent saying their companies seek to align sustainability with overall business goals, mission, or values. This is up from 30 per cent in 2012.

However, the study found that as sustainability rises in significance, capturing its full value grows more challenging. This is possibly due to the fact that the more that companies prioritise sustainability, the more it needs to be integrated into, and possibly change, the core business.

Of those companies that are already taking action in terms of sustainability, respondents said execution remains a considerable challenge. Similarly, the absence of performance incentives and the presence of short-term earnings pressure tends to be at odds with the longer-term nature of these issues.

Accountability and reputation management were also cited as major concerns. Thirty four per cent of executives said too few people at their companies are accountable for sustainability and 59 per cent said managing their corporate reputations for sustainability was a priority.

A full copy of the study can be found here.


Discrimination “systemic and pervasive” in workplace

Despite moves to address gender equality in the workplace, discrimination against mothers and new parents during pregnancy, parental leave and return to work periods remains a very real issue in Australian businesses.

Speaking at a recent CEDA Women and Leadership event in Sydney, Sex Discrimination Commissioner, Elizabeth Broderick said discrimination is, and remains, “systemic and pervasive” in many Australian businesses.

Quoting figures from quantitative research carried out for the Supporting Working Parents: Pregnancy and Return to Work National Review, Broderick revealed that one in two women reported experiencing discrimination in the workplace at some point while pregnant, on parental leave or once they had returned to work.

As a result, the impact on women in the workplace is staggering, she revealed, with 32 per cent of mothers who experienced discrimination choosing to look for another job or resigning while 22 per cent left the labour market entirely. In addition, one in five mothers said they were either restructured, dismissed or their contract was not renewed during this period.

“Alarmingly, this is very deeply hidden,” she added. “Ninety one per cent of mothers who experienced this issue did not make any formal complaint.”

Broderick added that the issue of discrimination also extends to new fathers, with 27 per cent experiencing discrimination in the workplace as a result of taking paid parental leave and called on employers, unions and community sector groups to work collaboratively with one another to address this ongoing concern.

“Gender equality is not just women’s business, it is all our business. Discrimination has a cost to everyone. We can have the best paid parental scheme system in the world and a childcare system that delivers, but if pregnant women and new parents are not welcome in the workplaces of Australia, then we will never fix the issue of women’s workforce participation,” she said.


ASIC pushes breach reporting standards

The Australian Securities and Investments Commission (ASIC) has moved to address the importance of breach reporting by Australian financial services (AFS) licensees by announcing a review of the process by which it occurs.

Peter Kell, ASIC deputy chairman, said concerns about inconsistencies and delays in reporting significant breaches prompted the review, which will focus on who has reported a breach, the nature of the report and its timelines. The regulator will then conduct a proactive review of some licensees it identifies as having a high risk of non-compliance.

Kell said recent enforcement actions against both large and small firms have highlighted deficiencies in the current approach, in particular, the timeframe for reporting significant breaches.

He added that failure to comply with breach reporting requirements was a criminal offence and stressed that AFS licensees must report significant breaches to ASIC as soon as practicable and within 10 business days after becoming aware of a breach.

Kell warned licensees against waiting until a full investigation has been completed by its board of directors or by its internal or external legal advisers to identify whether or not the breach or likely breach is significant. If in doubt, err on the side of caution and report the breach to ASIC, he said, as it helps to better manage risk.

He added that breach reports provide an important source of intelligence for ASIC, but are only effective when timely. He warned that inadequate or late reporting could indicate to ASIC that the licensee has broader compliance and cultural issues and would be a red flag for closer scrutiny.

The full speech is available here.


TAL appoints new group CEO

Australia’s largest life insurer TAL has announced the appointment of Brett Clark as the new group CEO from 1 April 2015.

Clark will replace retiring group CEO, Jim Minto MAICD, who will remain at TAL until the year-end process is completed in the first half of 2015.

Clark has been a senior executive with TAL for six years and is currently CEO of the TAL Life business division, where he has accountability for the retail life and investments adviser business, TAL’s group insurance and wholesale business and TAL’s customer-facing advice businesses, Affinia and Lifebroker.

His appointment as deputy group CEO came into effect on 1 October 2014 until he assumes his new role in April next year.

Environmental scientist Professor Tim Flannery has joined the University of Melbourne Sustainable Society Institute as a Professorial Fellow.

He will contribute to research and engagement on issues of sustainability and climate change, specifically on what is needed to renew and replenish the earth’s ecosystem.

Professor Flannery was named Australian of the Year in 2007 for his work on population levels and carbon emissions and was also chairman of the Copenhagen Climate Council, an international climate change awareness group.

He was the chief commissioner of the Climate Commission before it was dismantled in 2013 and subsequently launched the Climate Council to ensure the continued provision of independent information on the science of climate change to the Australian public.


Boardroom Report disclaimer:

The opinions in Boardroom Report do not necessarily represent the views of the publisher nor the publication. Every effort has been made to ensure accuracy, but no responsibility is accepted for errors. All rights reserved.