STAGNATION FEARS AS BOARDS BURIED IN PROTOCOL

Written on the 3 September 2015

STAGNATION FEARS AS BOARDS BURIED IN PROTOCOL

RULES and regulations are at the forefront of the board members' minds as growth management and company strategy take a back-seat, a new study has found.

Deloitte's fifth Directors' Cut survey revealed 67 per cent of CEOs and board chairs believe company regulation is increasing, with 65 per cent agreeing that business may be stagnating as a result.

Richard Deutsch, managing partner of assurance and advisory for Deloitte, says corporate efficiency has been shot by a fixation on rules, both self and government imposed.

"There is a tendency in Australia to focus on government red tape as a drag on productivity, and our discussions with chairs and CEO's have substantiated this," says Deutsch.

"But with the evidence that internal bureaucracy is as much, if not more than an issue, they also acknowledge that external regulation isn't necessarily a burning platform for them. The real issue for many is corporate red tape."

According to the survey, 60 per cent of executives believe their boards find the time to deal with strategic issues, and from these windows many confirm dealing with protocol to be the biggest time-sink.

Deutsch believes both government and company are able to fall into a happy medium, provided that directors stay afloat in the sea of procedural tasks and departments work to simplify requirements.

"Governments can certainly do a lot to streamline the regulatory environment," says Deutsch.

"It may be stringent in some areas, but it's also accompanied by positives for business such as low sovereign risk and a stable political environment.

"Boards need to operate in this environment. It's critical that [chairs and CEOs] don't lose sight of the more strategic issues confronting their organisations rather than being overwhelmed by compliance."

A second major finding from the report indicates concerns over technology, with 37 per cent of respondents neutral to the concept of understanding how well their own organisations manage cyber risk.

"Information security is currently one of the most pressing issues facing governments and business, and it is certainly a strong focus area for the Australian Securities and Investments Commission," says Deutsch.

"Surprisingly then, while 54 per cent of our respondents were confident they understood the risks, nearly 40 per cent were neutral on the question of how well cyber risks were being managed."

Looking toward the immediate short term, the survey found that operations for CEOs will be characterised by an environment of economic and political uncertainty where regulation is expected to remain an issue at large.


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