With Australia emerging less scathed from the pandemic than other global economies despite the continued challenges of Omicron, the chief concerns of Australia’s business leaders, and the perceived risks to their companies, are shifting - from climate change, supply chain disruptions, skilled workforce shortages and cyber threats. Faced with increasing public scrutiny in areas such as ESG, data privacy and regulatory compliance, Australian companies are becoming more proactive in their risk preparations and ability to respond to crisis scenarios.

Looking beyond the challenges of COVID-19, Australia’s C-suite executives are most concerned about climate change in 2022 as extreme weather events become increasingly common. Australian companies are also more concerned than their G20 counterparts when it comes to changes to global tax regimes, escalating US-China tensions and the risk of large-scale cyber-attacks.

In contrast, the top reported concern for G20 companies was surging energy prices at 36% compared to 23% of Australian respondents – the lowest figure in the G20. With concerns around climate change and geopolitical uncertainty intensifying, this could become a more prominent issue for Australia’s C-suite throughout 2022.

  • 27% are concerned at how measures to tackle climate change might cause economic damage if they are implemented without a clear strategy or strong coordination across fragmented markets.
  • With 32% of Australian companies experiencing talent shortages in 2021 and it having the highest impact on lost turnover, only 23% are concerned with rising unemployment (compared with 30% G20 average) dropping 13 points from our September 2021 Resilience Barometer.
  • Cyber attacks are increasingly worrying Australia’s C-suite, jumping 7 points to 28%.
  • Data privacy, fraud and financial crime (both 54%) and supply chain disruptions (53%) are the top risks which Australian companies are demonstrating the greatest proactivity in addressing in 2022.
  • ESG and sustainability saw the most significant increase in proactivity - up 14 points to 52% - as this area continues to be a key priority for corporate Australia.

of Australian business leaders are alarmed at the rate at which economies are tackling climate change – the top concern cited by Australian respondents

After two years of dealing with a succession of crises, companies are taking action to improve their ability to monitor and plan for risk, respond to crisis scenarios and prioritise stakeholder engagement.

Crisis preparedness

  • 47% of Australian business leaders are assessing their cybersecurity programs to prepare for potential future crises in 2022 – the highest reported area of crisis preparedness.
  • 88% believe their leaders are better prepared for future crises.
  • On the other hand, 63% say their company struggles to adequately plan for an increasing number of crisis scenarios.
  • Despite increased investment in cybersecurity crisis preparedness, 21% say the incident response crisis communications plans are weak.

Stakeholder capitalism on the rise

  • 88% of Australian business leaders believe companies should be run for the interest of all stakeholders, not just shareholders.
  • Shareholders are also seen as a less influential stakeholder, dropping seven points from our previous Barometer to 31%, with Customers/clients (35%) and Suppliers (33%) having the strongest impact on corporate Australia
  • 83% believe their companies should publicly engage with pressing social or political discourse.
  • 65% of Australian business leaders feel under pressure to personally communicate on social media.
  • 86% are expecting media scrutiny on their company in 2022 with data privacy reported as the top area of scrutiny.

of Australian companies are actively preparing for future crises in 2022

With work from home the ‘new normal’, Australian business leaders are now working to transform their businesses both physically and digitally. As they face workforce shortages, Australian companies are having to review and re-imagine their business models to attract and retain top talent.

The future of work

  • 96% expect their employees to work remotely at least 10% of the time, with the majority falling into the 40-50% range.
  • 83% have permanently reduced their real estate footprint.
  • 71% believe their business model needs to fundamentally change to be competitive, with 48% proactively managing the risk of it becoming outdated.
  • 39% are under extreme pressure to integrate technology and innovation, with 37% planning to conduct M&A to acquire new technology platforms and systems.
  • Yet 56% admit they are struggling to digitalise their business.
  • 32% reported talent shortages in 2021 which also had the highest impact on lost turnover at 12%.

of Australian businesses are adjusting their approach to retain and attract top talent in 2022

Australian companies are committing substantial resources to their ESG efforts, but business leaders still feel underprepared to navigate the current landscape.

  • 88% have been spending more resources on ESG and sustainability, with 52% proactively managing its impacts.
  • 84% are shifting their approach from managing ESG risk to identifying new business opportunities.
  • 68% agree they currently have insufficient ESG expertise to cope with increasing scrutiny:
  • 27% admit falling short in ESG reporting and performance, lagging other major economies like the US, UK, France, Germany, and Brazil. 
  • 38% increased their commitment to addressing climate change in 2021 – a 7 point increase from our September 2021 Barometer and higher than the 31% G20 average.
  • 41% are revising their company's internal governance and policies in response to potential consumer activism.
  • 23% believe they fall short in their diversity strategy and 19% are still falling short in their corporate citizenship strategy to engage, support and contribute to wider local communities.

of Australian respondents believe business leaders should publicly engage with pressing social or political discourse

Australian business leaders are increasingly prioritising data privacy but continue to face logistical challenges in navigating rapidly evolving privacy regulations – both in Australia and globally.  Australia, along with other jurisdictions with less mature information governance awareness and strict data privacy laws—including India, China, Brazil, South Africa and Saudi Arabia—had higher incidences of breach reporting than the G20 average.

  • 54% of Australian companies are taking a proactive approach to managing data privacy risks, but 42% manage this risk reactively, or not at all.
  • 28% experienced data privacy issues at their company in 2021 – the same number as reporting cyber-attacks and threats.
  • 35% saw rises in privacy breaches or violations caused by increased use of collaboration apps, personal devices, and remote work environments.
  • 35% expect media scrutiny on data privacy, making it the most commonly reported area of scrutiny, up from 4th place in our September 2021 Barometer.
  • 75% said privacy issues are already impacting their M&A decisions.

of Australian respondents reported breaches of personal data or personally identifiable information in 2021

The risk of cyber attacks and threats harming their company is the top concern for both Australian and G20 organisations in 2022. A shifting operational landscape, including a hybrid workforce, has led to evolving threats, with organisations facing a diverse range of cybersecurity risks.

  • 28% of both Australian and G20 business leaders are concerned about cyber attacks and threats harming their company – up 5 and 3 points respectively from our September 2021 Barometer.

Top three cybersecurity risks concerning Australian business leaders:

  1. Cyber attacks from nation states (40%) - significant 15 point increase from our previous Barometer.
  2. Vulnerabilities arising from increased remote working (39%) - dropping 8 points.
  3. Third-party suppliers (34%) - increasing 9 points.

Top three cybersecurity risks concerning G20 business leaders:

  1. Vulnerabilities arising from increased remote working – (36%)
  2. New phishing or social engineering techniques – (36%)
  3. Employee use of unauthorised devices/applications (36%)

of Australian respondents admit they are either reactively managing the risk of cyber attacks and threats or not managing this at all

Australian companies are making efforts to improve their investigations and disputes processes, with the vast majority reporting they are currently being, or expect to be, investigated in 2022.

Investigations

Top 3 reported areas of investigation:

  1. Relationships with public bodies/government contracts (28%) – moving to top position from our September 2021 Barometer.
  2. Financial crime and sanctions compliance (26%) - moving up three points.
  3. Business conduct and the treatment of customers (23%) - dropping down from 1st position.
  • 54% of Australian respondents are proactively managing fraud and financial crime risks.
  • 38% are investing in dedicated technology to tackle financial crime.
  • 74% accept clients from jurisdictions that present a high financial crime risk – compared to 68% G20 average.

Disputes

  • 70% are planning to allocate a portion of their legal budgets to dispute settlements, with majority (77%) apportionng spend towards adapting to new regulation or legislation.

  • 64% are also allocating spend towards litigation and arbitration.

  • 76% agree class actions are becoming more costly for their business, increasing 5 points from our September 2021 Barometer.

  • 40% are reactively managing the risk of class actions, increasing 4 points from our previous Barometer.

  • 16% are concerned about class actions forcing them into litigation in 2022.

 

of Australian companies are either currently being investigated by regulatory or government bodies, or expect to be in 2022

Resilience Barometer® AUSTRALIA

As we emerge from the pandemic, Australian business leaders are facing an ever-diversifying and growing number of risks and challenges to their companies under increasing public scrutiny. Concerns around climate change, intensifying geopolitical tensions and pressure to improve ESG and sustainability credentials are testing the resilience of Australian companies and making them more proactive in their risk preparations.

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