Navigating the cliff’s edge

Once again in a global crisis, Australia features in headlines for the right reasons. Our health results are matched by few countries.

Once again in a global crisis, Australia features in headlines for the right reasons. Our health results are matched by few countries.

We are now contemplating a path to economic recovery, in the shadow of COVID-19 and the state of the global economy. That path must be focused on long-term growth or we risk wasting the tremendous sacrifices we have asked — and will continue to ask — from generations of Australians.

The Reserve Bank’s May statement baseline scenario has Australia’s output and employment starting to recover in the second half of 2020 as restrictions are gradually eased and mostly removed by the end of September. What the central bank calls a “gradual recovery” will see GDP decline of three per cent in FY21, with unemployment at 8.5 per cent at the end of June 2021, after going into double digits during the crisis.

While our outlook is better than most, this will be a difficult period. An unemployment rate above eight per cent in the pre-COVID-19 world would have been a sign of a deeply troubled economy. As government programs unwind, particularly JobKeeper, boards will face hard decisions. With sectors such as travel and tourism constrained for longer by global restrictions, there will be a painful restructuring across the economy. When the “guardrails” of temporary regulatory relief and protection are removed, we could confront a “cliff edge” of decisions that stall the recovery.

Boards will play a critical role in navigating the cliff’s edge. For most boards across the economy, work has started on reassessing business models, resetting strategy and adapting to the post-pandemic “new normal”. For many organisations, especially in the not-for-profit and SME sectors, financial sustainability will remain a priority for some time — and the AICD is no exception. Cost discipline will be important, but is unlikely to be enough. Organisations will need to adjust to changes in the level and nature of demand, and access to resources and capabilities. We will not pick up where we left off in February.

In one critical area, returning to the past would be a backwards step. COVID-19 has clearly demonstrated the capacity of Australians to adapt and innovate. There are countless examples. Stagekings moved from the construction of massive stage sets to compact, collapsible home office desks; Victorian boat cover manufacturer Cover Craft pivoted to manufacture PPE; ResMed shifted production to increase the manufacture of respirators for COVID-19; and of course, a rapid and successful work-from-home mobilisation demonstrated we can be agile in our working environment and better use technology. That agile and open aspect of our character and culture is essential to overcome the challenges we are facing. Our economic recovery depends on a significant shift in risk-taking and an innovation mindset in our directors and boardrooms.

Our mission is to support you through the recovery, building capability by providing access to experts and resources in critical areas such as recovery strategy, reviving growth and financial reporting, as we did through the crisis period, to help you through each phase. Expect to see regular webinars, new director tools and new education offerings covering the issues that will be front of mind for directors. There has been unprecedented engagement on the resources we have released so far with 12,500 registrations for AICD webinars, more than 180,000 visits to our COVID-19 website content and record enrolments in our online courses, including the self-paced version of the Company Directors Course.

The AICD will also launch a new website shortly. We have made a major investment in a platform that will enable our members to stay current with rapidly developing governance challenges. We have redesigned the AICD Member Portal, formerly MySite, to make it an essential tool for your professional development. This is a significant step in evolving the AICD member digital experience.

Australia has an early lead on economic recovery compared to most, but we face our own challenges: getting Australians back to work, setting a policy agenda that supports sustainable growth, resetting our regulatory environment to encourage risk-taking and innovation. The risk is real that we drift back into “bad habits” associated with “old normal” as deadlines compound and the crisis abates. The global environment is not that benign. As a nation and community, we must maintain our resolve to respond decisively with our focus on the long term. It’s not wise to wander at the cliff’s edge.