Directors tired of being over an insurance barrel now have some new tactics to tackle risk management.
Insurers and local governments have joined forces to call for federal and state authorities to urgently prioritise spending on disaster mitigation and to involve local communities in better planning to manage rising climate change risks.
The east coast NSW and Queensland floods, which saw towns inundated at record levels, causing widespread destruction and leaving thousands homeless, were declared a national emergency on 9 March. At time of going to press, the Insurance Council of Australia estimated insurance claims costs at $1.77b.
Linda Scott GAICD, president of the Australian Local Government Association (ALGA), which represents 537 local councils, has urged boards as well as governments to scenario plan better and direct more investment to risk mitigation. “Governments are going to need to rethink how they manage disasters in the light of climate change,” she said. “It’s critical that investment in disaster preparedness and resilience be lifted. We are concerned if this doesn’t happen, our assets will be uninsurable.”
Praising the efforts of business during recent recovery efforts, Scott also urged boards that are scenario planning for the future to shift their asset spending to mitigation and prevention. “We need to move funding from nearly 100 per cent spent after a disaster gradually over time, to funding of 50–60 per cent going to prevention.”
Insurance Council of Australia CEO Andrew Hall GAICD joined ALGA in calling for Commonwealth investment in extreme weather resilience measures to double from $100m to at least $200m a year — or $1b over the next five years, matched by the states and territories. This is in line with recommendations from the 2015 Productivity Commission inquiry into disaster funding.
Current legislation allows for $200m per year to be spent from the federal government’s $4.8b Emergency Management Fund — although since 2019, only $150m has been committed.
ALGA is also urging restoration of funding provided through local government Financial Assistance Grants to one per cent of commonwealth tax revenues. “This would further lift the level of preparedness of local government in regional areas where exposure to fires and floods is greatest, but local tax revenue is small,” said Scott.
The ICA is calling for subsidies to improve resilience of homes and businesses to cyclone, flood and bushfire in at-risk communities, and to fund pre-emptive projects such as levees, floodways and prescribed burning.
Hall said the need has only become more urgent. The ICA’s recent policy document, Building a More Resilient Australia, noted that without increased resilience funding and a change in approach to what we build and where we build it, the risk profile of communities exposed to extreme weather will not change.
The 2020 Royal Commission into National Natural Disaster Arrangements report said direct and indirect disaster costs in Australia were projected to increase from an average of $18.2b per year to $39b per year by 2050, even without accounting for climate change.
In the May 2021 budget, the federal government established the National Recovery and Resilience Agency in response to the royal commission recommendations.
Racism @ work
New Diversity Council of Australia research provides a framework for boards to tackle racism.
Diversity Council Australia (DCA) has released Racism at Work, an evidence- based guide to help organisations effectively address workplace racism. The report outlines six organisational barriers keeping racism entrenched in Australian workplaces. These range from language and lived experience, to biased recruitment and a failure to call out discrimination. It outlines six actions that can tackle the barriers, including building racial literacy, removing bias in recruitment and creating the capacity to call it out.
The survey of 1547 workers showed 88 per cent of respondents agreed racism is an issue in need of direct action in workplaces, while only 27 per cent said that their organisations were proactive in preventing workplace racism.
“Our research shows that racism is not only the result of behaviours or attitudes from a few individuals, but entrenched within organisations, their policies and workplace cultures — it’s really time that board directors and senior executives take it seriously,” said DCA CEO Lisa Annese. “It shows there are real risks to businesses that don’t address racism in their workplaces, with a high personal cost for the individual employees who experience it and, for workplaces, an impact on innovation, market share, profit, absenteeism, staff morale and productivity.
The research was sponsored by Diageo, IKEA Australia, Relationships Australia NSW, Arup and QBE.
The inflationary and supply repercussions of an oil market caught in the biggest shock since the 1970s will feed through the global economy, presenting new risks, according to Reuters senior energy market analyst John Kemp. Even before Russia’s invasion of Ukraine, the combination of sluggish growth in production and rapid growth in consumption had created classic conditions for a spike in prices. “Production will have to grow faster, consumption must grow slower, implying a downturn in the business cycle, and a major disruption of oil supplies must be avoided,” he wrote in a market update.
Extreme weather event (NSW, Vic, Qld) March 2022
$612m in claims incurred
59,000 claims submitted
Source: Insurance Council of Australia (at 14 March)
In the wake of disaster, communities end up with a bigger headache — piles of donated goods that aren’t suitable, which then end up as landfill. GIVIT — a platform partnered with most state and territory governments and supported by organisations like NRMA and IAG — allows people to offer donations that are only accepted once a person/agency in a disaster area has identified a need.
Congratulations to five AICD members who were awarded AICDLife fellowship at the March Australian Governance Summit in Melbourne.
Peter Hay FAICDLife, chair Australia Pacific Airports Corporation; former chair Newcrest Mining.
Dr Cherrell Hirst AO FAICDLife, chair Factor Therapeutics; director Gold Coast Health and Hospital Service, Bolton Clarke, The John Villiers Trust; advisory board chair/adjunct professor Institute for Molecular Biosciences at University of Queensland.
Elana Rubin AM FAICDLife, non-executive director Telstra, Slater & Gordon, Transurban Queensland, chair Victorian Managed Insurance Authority; former chair Afterpay, Australian Super.
Gene Tilbrook FAICDLife, non-executive director Woodside Energy, Orica; former director Aurizon Holdings, Fletcher Building, GPT Group; former executive director Wesfarmers.
Peter Achterstraat AM FAICDLife, NSW Productivity Commissioner, chair Bankstown Airport; former Auditor-General NSW, former president (NSW) AICD.
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