Kiwi Businesses Unprepared To Face Current Perfect Storm Of Organisational Risks – BDO NZ Risk Landscape Report

A new report from BDO highlights that geopolitical tensions, economic uncertainty, supply chain and ESG are all combining to create a perfect storm of risk for NZ businesses. However, the report indicates that both globally and here in New Zealand, businesses are not prepared for the higher levels of organisational risk they are facing.

One-third of businesses not prepared for risks stemming from geopolitical tensions

‘Riding the wave of uncertainty: New Zealand perspectives on the Global Risk Landscape Report’ draws on insights from BDO’s seventh annual Global Risk Landscape Report, where one-third of respondents said that they are not prepared for risks stemming from geopolitical tensions.

The war in Ukraine, volatile European markets and currencies, and challenges across China’s political and economic landscape are just some of the issues having a direct impact on Kiwi businesses. The war in Ukraine, for example, has led Europe to purchase oil from countries where NZ has traditionally imported from, thereby driving up the price. Meanwhile the decision of many Japanese businesses to move their supply chains away from China is causing delays to importing goods into New Zealand.

Political instability has led to economic instability – with businesses now operating in a high-inflation, high interest rate environment, causing business margins to become increasingly squeezed as both their internal and external costs have risen.

The report highlights that the only way for businesses to manage this political and economic instability is to engage in strong risk management processes, enabling Kiwi businesses to understand and monitor risks as they develop, and know what controls they have in place to mitigate the impacts of, for example, increased interest rates.

Nearly half of businesses have experienced severely disrupted supply chains

Nearly half of respondents to the BDO Global Risk Landscape Report said that their supply chains had been severely impacted by disruption over the last 18 months. New Zealand, being at the end of the global supply chain, has also suffered. According to the report, many businesses in New Zealand have been forced to change their suppliers, find alternate routes, purchase greater quantities of stock ahead of time, or endure unprecedented lead times. All of this has come at a cost – both real and opportunity – that is putting even further strain on cash flow.

The report also highlights the risk and opportunity presented by ESG (Environmental, Social & Governance) factors. Only 22% of respondents to the BDO Global Risk Landscape Report highlighted climate change and natural disasters as a significant priority. However, while ESG factors typically take longer to impact a business than the very immediate risks presented by supply chain disruption or inflation, they present some very serious risks to businesses.

The New Zealand report highlights that these can be broken down into losing competitive advantage as consumers and other businesses expect organisations they purchase from to act on ESG, increased Government regulation, and physical risks to infrastructure and resources caused by climate change. For example, the report explains how commercial fisheries in New Zealand are seeing lower yields of several key fish stocks as marine heatwaves become more common.

War on talent a key issue for NZ businesses

Another ESG-related risk, and also a more general risk for Kiwi businesses, is the war on talent. Just as consumers expect businesses to act on ESG, so too do employees. The report shows that New Zealand is increasingly stretched for available talent, and recent visa changes have only made the process of hiring overseas workers more burdensome for the employer. This issue was also highlighted in BDO’s recent Wellbeing and Business Performance Index, where workload was the third most common stressor for Kiwi business leaders.

Tarunesh Singh, BDO Risk Advisory National Leader, explains: “There are many events taking place on the other side of the world that are having a very serious impact on Kiwi businesses and their ability to achieve their strategic vision. While ‘Riding the wave of uncertainty’ is about accepting that these risks exist, it’s also about showing that NZ organisations can still take action in the form of strong risk management processes that enable them to stay up to date with changes, understand their impacts and exactly which levers they can pull to lessen those impacts.

While Kiwi businesses are facing an unprecedented level of risk currently, it’s important to remember that every risk also presents an opportunity – competitive advantage, stronger financial management and more efficient supply chains are all potential outcomes of managing these risks effectively.”

‘Riding the wave of uncertainty’, features a range of insights and tips for New Zealand businesses in effectively managing risk during the current and upcoming environment of global uncertainty.

To view the report as well as a video interview with reporter Wilhelmina Shrimpton and Tarunesh, go to bdo.nz/risk-report.

About BDO

BDO offers a wide range of business and corporate advisory services to large corporate organisations, Government & Public Sector entities, private businesses, entrepreneurs, and individual clients across a wide range of industry sectors.

In New Zealand, BDO can offer the expertise of more than 100 partners, supported by over 900 staff. We are one of New Zealand’s largest networks of independently-owned accounting practices, with offices in Kerikeri, Whangarei, Auckland, Tauranga, Rotorua, Gisborne, New Plymouth, Napier, Palmerston North, Wellington, Christchurch, Queenstown, Wanaka, Alexandra, Cromwell, Blenheim and Invercargill.

Our service lines include: Audit & Assurance, Corporate Finance, Tax, Advisory, Forensic Services, Risk Advisory, Business Recovery & Insolvency, HR Services and Information Systems. We also focus on a range of industries and specialisations, including: Automotive, Agribusiness; Government & Public Sector, Healthcare, Not-for-Profit, Professional Services, Real Estate & Construction, Retail, Technology, Entertainment & Telecommunications; and Tourism, Sports & Leisure.

International BDO network

The BDO network (referred to as the ‘BDO network’) is an international network of independent public accounting, tax and advisory firms which are members of BDO International Limited and perform professional services under the name and style of BDO (hereafter: ‘BDO member firms’). BDO International Limited is a UK company limited by guarantee. It is the governing entity of the BDO network.

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