Category Archives: Pro Experts

Hawke’s Bay’s leading professional service advisers & leaders

A closer look at Carbon

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At times of market and economic uncertainty, combined with relatively low expected returns for many asset classes, we should consider more widely the assets we hold.

It’s important to have a portfolio strategy, designed with discipline, embracing market opportunities while preparing for the unexpected. There are several components of a well-constructed portfolio, including a robust strategic asset allocation that’s consistent with your long-term goals and objectives. A mix of asset classes and strategies all have a role to play. In more recent times, we’ve been challenged to look beyond traditional alternative asset allocations like gold, silver, commoditised debt and emerging markets (amongst others).

This is where carbon has a role to play. Growth in carbon markets may have wide-ranging implications for climate finance, corporate strategy, and global trade. Now when constructing a portfolio for retail investors, carbon can be a serious consideration. It is our view that the New Zealand carbon market was surprised last year when the Government rejected the Climate Change Commission’s (CCC) advice to reduce the number of NZUs up for auction and raise the price settings.

We understand the rationale for the CCC’s recommendations may have been that it wanted to reduce what is perceived as excess supply in the system. In short, it looked to raise the auction floor price, reduce the number of NZUs auctioned and move the Cost Containment Reserve (CCR) much higher than present levels. The CCR is the price level where the Government will sell more NZUs if demand exceeds the regular auction supply.The Government considered the recommendation was likely too inflationary as our petrol, electricity use and landfill trips all have a carbon cost embedded into them.

Given the NZU market had seen the CCR as a magnet previously and both CCRs were fully used in the 2021 and 2022 auctions, it was concerned carbon prices would jump too high on the CCC recommendations. The Government decided to keep with the current plan of the CCR being $80.64 in 2023 and to rise it incrementally to $129.97 by 2027.

The market underwent a significant correction on that announcement – one of the biggest seen in its fifteen-year history, falling $20 or 25% from a high of $88 to the current price of $67. So where to from here for prices? There are two questions. What will the Government do next, and then where do prices go from here?

Whether you agree with the Government’s view or not is somewhat irrelevant. NZUs have been deflationary since the announcement, and whilst we need higher carbon prices – not lower to decarbonise – the ETS is a market where prices will change, both up and down. Regulatory risk is the fundamental risk you assume if you trade in the ETS.

The reality is that domestic and international targets remain. It’s just become harder to achieve. Unless we start making emission reductions now, carbon credits on the ETS become shorter in supply. The ETS covers roughly half of our emissions – circa 40 million tonnes per year. That’s approximately the amount of NZUs that need to be surrendered by liable entities in our ETS every year. Some liable entities are fuel companies, coal and gas users and electricity companies.

They collect the carbon from us in cash, buy NZUs in the market or at auction, and hand them to the Government every year. 1 NZU equals 1 tonne of CO2e emissions. Looking at the following table, you can see if emissions remain flat and the government supply falls from 2023 to 2027 through auctioning, the market will be short 45 million tonnes in 2027 if the CCR is taken out every year, and 85 million tonnes in 2027 if it is not.

Source – CCC and Jarden This means that the shortfall will have to come from actual emission reductions, such as forestry or the current registry stockpile. All these (extra) NZUs sit in the hands of private actors. We know some will come to market, but we don’t know how much. What is required is approximately 10 to 20 million NZUs per year for supply to equal demand – we’re not sure that is achievable. Carbon prices may be impacted.

Tobias Taylor is Director, Wealth Management Adviser at Jarden. The information and commentary in this article are provided for general information purposes only. It reflects views and research available at the time of publication, using external sources, systems and other data and information we believe to be accurate, complete and reliable at the time of preparation. We make no representation or warranty as to the accuracy, correctness and completeness of that information, and will not be liable or responsible for any error or omission. It is not to be relied upon as a basis for making any investment decision. Please seek specific investment advice before making any investment decision or taking any action. Jarden Securities Limited is an NZX Firm. A financial advice provider disclosure statement is available free of charge at https://www.jarden.co.nz/our-services/wealth-management/financial-advice-provider-disclosure-statement

Risk register protects and creates opportunities

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The start of 2023 has been a rough one. Cyclone Gabrielle and the subsequent flooding brought a degree of destruction not seen in the Hawke’s Bay for decades.

If we have learnt anything over these last few years following a global pandemic, lockdowns and cost of living crisis, it is that as a group, Hawke’s Bay people and businesses are resilient, adaptable and incredibly hard working! And while some businesses are back to a ‘business as usual’ operating landscape, many are still in recovery mode.

Resilience goes past simply responding to disruptive events; it also means seeking out and seizing opportunities that are created by external forces. Businesses cannot control what happens in their external operating environment, the number one action you can take to manage uncertainty is to create an up-to-date risk register.

This involves identifying the top risks facing your organisation (say 5-10) and prioritising these risks before working out what controls you have in place to help mitigate them. This will give you a baseline to work from and allows you to make actionable plans to improve where and how your business is protected against risk. If you do have a risk register for your business and you haven’t reviewed this following the cyclone – now is probably a good time to review it and your action plan accordingly.

Completing a SWOT analysis is a crucial element of any risk assessment. Analysing the strengths of your business helps identify distinctive features – a strength unique to your business that competitors would have difficulty matching, or that gives you a market advantage.

Analysing the weaknesses of your business helps identify issues that may currently, or could in the future, impact on your success. You should try to identify the most promising opportunities available to you to meet your goals. Some major opportunities could be pursuing new lines of revenue, re-evaluating your premises, implementing new technology, working more online, redefining roles within the business or even acquiring new businesses. Leave no stone unturned.

Next, what are the biggest vulnerabilities in your business right now? Insufficient cash flow, a drop in demand, and poor debtor management are common culprits. It’s important to consider the people you deal with (your customers) and their businesses.

If your clients’ businesses are struggling, this will impact you. Identifying vulnerabilities empowers you to put in place a plan to overcome them. You need to be brutally honest in your assessment. A rosy plan won’t help you.

Short-term action plan

The potential output of a short-term action plan should be a succinct, “fit-for-purpose” plan that prioritises the what, who and when for your organisation and can be used as a roadmap for the upcoming months. It can also be used as a key discussion document for sharing with your business’ stakeholders. Ideally a short-term action plan should focus on a time period that lends itself to becoming the basis for a reviewed annual plan. Following a large disruptive event like the cyclone, using your risk register and updated SWOT analysis will provide the basis for a short-term plan that can be worked into your long-term action plan or provide outcomes for action at a later date when your business planning moves from a recovery to a growth phase.

Be Informed When dealing with a Regional disaster such as Cyclone Gabrielle making sure you are aware of all of the support and options available to your business is paramount. Unlike during the pandemic where we had a centralised government response with daily televised updates, this isn’t the case this time. There was an overwhelming multitude of different communication channels from a myriad of sources, all with their own unique viewpoints, priorities,
and communication styles.

If you as a business owner don’t have capacity to keep yourself informed, ensure that you delegate this task to an appropriate team member. Social media and local print publications seemed to be the communication channels of choice for many organisations, providing free, timely and easy to use platforms to distribute information. What we have heard time and time again from our local networks is that there is a degree of frustration as many affected business owners find themselves in a state of limbo.

They were waiting for instruction, waiting for guidance, waiting for information, waiting for answers, waiting for pay-outs, waiting for decisions on red zoning and some are still waiting. By completing the above tasks, business owners can take back some control during times of disruption and provide a framework for future business success even while navigating a change cycle.

Heather Hallam is a Director with BDO. She has extensive experience assisting both small and medium sized entities with a wide range of audit and advisory services, particularly in the Tax and Advisory sectors. BDO Hawke’s Bay are Chartered Accountants and Business Advisors. The firm is an independent member of BDO New Zealand and part of the global BDO network. www.bdo.nz

Cyclone Gabrielle & tenancies – know your rights

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Article by Edward Bostock, Director and Kelly Henderson, Legal Executive 

One of the most significant impacts of Cyclone Gabrielle has been the damage and destruction to commercial and residential properties in Hawke’s Bay. Building officers are completing rapid building assessments on properties effected by the Cyclone.

To date, there are 100 red stickered properties (meaning the property has been seriously damaged) and 712 yellow stickered properties (meaning the property has been damaged and may need to be temporarily vacated) in the Hastings District. Understanding what rights landlords and tenants have if their property is affected is important. Commercial Leases What does “untenantable” mean?

The term “untenantable” is generally accepted to mean that a leased property has become so badly damaged or destroyed it can no longer be occupied or used by a tenant for the purpose intended in the lease. To determine whether a property is ”untenantable” the following points should be considered:

■ How permanent the damage is;

■ How long any repairs will take;

■ Whether the damage or destruction prevents the tenant from their right to use, enjoy and operate the property; and

■ What proportion of the term of the lease the property will be unusable for.

What does the Deed of Lease say? Landlords and tenants should look to the Deed of Lease as a guide for how  to proceed when a property has been destroyed or damaged by an event such as Cyclone Gabrielle. Leases will generally contain clauses differentiating between properties that have been completely destroyed and those that have been partially damaged or destroyed. The ADLS Deed of Lease is commonly used for commercial leases and (subject to specific changes) this provides as follows:

1. Total Destruction
If the property or any portion of the property is so badly damaged or destroyed so as to render the property as untenantable then the term of the lease will automatically terminate from the date of destruction or damage. The tenancy may also be terminated if the landlord, acting reasonably, decides that the property is so badly damaged it requires demolition or reconstruction.

2. Partial Destruction
If the property or any portion of the property is damaged, but the property is not untenantable then the expectation is that the landlord will spend all insurance money received to reinstate the property. There are a number of points to note with this:

■ The landlord is not required to spend any amount of money greater than the insurance money received.

■ The landlord may carry out the repairs or reinstatement and use any materials and form of construction they see fit as long as the property is reasonably adequate for the tenant’s occupation and use of the property.

■ Until the repairs or reinstatement are complete, a fair proportion of the rent and outgoings shall cease to be payable from the date of destruction or damage.

■ If a necessary permit or consent (such as resource or building consents) is unable to be obtained, or the insurance money received is inadequate for the repairs or reinstatement required, then the term of the lease will automatically be terminated.

Not all commercial leases use the ADLS Deed of Lease and there are situations where there are no written lease arrangements at all. Residential Tenancies Section 59 of the Residential Tenancies Act 1986 deals with properties that have been damaged or destroyed due to a natural disaster and as with commercial tenancies, the requirements differ depending on the severity of the damage.

The property has been destroyed If your residential property has been destroyed or the damage is so severe that it can no longer be lived in, then either the tenant or the landlord can give notice to terminate the tenancy regardless of whether the tenancy is fixed term or periodic. In this case, the landlord must give seven days’ notice to a tenant, or a tenant must give two days’ notice. During this notice period the rent should be reduced accordingly. The property has been damaged If part of your residential property has been destroyed or damaged so that part can no longer be lived in, then the rent payable should be reduced accordingly. Either party can apply to the Tenancy Tribunal to terminate the tenancy.

The Tenancy Tribunal will make an order to end the tenancy if it is deemed unreasonable for the landlord to reinstate the property or for the tenant to continue with the tenancy even at a reduced rent.

We understand that this may be a stressful time for landlords and tenants alike. If your commercial or residential property has been destroyed or damaged and you are unsure what your rights are then please give our office a call – we are here to help. Contact: edward@bramwellbate.co.nz or kelly@bramwellbate.co.nz (06) 872 8210 www.bramwellbate.co.nz

People Planning for a Year that is not business as usual

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It was anticipated as a year of positivity, business as usual and moving on, but 2023 so far has not been what Hawke’s Bay expected.

From a people and business perspective, managing through a disaster creates additional issues to navigate. Resilient Organisations, a research and consultancy group, classify the stages of looking after staff in a major disaster into four areas – planning for your people, responding to the situation, rebuilding a better future and leadership.

The Dichotomy

The impacts from the cyclone appear to be a dichotomy – those affected and those not. There is now potentially a third category – those presented with an opportunity in the rebuild. Employers successfully navigated the first weeks after the cyclone and (from what we have seen) supported staff through that first week. It is worth noting, however, that just like the Christchurch earthquake, the six-week mark can be tough – the novelty has worn off, adrenaline is no longer flowing, and the rest of the world seems to be moving on. If some of your staff “hit a wall” at this point, you are not alone. WorkSafe are currently emphasising a focus on mentally healthy workplaces with the expectation that employers proactively manage mental health as part of their health and safety management plan. For staff that are notably impacted, keep this in mind.

The Downside

There are some sad stories emerging where a small number of impacted businesses will need to downscale for a time
or cease operations altogether. While there has been a natural disaster, employers are still required to follow through on contractual obligations. As such, any changes to their people’s working arrangements and restructures need to
be supported by the right conversations, processes and documentation. This will require some short and longer-term planning. Disestablishing positions requires a robust process and considerations to individual employment agreements, legislation and procedural correctness is required. It is advisable to seek advice from an HR consultant or employment lawyer to get this process right.

Leadership

Building confidence in leadership during times like this is important. Likewise, leaders need to instil confidence. The recent report on the Auckland response to the January flooding highlights this. Visibility in leadership in times like this is important. Amid COVID-19, business confidence has dissipated. We have seen leadership and team dynamics fraying and resilience and agility has been tested. Guide your leaders through change and build their capabilities to manage issues. Coaching and leadership development is a great investment right now.

The Upside

There are others for whom the rebuild poses great opportunity. Certain industries will need key skills on the ground floor and also in key technical roles such as engineering. When talent has already been difficult to source, having a clear strategy for finding the right staff will be vital. Having a good Talent Strategy will provide a set of plans and initiatives to attract, develop and retain quality people, and assists in identifying skills and capabilities required to achieve organisational goals and programmes to develop your people. If your business is trying to pivot, you will need new skills and potentially some people who are different to those you’ve have hired before. You will need to plan for this.

Your Talent Strategy

Five components you should feature in your strategy:

Attracting great employees requires identifying specifically your EVP (Employee Value Proposition), Analysing the candidate experience as a litmus test – would a great candidate who came a close second for the job give you a positive rating for your recruitment process and refer a friend to you? Measure your Return On Investment in your process, even just the basics – how long to fill the vacancy, where did we advertise, how much did it cost, which channel did the quality candidates apply through and, after six months in the job, were they a good or bad hire? Good data enables us to continuously improve what we do. The definition of success is also shifting for employees. Beyond just job title and pay, looking to find a balance in hours worked, organisational culture, mental and physical health, development and progression, and job satisfaction will help retain and attract talent.

For assistance with human resources initiatives including teams, leadership, investigations or facilitated meetings, please contact hr-consulting-hawkesbay@bakertillysr.nz

The Growing Value of Insurance Cover

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There is nothing like a natural disaster such as Cyclone Gabrielle to once again have the spotlight shone firmly on ensuring your property is adequately insured in the event of loss and damage.

The way Kiwi homes were insured largely changed following the devastation of the Canterbury earthquakes with a shift from guaranteed full replacement or undefined cover to a defined cost of replacing a home which is destroyed referred to as ‘Agreed Value or Sum Insured’. Primarily the shift meant that insurers had a more accurate way of defining what their exposure was in the event of damage or loss.

However, as a result, there is a mixture of policies available in the market but unless you have a current Replacement Insurance valuation you risk being underinsured. When homeowners are asked to come up with an agreed amount to replace their house, homeowners think of just the house itself and will use a dollar rate per square metre to approximate the replacement cost, which may be reasonably accurate.

However, there are other important aspects to consider, such as demolition, site works and inflationary provisions, which all cost, as well as the replacement value of your home. If your house is damaged or destroyed by fire, there is a very genuine cost attached to removing/demolishing the existing structure so that you can commence work on your replacement, if demolition is not considered this sum simply gets deducted from your Agreed Value and you have less money to build your new home.

If your home is destroyed on the last day of your insurance policy there is 12 months’ worth of inflation on building costs, although it is likely to be considerably longer than that before you can rebuild. Demolition, drawing plans, getting council consents and then the build time could easily be another 12 months, meaning potentially 24 months on inflationary provisions will be required, if not allowed for, again you will simply have less money to rebuild with. This is also true of site works such as concrete sealed paths and drives, fencing, landscaping, clotheslines and even your letterbox. To replace them they all have a cost that needs to be accounted for.

If homeowners have not factored these costs into their Agreed Value, they will be the ones paying for the site works should they be faced with loss or damage to their property. The sum to replace a metal letterbox is negligible; however, the cost to replace 300m² of concrete seal is not. Just working out a per square metre rate on your house, will not in the future translate to full replacement as we currently understand it.

However, you can get a Replacement Insurance Valuation from a Registered Valuer to ensure you are properly insured and can replace your home with the same size, scale and quality as the home you had before the disaster. Whilst many New Zealanders remain fee averse about paying for professional advice, it’s important to remember; your home is your most valuable asset and worth properly insuring. Furthermore, I wrote in June 2022 about the significant coverage given to the rapid escalation of costs within the New Zealand (NZ) construction sector.

The escalation was so rapid that even if your policy includes an automatic inflation guard to cover annual inflation, your coverage had probably not kept pace with this unexpected spike in building and labour costs. To be protected against loss, your coverage should equal the cost to rebuild. An accurate valuation is vital to ensure policyholders have appropriate coverage in the event of a loss as this will allow you to replace your asset in the event of a disaster and this will directly impact the values assessed to ensure your property is adequately insured.

How does this Impact your Replacement Insurance Value? Firstly, it’s important to understand that Market Value (MV) of your property can be very different to the Reinstatement Value which refers to the cost to replace your asset today, to the same size and scale, considering modern equivalent technologies, materials and services.

Therefore, cost does not always equal value and if you have older premises, the cost to recreate may well be above the asset’s current market value (MV). However, with construction costs rising quickly in a comparatively short period and with most property insurers on an ‘Agreed Value’ policy, this means anything over and above that amount will not be paid out if the property needs repairs or a total rebuild.

As a result, you could discover that your existing policy limits and coverage no longer offer adequate protection. Considering these ongoing cost concerns, insurance companies are being proactive and asking for more regular valuations compared to five years ago. Property owners need to be proactive too and the most prudent thing they can do is to make sure they have a current replacement insurance sum that is as accurate as possible.

Unfortunately, insurance companies have already signalled that due to rising construction costs, an increase in claims due to the impacts of the cost escalations as well as the increased cost of reinsurance, premiums are signalled to go up.

Initial responses and build back better

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The impact of Cyclone Gabrielle has been felt, and will continue to be felt by many, and across many sectors. Suffice to say that many families and businesses have been massively affected. From a resource management perspective, new legislation has been introduced to assist initial recovery responses, and various planning processes are likely to follow around consenting and new policy initiatives to better manage risks and ‘build back better’.

Where a natural disaster occurs, it is recognised that emergency discharges, for example, may occur, and the RMA sets down a process whereby such activities are then consented on a retrospective basis. The need for other activities to occur, that would otherwise require resource consent, is also common as part of any immediate response, and obviously it would not be practicable to wait for a resource consent application for such activities to be granted. Examples include the installation of culverts washed away, construction of temporary bridges and establishing silt dump sites.

Among other initiatives, the Severe Weather Emergency Recovery Legislation Bill widened the breadth of activities that could be undertaken under ‘emergency works’ and extended the timeframe for which retrospective consent applications for such activities need to be lodged. It also introduced new provisions to allow certain emergency activities to be undertaken by certain rural landowners and occupiers as a Permitted Activity. The general purpose of the Bill is to assist local authorities and communities in the areas affected by the severe weather events, and in particular, to:

■ Assist rebuilding and economic recovery,

■ Increase safety and resilience,

■ Ensure governmental activity can continue to be undertaken,

■ Temporarily enable the relaxation or flexible operation of some legislative requirements.

Part 2 of the Bill sets up a process whereby a Minister can recommend an Order in Council which exempts or modifies any legislation for the purpose of planning, rebuilding, and recovery of affected communities and persons.

This could include allowing activities that may otherwise be classified as prohibited to be considered as part of potential responses, such as the burning of certain materials, and providing an alternative (faster) process to standard RMA processes for specific recovery, rebuilding and resilience related activities or policies.

How resource management requirements have affected response efforts and whether enough has been done to assist recovery will draw different reactions and views, but those most affected by the impacts of the cyclone have no doubt been presented with a range of barriers including resource management requirements, and the impact of those barriers should not be underestimated.

Moving forward though, what can we expect in the resource management field?

There will be a number of retrospective resource consent processes for activities that have needed to occur as part of the immediate response and a number of resource consent processes for new activities. There may be new planning projects looking at different alignments for roads and railways and there will almost certainly be projects looking at risk management and land use planning within areas subject to risk.

What new land use controls may look like may differ between affected areas and are likely to be influenced by the degree of risk mitigation able to be established. Hawke’s Bays’ strength is its natural environment and diversity of industry, and although the impacts of the cyclone on those most affected cannot be cast aside, there is opportunity to think about what a more resilient Hawke’s Bay may look like, and opportunity in the Bill to carve out a process to enable these sort of things to be considered.

The term ‘build back better’ is frequently referred to, but what does ‘better’ mean, and who are we building back for? Let’s not overlook those who have been most affected, and let’s understand what build back better means for them as a starting point and make sure efforts are focused and prioritised for their benefit.

Learning from Disaster: What we should take away from Cyclone Gabrielle

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Over the course of the last several years, we have seen three major events that forced us to reassess our business continuity and disaster recovery planning. The Christchurch earthquake of 2011 initiated a shift towards cloud technology in preparation for office access becoming more unpredictable. 2020’s COVID-19 pandemic solidified remote working and online collaboration as an essential part of modern businesses, while Cyclone Gabrielle reminded us just how vital power and communications networks are during turbulent times. No business could have predicted the unpredictable.

Yet, despite all these unforeseen events disrupting businesses everywhere, one thing is certain: now more than ever, we must plan for and manage potential disruptions from any source – natural disasters, cyber-attacks, data breaches or pandemics included. Our approach towards continuity planning and disaster recovery will determine our ability to come out stronger on the other side.

Cyclone Gabrielle recently caused devastating destruction along the east coast of New Zealand. The repercussions of this storm will take years to overcome and have prompted an examination of the risks individuals and businesses face. As authorities investigate ways they can better prepare for future disasters like these, key insights garnered from Cyclone Gabrielle are helping create a solution-oriented approach moving forward. Herein lies several key lessons businesses can consider for the future:

Businesses should develop a comprehensive disaster recovery and continuity plan that is tailored to their particular risks, including the possibility of natural disasters like earthquakes, tsunamis or cyclones. Particularly important for coastal businesses would be preparation against potential tsunamis – so far, an untested but promisingly survivable force of nature!

  • A good backup system should be put in place to recover data even if major damage occurs to the business premises or IT infrastructure.
  • Business owners should take extra precautions with important documents, such as making electronic copies of those documents and storing them off-site or in the cloud.
  • Employees should be prepared for potential disasters through training courses on emergency response and crisis management protocols.
  • Businesses should allocate an emergency budget that includes emergency funds to cover any losses incurred due to a disaster and additional expenses associated with rebuilding operations afterwards.
  • Businesses should consider their supply chains and the likelihood of disruption to services if their suppliers are affected by a disaster. More importantly, businesses need to think beyond just the restoration of services and focus on ways to build resilience so they can better handle such events in the future and avoid disruption from occurring again down the line.

Following the devastation of Cyclone Gabrielle, communities banded together to help one another in remarkable ways. Volunteers and agencies donated food, clothing and other necessary items as people exchanged desks and computers for shovels and gumboots to undertake the reconstruction efforts.

Though we will never forget the people and property we lost or the destruction caused by this disaster, there is light at the end of this tunnel; together, we shall overcome these trying times – but not without first considering our future through preventive planning. For a more detailed look at Business Continuity and Disaster Recovery Planning, along with free templates and resources, go to https://govern.co.nz/resources.

Tom Hartley is a certified ISO 22301 Business Continuity Lead Implementor and is available for free consultations. He can provide guidance on implementing an effective Disaster Recovery Plan and help with any questions you may have.

Tom is the owner of Govern Cybersecurity. He has over 18 years in the cybersecurity and IT industry at management level, and for the past 6 years has been a lecturer in cybersecurity at the Eastern Institute of Technology. He has earned certifications in ISO 27001 Lead Auditing, Lead Implementation, SOC2, and Ethical Hacking. These certifications are considered the international gold standard for business security.

What did we learn from disaster

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It’s been a tough couple of months for many with Cyclone Gabrielle having wreaked havoc across our beautiful region.

Over 40,000 insurance claims have been lodged. The cost attached to these claims is around $890 million of which around $70m has been paid, according to The Insurance Council of New Zealand at 20th March. This only covers insurers who are members, and the industry consensus is that the final bill will be in the billions. What became apparent immediately after the cyclone was –

  • How unprepared some people were from a business continuity perspective.
  • The level of under insurance in some areas when people were making claims, including having insufficient business interruption cover.

Hindsight is of course wonderful thing but, given the nature of these severe weather events which are likely to continue with climate change, planning for any future events is critical. As you start moving forward and rebuilding, here are some things to consider –

Business Continuity Plan (BCP)

Developing a sound BCP is crucial to preventing even a minor disruption from turning into a catastrophe.

A BCP should not just cover natural disasters it should also focus on risks such as supplier failure, economic crisis, cyber-attacks, and pandemics. Should any of these risks occur, unprepared organisations don’t just stand to lose profits but their reputation, and possibly even their whole business.

BCP’s help organisations protect their employees and assets and resume operations in an expedient and more controlled way. They are not just designed to cover ‘in-the-moment’ procedures in a crisis, such as escaping your building safely from a fire, a BCP covers how you’ll get core parts of your business up and running again after the event. It includes things such as –

  • Accessible recovery locations and emergency operations centres.
  • A process for automatically switching telephone and data lines.
  • Manual processes for continuing operations until technology is repaired.
  • Processes to deal with the loss of information that is not available from backup data.
  • A BCP awareness programme.
  • A review process to keep the BCP up to date.
  • Testing of the BCP on an end-to-end basis.

Once the plan is developed it is important to test it with a group of different people from the across the business. For example, what are the practical realities of switching over phone systems from an IT perspective or how do you get communications out if no one has power?

Risks are changing all the time, so the plan needs to be pulled out regularly and reviewed.

Business interruption (BI)

When you are next reviewing your insurances, make sure you review your BI policy thoroughly and have the correct sum insured and indemnity period. The indemnity period is the timeframe which the turnover of the business could be affected by damage to your buildings, plant or contents.

It should be the period it would take to restore the income of your business to the same position as if the loss had not occurred. We saw through the Christchurch earthquakes how inadequate many indemnity periods were due to the underestimation of how long it would take to re-establish a devastated business.

For example, getting tradespeople before the cyclone was a challenge and now demand is even higher – meaning that wait times to get work done are even longer. You will still need to be paying for staff wages and may incur costs for temporary premises until yours are reinstated. We appreciate that this is a challenging and Hawke’s Bay are here to help.

Employee Benefits How do you measure the health & wellbeing of your team?

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There has been a lot of talk lately around employee health and wellbeing, especially with the struggle for employers to attract and retain staff and recent initiatives such as Mental Health Awareness Week. We all know that a healthy workforce leads to a healthy business but what is the right approach for employers to health and wellbeing and, if the goal is to ‘improve’ the health/wellbeing of the workforce, how can you measure this?

Defining what wellbeing is and why it matters to employees The term ‘wellbeing’ is multi-faceted. It includes everything from the physical health of a person to their mental and spiritual state, social interactions, cultural engagement, and financial situation. Gone are the days of the lifelong nine-to-five career with a gold watch at the end. Employees are now expecting their employers to value their wellbeing and offer flexible working arrangements – at a minimum.

The measure of success from an employee’s perspective has changed from merely financial rewards to aspiring for an overall package that affords an attractive lifestyle for them and their family.

  1. Why should wellbeing matter to employers? An employee in good general health contributes to a safer workplace and is proven to be significantly more productive
  2. Given the lower rates of absenteeism, increased output of quality work. In a tight labour market, it is crucial for employers to not only offer a competitive salary or wage but to go that step further and provide additional benefits that will impact their life and wellbeing in a tangible way. Many employers offer discounted gym subscriptions or social/competitive sporting events, weekly yoga sessions or onsite massage therapists. Some businesses are implementing a group life, disability, or critical illness insurance plan to provide peace of mind to an employee and their family. More commonly, in recent months, organisations have instigated health plans for all staff with universal acceptance to cover treatment in private health facilities or assist with day-to-day costs such as GP visits, dental check-ups and prescription lenses. This continues the trend of health insurance plans as the most desired employee benefit in New Zealand.
  3. As well as looking after the health of the employee these plans help avoid the lengthy wait they might otherwise face in the public health system, and supports them to recover faster and thus return to work sooner. There are currently 200,000 New Zealanders on a health-related wait list and forty two percent have been waiting more than four months.
  4. How do you measure wellbeing? To attract and retain a happy/healthy team, businesses would do well to use the approach of a medical check-up when it comes to measuring the health & wellbeing of their workforce. For example when visiting your GP there are the routine physical checks however there is often equal weight given to other external factors (think alcohol consumption, family or work-based stress). Likewise, in addition to focusing on the physical health of employees it would benefit a business to reflect on the wider aspects of their employees’ lives such as family commitments (ie. school or day-care routines) and other extra-curricular obligations or pursuits. A simple online or anonymous survey is a good way of gathering the wider picture of what is important and where new initiatives or benefits may deliver positive outcomes.

Although it is not easy to measure wellbeing here are some ideas once you have decided to get focused around your team’s wellbeing –

  • Decide where you expect your business to sit in relation to your competitors (below/average or an ‘employer of choice’ for wellbeing?)
  • Nominate a wellbeing champion or committee in a similar vein to what a social club committee might be. What would a happy/healthy team look like to your business?
  • Attempt to define the current culture of health/wellbeing – in practical terms are sick days generally encouraged or avoided/discouraged?
  • Next Steps

It is critical to appreciate the impact that wellbeing has on individual employees and the positive benefits this can have on a business. We recommend becoming intentional by implementing a wellbeing strategy that is tailored to your team and their working environment and that delivers a positive impact on their health and lifestyle. If you are undertaking salary/wage reviews it would be the perfect time to consider alternative benefits that go over and above a competitive pay packet. Show additional value and demonstrate that yours is a business that cares about your people and their wellbeing. Need help or have questions?

Your ICIB Life & Health team is here for a no obligation chat. Icib.co.nz/products/life

Plan to Make 2023 Your Safest Year Yet 

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 2022 has seen two notable cybersecurity incidents: the significant data breach of the Pinnacle Midlands Health Network and the white-hat hacking of the Christchurch Hot Pools.   

While the Christchurch breach was downplayed as having been conducted by an “ethical hacker” intentionally identifying security vulnerabilities, the important takeaway in both cases is that a security hole in the systems was breached, and many customers’ data was exposed. In businesses that no doubt thought they would not be targeted.   Businesses were not the only victims this year either.

It was recently reported that a pensioner lost $134k after his online bank accounts were hacked, and customers of Unity Bank in Hastings were victims of a Bank Identification Number (BIN) attack – proving kiwi banks are a growing cybercriminal target.   This uptick was recently explained by Forbes Magazine who said “Cybercriminals thrive in times of uncertainty.” And that during this time of economic downturn businesses should be aware that “Threats like phishing, ransomware and business-email compromises have a significant impact on the health and viability of a business.

Beyond financial consequences, a breach can also lead to loss of customer trust and significant reputational damage.”   Closer to home, CERTNZ responded to 2,001 cyber incidents in Q2, 2022 with a direct financial cost of $3.9m. Phishing and credential harvesting, scam and fraud cases and unauthorized access incidents accounted for 94% of these incidents – confirming that human connection is still the weakest link when it comes to cybersecurity.

And just to drive the point home, if Q4 2021 (with a reported financial impact of cybercrime in NZ of $6.6m) is any indication, this holiday season will see a major cybercrime impact on businesses and individuals in NZ, and an increase in cybercrime can be expected in 2023.

So, what can you do about this?

  1. Identify your vulnerabilities with a comprehensive cybersecurity audit by an independent, trained professional. You wouldn’t get your accountant to complete your financial audit, and neither should your IT department/MSP undertake your cybersecurity audit. Impartiality is imperative.
  2. Determine your potential for damage with a risk assessment.  Understanding your risks goes a long way to protecting your company. Assessing your risks means understanding the “what if’s” that threaten you every operations, identifies gaps and provides opportunities to take preventive measures.
  3. Create a robust risk management program.  There are a few ways to handle risk treatment. Avoid the risk- remove the opportunity completely. Mitigate the risk – put measures in place to lower the risk. Accept the risk- the cost of protection outweighs the threat.

These are the three most common responses to risk treatment and set the countermeasures against each scenario in the assessment.  We have identified that the lack of robust risk analysis and treatment plans is common across New Zealand.

Throwing cybersecurity technologies and employee awareness training at the problem can only go so far. Moving into 2023, the focus needs to shift at the Board, owner, and executive level to understanding cybersecurity gaps and the risks to businesses and plugging them.

Cybercrime is unpredictable, and the New Year is a good time to start taking a top-down cyber risk management approach to ensure your business is secure.

Introducing GOVERN.  From 2023 Hartley & Associates will now be known as GOVERN Cybersecurity. www.govern.co.nz We are excited to continue to work with businesses to master their cybersecurity resilience, and look forward to introducing tailored training packages for board members and C-Suite executives.