Bay Businesses step up to carbon reduction ambitions

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If reducing carbon emissions wasn’t a goal for your business before 2022, it certainly will be now, since the New Zealand Government released its first Emissions Reduction Plan (ERP) in May.

Hawke’s Bay has felt the impact of climate change with a severe drought in the summer of 2020/21 and then major rain events along the East Coast during our most recent summer.

The drought impacted our farming community, while the rain and humid weather took its toll on the wine, apple and cherry growing sectors.

As local business owners, we know a poor harvest season sends economic ripples throughout the community as smaller crops and inferior produce hit profitability and wallets are tightened.

The ERP is the government’s move to place greater responsibility on businesses to take measures to reduce their environmental footprint, including setting emission reduction targets for specific sectors.

Emissions from energy and industry sectors make up 27 percent of total emissions and the plan will lead to estimated emissions reductions during the first budget period of:

● From Transport: 1.7 to 1.9 Mt carbon dioxide equivalent

● From Energy: 2.7 to 6.2 Mt carbon dioxide equivalent

● From Agriculture: 0.3 to 2.7 Mt carbon dioxide equivalent

● From Building and Construction: 0.9 to 1.7 Mt carbon dioxide equivalent. Overall, the plan aims to meet the nation’s first emissions budget of 72.4 million tonnes a year, reducing carbon dioxide equivalent emissions by 11.5 million tonnes of carbon in the next three years.

The policies will be backed by $2.9 billion in proceeds of selling carbon credits to polluters under the Emissions Trading Scheme over the next four years, and Hawke’s Bay businesses can apply for funding support to launch their decarbonisation journey via the Government Investment in Decarbonising Industry (GIDI) Fund.

The fund has had a cash injection due to the launch of the ERP, jumping from $69 million to around $650 million to partner with major process heat energy users and help them cut costs as well as emissions.

The ERP announcement also included targeted investment at a regional level for projects that optimise low emission fuel use; funding for electricity transmission and distribution infrastructure upgrades to support fuel-switching; and the early adoption of high-decarbonisation energy technologies.

The original fund is regarded by government as a huge success funding fund 53 major industrial decarbonisation projects and estimated to save 7.46 million tonnes of carbon dioxide over a lifetime – the equivalent to taking 134,800 cars off the road.

Wool scouring business WoolWorks was one of the first to get GIDI funding, convert gas and oil boilers to efficient hot water heat pump technology – see story on page 11.

Unison powers up to meet business demand for decarbonisation initiatives

Already in Hawke’s Bay, power lines company Unison is providing support to some large processing and manufacturing businesses and is anticipating an increase in interest by other local businesses looking to reduce their reliance on industrial processed power, such as from coal, oil or gas boilers.

“From an electricity perspective, the direction of travel is very clear. Electricity is going to do a lot of the heavy lifting in terms of decarbonisation of transport fleets and converting industrial processes – especially those that rely on coal, oil or gas boilers – to electricity,” says Unison general manager commercial Nathan Strong.

“To the credit of many local businesses and industry, they have been thinking about de-carbonisation for the last three years, and maybe longer and we have already had a few knocks on the door in terms of our customers wanting to look at options to decarbonise as well as get an understanding of infrastructure impacts of any transition.

Unison relationships manager Danny Gough adds that the types of businesses introducing decarbonisation initiatives is very diverse but mostly include those within the production and manufacturing sectors who are looking to get away from utilising thermal heat.

“We’ve also seen interest from government agencies, as well as district health boards, schools and the residential retirement sector.”

Danny says businesses aren’t just looking at reducing their carbon footprint as ‘doing their bit’ to improve the environment, but also as part of their growth strategies and promoting their sustainability actions.

He says Unison is working closely with those organisations and their consultants to support their decarbonisation aspirations and sustainability goals.

“Our role is to provide relevant information and advice on fitfor-purpose optimal electrical solutions, and to assist them in determining their electrical requirements and the upfront and ongoing costs associated with infrastructure upgrades.”

Nathan says the GIDI Fund offers a major opportunity for local businesses as they consider how to fund their emission plan.

“The government has injected 10 shots of adrenaline in the arm with the fund, which will get businesses thinking about how they can afford the cost of accelerating the likes of a boiler replacement, so one of the challenges for Unison will be to manage demand from businesses that want to get underway quickly.

“One of the things we are doing as a business is making sure that we are resourcing up to meet expected demand while making sure that we are in front of the change.

“Our message is, talk to us early or risk joining a queue at some point in terms of getting the hardware and the infrastructure in place.”

Regional council adopts climate action network

The Hawke’s Bay Regional Council has launched a Hawke’s Bay Climate Action Network for businesses, a shared platform for peer-to-peer learning for businesses committed to reducing emissions, which will feed directly into council planning.

It meets every six weeks to discuss emissions reduction, sustainability and adapting to the changing climate.

The council is also aiming to launch its Regional Climate Action Plan by July 2023, outlining how the council will be carbon neutral by 2025 and the region by 2050.

The network and plan is being led by the council’s first climate action ambassador, Pippa McKelvie-Sebileau.

Pippa says climate change is already impacting our way of life, from being able to swim in the waterways we love to where we live around the coast.

“Successful adaptation to climate change is not only essential for economic resilience of our region but also for the wellbeing of our communities.

“This role is about climate action. The Hawke’s Bay Regional Council already has an excellent science base and team of scientists, so it will be about turning that knowledge into practical solutions for our community.

Pippa says the ERP offers businesses and organisations a significant financial commitment to support the transition to lower emissions activities.

“This plan marks the first steps to create the conditions we need for a long delayed journey towards a fairer low emissions and a more secure future for everyone.”

“Farmers are crying out for solutions to help them lower their agricultural greenhouse gas emissions and respond to a warming climate, so the investment and acceleration of research and development is welcome.

“But we cannot rely on breakthrough technology solutions to reduce emissions by the rate they need to be to keep warming under 1.5 degrees.”

Pippa also sees potential to create added value roles within traditional sectors such as construction.

“There is also no funding to retrofit houses with better insulation to reduce energy needs and make homes healthier, and it would be good to see a focus on shifting economic paradigms to support more sustainable models with lower inequality and greater social cohesion.”

Product stewardship firm leads by example

Hastings-based business and sustainability programme developer 3R introduced a carbon reduction plan in 2014, and reduced its greenhouse emissions by 32 per cent (129 tonnes) in the first year, surpassing its goal of 20 per cent by 2020.

It also gained accreditation to CEMARS (Certified Emissions Measurement and Reduction Scheme), the world’s first internationally accredited greenhouse gas certification scheme to ISO14065.

3R chief executive Adelle Rose says much of the initial reduction was largely achieved by opening a depot in Christchurch, which meant material it collected in the South Island was no longer sent to the North Island.

3r Group – Adele Rose – Hawkes Bay, New Zealand, July 2020. Photo by John Cowpland / alphapix

“The following year we went a step further and gained carboNZero (now Toitū net carbonzero) certification through Toitū Envirocare. This certification isn’t simply about measuring emissions and offsetting them through carbon credits, but rather identifying and taking actions to reduce emissions.”

Adelle says with freight being its largest source of emissions, 3R constantly reviewed travel routes and alternative freight service options, overlapping collections and where possible collaboration across stewardship schemes. Efficiency in these aspects helps drive down our emissions even as we grow the volume of materials we collect for recycling.

“However, our next step to reduce emissions is a big one – changing our fleet to low-emissions options – and this requires significant investment along with infrastructure to support it, which isn’t necessarily available nationally at present.

“This means we need to focus on small incremental changes that can help such as minimizing employee travel, using other Toitū net carbonzero certified suppliers like power provider Ecotricity, driver training and regular vehicle maintenance, improving web conferencing technology, and staying on top of our organic waste to landfill.”

Adelle says 3R is the only Hawke’s Bay based member of the Climate Leaders’ Coalition , which has a highly ambitious commitment to accelerate our transition towards a zero carbon and resilient future.

As part of commitments, 3R is also starting to work with staff and suppliers to reduce their emissions.

Adelle says the ERP is a step in the right direction, adding its mostly up to government and industry to do the hard yards in tackling climate change.

“While the actions of individuals to tackle human contribution to climate change are important, the most impactful and far-reaching are those taken by government and industry. It’s therefore significant that the plan released by government sets out a way forward for reducing the country’s emissions but shows that climate action is the new business as usual, as well as showing New Zealand’s leadership on the issue on the global stage.”

Going forward, Adelle is looking for a greater partnership between government and the private sector with the introduction of an advisory group.

“For us and our work designing product stewardship schemes, partnerships are essential, and we would have liked to see a closer relationship between government and the private sector when developing the plan.

“Government still has the opportunity to improve this aspect as it moves forward with the implementation of the plan.

An advisory group that allows the private sector to have its voice heard and included in the conversation would be very welcome.”

The ERP also offers 3R an opportunity to help other businesses in Hawke’s Bay and around New Zealand by introducing new product stewardship programmes, such as a new recovery programme for synthetic refrigerant gases – one of the most potent greenhouse gases, thousands of times more so than carbon dioxide.

Having achieved its own targets five years earlier than planned, 3R has now reset its targets to a 12 percent reduction of total emissions (excluding air travel, waste and freight) by 2025 and 38 percent by 2030, and a 12 percent reduction of all emissions by 2030.

Unhappy at Work? Here’s 4 tips to consider before quitting

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According to the latest TradeMe Jobs Employer & Job Hunter Intentions Report released in April, almost 6 in 10 Kiwis are keeping an eye out for a new job or would be open to a role if the opportunity came up.

This comes as no surprise; the last two and half years have taken their toll, with many feeling burnt out, disengaged and unhappy in their professional lives.

With unemployment at its lowest rate in years, job hunters with good skills will have more options available to them, however, changing jobs is a big decision and shouldn’t be taken lightly. So, if you’re unhappy in your current role, what to do? Here are four ideas for starters:

1. Don’t quit your job – improve it 

Before you decide to through in the towel and make any decisions you might regret, I would highly recommend completing a review of your current role and being very clear on why you want to make a change. Use this review to identify changes that could make a difference to your job fulfilment and create a proposal to talk through with your manager. You’d be surprised at the number of times my clients have made changes (some of them very small) which have made a world of difference. Most managers and employers I’ve had dealings with are fairly supportive of this approach.

2. Consider the big picture

The big picture involves considering factors outside of your actual work tasks, for example, the location of your workplace being handy for school pick up, or you have some big bills to pay and your current remuneration allows you to do this. I’m not saying to stay in a role if it’s causing you distress, but no job is 100% perfect 100% of the time, so if the good times outweigh the bad, then consider whether you’re content to accept the reality of your job at this point of time.

3. Take a break

Often, being in the thick of things day in day out can raise emotions and cloud judgement around the reality of a situation. If you’re able to take annual or unpaid leave to remove yourself from your role and have a genuine break – with the express purpose of giving yourself space to review your situation – this may increase clarity and help you to make better informed decisions on next steps.

4. Engage a careers professional

Friends and family may mean well, but sometimes their advice is just not helpful… or there may be conflicting motives. For example, I once had a client whose husband who didn’t want her to leave her well-paying but high stress exec role as it would’ve meant him playing golf less often. For the best outcomes, work through your options with an impartial expert who will support you through the process, help you to consider all the dynamics at play and feel confident with the decisions you’re making. Considering the huge amount of time and mental energy we dedicate to our jobs, investing in a careers advisor is worth its weight in gold.

Is the housing crisis over? How effective is the fast track planning process?

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In our April 2022 article we talked about housing supply and how the effective use of fast-track planning processes under the RMA could assist us, while on the other hand recognising the views of some economists that ‘the housing market boom is over’. While the latter could be considered to prevail the former, does this make the issue worst?

Even if the housing market boom is in fact over, there is a legacy issue that still needs to be dealt with in that while the problem may or may not increase – Hawkes Bay had the problem, and that problem remains.

Our concern is where does the motivation and funding come from to address the initial problem if there is a perception that end buyers are not there – especially in a climate of increasing building costs, uncertainty and greater onus around lending.

Further, while fast-track planning processes have been established under the RMA to speed up delivery, is the motivation there to take these up, especially when from the outset they are still relatively daunting processes and not necessarily quick relative to the somewhat volatile environment we’re playing in.

We’re finding ourselves thinking a lot more about what planning process may be the best for a given development scenario – is it a standard subdivision resource consent process? Should it include a concurrent land use consent to allow houses to be built quicker – noting that this may involve investment prior to the certainty of consent, or is the Covid 19 Recovery (Fast Track Consenting) Act 2020 the better option? This option may work well for development where the actual built outcome is known, but not so well for subdivision where various development scenarios would need to be provided up front with little flexibility during implementation.

On the other hand, while many of the limitations around resource consenting processes can be addressed through a Schedule 1 District Plan Change process, these are typically longer processes, and while the Streamlined Planning Process was introduced to try and speed these up through limiting appeals, there are entry criteria and approval is required by the Minster.

All these options have their own advantages and disadvantages and its all about matching the circumstances of the proposal to the process. The point is, without a high level of motivation, they are all daunting. So, if motivation is dropping or the appetite for risk is dropping, or does indeed drop, what then?

The answer lies in working together, and our observations are that our Councils are very open to this – in fact they’re doing it. Examples include 18 houses completed on Korowhai Street Flaxmere, funded by MHUD, built by Soho Development and managed by Te Taiwhenua o Heretaunga, housing completed at Kainga Ora’s 40-lot development at Kauri Street/Place, Te Taiwhenua o Heretaunga and Waingakau building 120+ houses for intergenerational whanau, and similar infill developments being completed by both Kainga Ora and private developersin Napier.

We’ve been fortunate to have been involved in the planning of a lot of these developments and have certainly noticed a theme of greater collaboration and smart resourcing to reduce risk and build certainty earlier in the process.

If we can achieve this, then confidence, or at the very least, comfort, is maintained, motivation is sustained, outcomes are delivered, people are housed, and our region is as great as we all know it can be.

We think it’s important to think outside the square, be open to working together differently and leverage off the strengths or opportunities of others – while being aware of the limitations and drivers of the various players involved. It may seem cliché, but collaboration from start to finish is where ‘easy’, or at least ‘easier’, is probably going to be found.

Getting the Basics Right

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Every business, regardless of industry or size, is vulnerable to cybersecurity attack- that’s just a fact; your business is not immune. As of the writing of this article, there’s an uptick in attacks across New Zealand in both the retail and manufacturing sectors, businesses that normally would be considered low on the radar, and that will only increase in these and other unexpected segments during the year.

According to CertNZ, 2021 was a busy year with 8,831 cyber incidents reported and a combined loss over $16.8 million (these are just reported cases). The primary causes of these incidents were phishing and credential harvesting, scams & fraud, and malware; where phishing had a significant increase in numbers.

I often hear, “We don’t know what we don’t know,” with many businesses adding that they’re not experts in cybersecurity. Covering the basics doesn’t require a specialized skillset or a large financial expenditure. There are four pillars of cybersecurity that every company should cover; securing people, securing communications, securing data (note: this was inadvertently missing from our last article), and securing technology.

Securing People

As noted above, the primary cause of cybersecurity breaches begins with phishing, credential harvesting, scams, and fraud- all due to direct interaction with people. Training employees to look for anything out of the ordinary and taking precautionary steps helps reduce the risk of exposure. Employees trained properly become your human firewall and first line of defense.

Securing Communications

Using technology to secure your inbound email and other communications works in concert with securing your people to reduce the initial attack surface. Products such as Trustifi can also help businesses secure outbound email traffic which is the main source of cyberactivity. Intercepting and misrepresenting emails in transit to recipients are ways cybercriminals deliver malware and harvest business and employee information. Protecting confidential information such as invoices, contracts, etc is especially important.

Securing Data

As our businesses grow and we’re on the move more, the flexibility of having our data up to date and accessible everywhere increases. Platforms like Office 365 and Google allow us to work collaboratively and provide us with that mobility and some extraordinary powerful tooling. SharePoint, office applications, OneDrive and email everywhere is important in today’s business world. In addition to protecting access, securing data means the ability to back it up and retrieve it if lost. These platforms offer limited and complex backup options which spells trouble if you need it now and it’s vanished. There are however some very good cloud-to-cloud solutions to secure your data and give peace of mind.

Securing Technology

Securing PC’s, laptops and other mobile devices is the last line of defense. Should something slip through your people and communications layers, having next generation Anti-virus technology on those devices is critical. Reliance on the off the-shelf brands that we’ve long known is not going to stop many of the advanced malware and attack methods. You need something built for a business environment.

All or any combination of the pillars mentioned here will go a long way to establishing reliable, resilient cybersecurity as the key to defending your business. Carefully selecting the right products and combinations is important, and the good news is that many of the technologies cost about the price of a coffee per month. A small price to pay for a big sense of relief.

The construction sector – The have’s vs the have not’s

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The opportunities and challenges inherent within New Zealand’s construction sector have always been amplified by its cyclical nature. With the high demand construction firms are currently experiencing in both the commercial and residential sectors, we are seeing the industry take fresh approaches as it responds to market challenges such as procurement of materials and delays due to supply shortages as well as mitigating financial risk with changes to negotiating and pricing of contracts due to inflation and market pressures. These key challenges will provide the footing for those within the industry who will continue to thrive and those who may fall victim to their own lack of forward planning.

Supply chain challenges

While non-availability of construction products and materials arising from disruption to production and shipping was an expected consequence of  the global pandemic, supply chain challenges have progressively worsened over the past 12 months, evolving into the major challenge it is today. 56% of respondents to BDO’s latest Construction Sector report indicated that they had experienced project delays directly linked to receiving materials later than originally planned and 32% of these experienced delays exceeding two months.

The sector has been quick to rethink and apply new strategies to mitigate this situation,  such as procurement teams tracking individual shipping movements to know exactly where their materials are. They are identifying alternative suppliers in case their historical supplier can’t deliver and where possible materials are being ordered and stored well before they are needed. Forward planning on projects has allowed some companies to keep a strong profit margin on a number of jobs by adopting these methods. Those who have also been able to strategically pass on additional costs incurred by these methods directly to the client, have fared best of all.

Inflation is underway

Builders and construction companies are receiving supplier emails advising of price increases weekly. Often, price increases exceed the gross margin of many companies. The issue is not restricted to materials; the acute shortage of labour in the sector is significantly forcing up labour costs too. We have been through a prolonged period of low inflation and most building contracts have a fixed price.

Initially builders and subcontractors were being forced to absorb the price increases. This is not sustainable, and practices need to quickly change. Inflation is not a risk that the construction industry has capacity to absorb. It is a risk that needs to be passed on to those best equipped to absorb it; the clients. Most construction firms expect significantly higher costs to flow onto clients, but acknowledge that contracts will need to change to allow for this.

Determining a projected final contract price will be challenging as each subcontractor and each materials supplier will want the ability to pass on increases that are more than modest. The head contractor/builder must collate these into a winning bid when quoting for projects, a very challenging task. Clients won’t be able to easily select a builder based on price alone moving forward and non-price attributes will become a greater factor in builder selection.

Margins

A distinct trend is developing in respect to financial sector performance and outlook. The majority of large head contractor firms are seeing their gross margins grow, while gross margins decline for small head contractor firms and the subcontractors  category. Should this trend continue for the sector, we risk seeing smaller companies battle each other on low margins in a period of high risk which will inevitably result in casualties. Organisations need to decide whether they will turn down some forward work – staying at existing activity levels and within the capacity of their staff and suppliers to manage. If they take on additional projects, they run the risk of being unable to successfully manage and perform on those projects, resulting in losses.

The Growing Value of Insurance Cover

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Recently there has been significant coverage given to the rapid escalation of costs within the New Zealand (NZ) construction sector. It’s no surprise then that this has seen a sharp increase in the cost to build/ rebuild in a comparatively short time frame. However, even if your policy includes an automatic inflation guard to cover annual inflation, your coverage has 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 disaster and this will directly impact the values assessed to ensure your property is adequately insured.

What is causing building costs to escalate?

Escalating costs within the building sector can be attributed to the Covid-19 pandemic as it has impacted three key areas, labour, materials and inflation. Globally the pandemic has caused labour shortages and locally we have also been impacted in large due to the lack of immigration caused by the closed borders as well as the Governments slow response to easing these settings especially in a boom.  This has contributed to the industry facing a labour shortage across the skills spectrum, with a particular shortage in higher-value roles.

Findings from the EBOSS Construction Supply Chain report in Q1 of 2022 found that 33% of suppliers don’t have enough staff to meet current demand and 56% say they don’t have enough staff to meet future demand. Furthermore, efficiency on building sites has declined due to health and safety requirements, increased public holidays, new sick leave provisions, the restrictions on the number of workers allowed on site as well as the onerous sign-in protocols have also directly contributed to the escalating cost to build/rebuild.

The same result also noted the following key findings:

  • 8% of those who rely on imports say they’re experiencing issues supplying the market
  • 90% of construction products sold in NZ are either imported finished products or manufactured locally from at least some imported components.
  • 73% of suppliers surveyed say the increased cost of freight is their biggest issue, followed by increased cost of offshore materials (64%), freight lead times (56%) and delays at NZ ports (41%).
  • Almost two thirds (64%) of suppliers have experienced significant increases to the cost of their materials (buy costs) over the last six months.
  • On average prices are predicted to increase 11%, with the cost of materials (buy cost) averaging an increase of 11% – indicating suppliers believe the two will be more aligned going forward.

It’s no surprise then that the cost to source and supply materials has gone up, especially as NZ is particularly reliant on imported materials for its construction sector. Initial lockdowns caused port closures and disruptions and the world had been trying to catch up ever since. The consequent effect of the backlog has caused freight congestion with ports globally now struggling to catch up. This in turn has created a shortage of available containers. Further exacerbated by a ‘demand boom’ both nationally and internationally is only adding extra pressure to an already stretched supply chain.

These factors as well as increasing fuel costs have contributed significantly to the upward trajectory of inflation, significantly adding to the overall operational cost and contributing to the escalating cost to build in a relatively short time period. This spike is not predicted to ease any time soon with major infrastructure projects and the volume of residential building activity lifting to historically high levels at $8.1 billion. (MBIE May 2022)

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 an older premises, cost to recreate may well be above the asset’s current market 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.

It is important for property owners 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 signaled 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 signaled to go up.

Small Trade Contracts: What you need to know moving forward

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The Fair Trading Amendment Act 2021 comes into force in August 2022 and this will place new obligations on businesses while providing new protections for consumers and small businesses.

The key change is that “standard form small trade contracts” will now be subject to the unfair contract principle.

To understand the significance of this change we first need to identify what constitutes a “small trade contract”? A small trade contract will need to be:

■ Between two parties engaged in trade;

■ Not a consumer contract; and

■ Not part of a trading relationship with an initial annual value exceeding $250,000.00 including GST.

Examples of a small trade contract will include terms of trade presented to a customer with little time for the terms to be reviewed or negotiated.

Prohibition of “unfair contract terms” A term will be considered “unfair” where:

■ It creates a significant imbalance of rights and obligations between the contracting parties;

■ the imbalance is not required to protect a party’s interests; and

■ if used, the term could disadvantage the other party. A provision giving only one party the ability to take certain actions (for example, varying the terms or terminating the contract) is likely to be considered “unfair”. Other terms that may be considered unfair include automatic rollover and renewal clauses, early termination charges and some forms of indemnity terms.

It is really important to remember that the Fair Trading Act is not designed to – and won’t – disadvantage a business that has a legitimate business interest and a term is required to protect this interest.

Unconscionable conduct

Unlike “unfairness”, the principle of “unconscionable conduct” is more nuanced, and less defined. Unconscionability will be considered on a case-by-case basis.

Factors that can be considered include:

■ Relative bargaining power of the parties;

■ Extent to which the parties acted in good faith;

■ Whether there was any undue influence;

■ If the affected party was able to understand the documents;

■ Commerce Commission.

The Commerce Commission has authority to commence proceedings against a business, if it believes that the terms of a contract are unfair, even if they are not party to the agreement or contract. As a result, it is important for a business to understand its obligations and to ensure that its standard form contracts will comply with the Fair Trading Act.

Existing Contracts

These changes will not apply to any contracts entered into before 16 August 2022.

However, take care when making any changes to existing contracts as the provisions will apply to contracts amended or varied after 16 August 2022 irrespective of when the contract was first entered into.

 

Where are you on the stress curve?

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As the world continues to reopen it looks like we will have some additional challenges and stress to deal with. How do we best manage this and look after our wellbeing?

Stress is often given negative press and we are continuously under pressure to reduce it. I’m going to encourage you to look at it in a different way. Stress is a necessary part of a life. Without it we wouldn’t achieve our personal and business goals, we wouldn’t be motivated to do anything. In short we wouldn’t get much done.

Back in the 1960s Hans Selye developed the general adaptation to stress model and its phases.

Good Health – Homeostasis This is when your body is in balance and isn’t being pushed or changed by the environment…i.e. no stress.

Alarm Stage – Thinking/Readying for the future

This is a state of heightened awareness, often related to increased speed of thinking, higher attention and higher state of arousal generally. However, nothing is happening yet, you are only readying yourself for something to happen. For  example, anticipation before a big meeting or just before you start a race.

Resistance Stage – The doing part of putting stress on your body

This is when you take action, and make your body adjust and cope with the environment. You are in the meeting or race and using fuel, and your body is resisting the stress. For example, doing a workout and pushing through to the end. It was stressful, but your body resisted and got through it. Going without sleep for a week, even though you’re tired, you push through, using stress hormones to stay on point.

Exhaustion Stage – Energy levels have been drained and your body goes into shutdown

This could be at the end of a very long day, or month, or year of work. Your body has had enough, it demands rest and gets it through shutting down and making you feel exhausted. For example, working hard for months leading up to a holiday and you get very sick as soon as the holiday starts.

You can cycle through these levels in one day (mini-cycle), or over a longer period of time of months or years (macro-cycle). Which phase are you in and how long have you been in it?

The key to managing the phases and avoiding the exhaustion stage is quite simple. Plan your recovery.

Maybe we shouldn’t be feeling more stressed trying to reduce our stress. We go to the gym to stress our body and break it down. This is a positive thing. What most of us miss is that we get stronger in recovery and that we need regular recovery for our body to get stronger. If I go and run a marathon this weekend and then try and run another one tomorrow it is very likely that I will be weaker as I haven’t yet recovered. Plan a good period of recovery and it is very likely that my body will become stronger and I will be stronger for my next marathon.

How much recovery have you got in your business week?

Your business week is no different from the gym and marathon example. If you load your week with back to back meetings, presentations and work and spend most of it in the resistance stage at some point you will hit the exhaustion stage and burnout.

This can be easily avoided if you plan in some recovery. Think of the alarm stage as preparing, the resistance stage as taking action and the exhaustion stage as resting. Cycling through the 3 will help us manage stress and improve our wellbeing. What recovery have you planned this week, what would it be, and when was the last time you were in the  preparing phase?

Investing through uncertainty: It’s a matter of time

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Equity markets for the year so far can be described in one word: Volatile

The current situation in markets is being driven by rising interest rates, alongside multi-decade high inflation, clogged supply chains and the war in Ukraine.

Times like these can often spark our ‘fight or flight’ instinct, or alternatively investors might avoid any risk altogether. But both scenarios could potentially harm the likelihood of achieving long term investment goals. It highlights the importance of having an investment plan to guide your decision making.

The length of time you look to hold your investments – the ‘time horizon’ – is important, because the approach you take when investing for the long-term may differ to that over a shorter period. This is all dependent on an investor’s unique risk tolerance, investment goals and needs, which are key for investors to clarify from the outset.

Investment returns

Does time really heal everything?

A longer timeline generally means an investor has greater capacity to take on risk, with the ability to withstand short-term drops in value. This allows a plan to be created for a well-constructed, diversified portfolio, which would usually contain a mix of asset classes (e.g., equities/shares, fixed income/bonds, cash) with different levels of investment risk and return.

When assessing an investment risk profile, there are a few key areas we regularly discuss with clients at Jarden; the amount of investable assets available, any cashflow demands, and their investment time horizon. This period ends when they need to draw down capital from their investment portfolio. It’s also important to think about the level of risk an investor is comfortable taking on, as well as any prior investment experience.

In periods of volatility, seeing a real-time decline in your portfolio’s value can be painful. However, conditions change, and any sudden reactions could result in losing potential future gains. Looking at the US equity market daily returns (excluding dividends) from 1927 to 2021, an investor who stayed in the market for all days would have made a 6.1 per cent capital gain (per annum), while those who missed the 25 best days made only 3.5 per cent.

By staying in the markets for longer periods, there is enough time to see them turn.


Our wealth research team analysed rolling returns from a sample “Balanced” portfolio (60% growth assets and 40% income assets) classified as medium risk from 1992-2020.  It showed over shorter periods of time, the portfolio was exposed to higher risks of negative returns. But over longer periods of time, the portfolio had historically produced positive annual returns on average.

Occasional changes to a portfolio – aligned with investment goals – can be beneficial. However, making decisions in reaction to current events can carry a greater risk of not meeting your aims, and create stress.

The next time an investor thinks about altering their portfolio, they should consider whether today’s situation impacts how their overall investments align with their objectives, or if their goals have changed. Often, it can be best to stay put.

This research has been prepared by Jarden Securities Limited (Jarden) which holds a licence issued by the Financial Markets Authority to provide a financial advice service. The information in this research solely relates to the companies and investment opportunities specified within. The nature and scope of any financial advice included within that research is limited to generic and non-personalised commentary about that investment only, such as the performance and the investment outlook of the company concerned. Any such commentary does not take into account any individual’s particular financial situation, objectives, goals or appetite for risk. We recommend that you seek financial advice that is specific to your personal circumstances before making any investment decision or taking any action. No fees, expenses, or other amounts will be payable for the provision of any financial advice in this research report. However, if you act on any information or advice contained in this research report, a brokerage fee (and other fees such as an administration and custody fee) may be payable to Jarden. For fees payable for brokerage and other services provided by Jarden, information on our complaints and dispute resolution process, and the duties applicable to us for providing financial advice, please see our publicly available disclosure statement at https://www.jarden.co.nz/our-services/wealth-management/financial-advice-provider-disclosure-statement

Navigating the fast-moving world of cyber risks

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Commentary on cyber risk seems to be in the news almost every day. With good reason. Many organisations from the Government, through to consulting firms, business associations and insurers are all trying to raise awareness of the risks that SME businesses face.

The simple fact is that cyber risk and threats are developing and changing. It is a fast-moving area that can seem confusing to anyone who does not have a deep understanding of IT. The risk is ever changing, and business responses need to keep up. That is a challenge.

Financial Impact of Cyber Attacks on SMEs in New Zealand

The average financial impact of a cyber-attack on a business is running at $159,000 according to a survey issued by Hewlett Packard and quoted in Scoop toward the end of 2021. Yet less than 5% of New Zealand SMEs have Cyber Insurance.

Insurance

While it is always better to avoid an incident, insurance can play an important role in helping if and when an attack happens. Just like cyber threats, cyber insurance is rapidly changing.

What can be covered?

There is no standard insurance policy. Different providers have different offerings, with differing limits but cover is generally available as follows:

● Incident Response – providing cover for IT forensics, legal, breach notification and
any emergency communication required following an event
● Cybercrime – cyber extortion, ransomware attacks, theft of funds, social engineering
e.g. responding to requests pretending to be your CFO etc
● System Damage/ Business Interruption – data re-creation , income loss, extra
expense, hardware replacement or repair
● Privacy Liability – fines and penalties

Critical Additional Services

When you buy cyber insurance you are not just buying insurance for the costs you incur if there is a loss.

As important, if not more so, are the additional services that the cyber insurers will provide, and these can include:

● Pre Policy Risk Assessment – an external review of your systems and
vulnerabilities, undertaken as part of the underwriting process, to help you
understand your risk and mitigations
● Real Time Threat Assessments – some insurers will provide Apps and tailored
notifications on new threats specific to you and your industry
● 24/7 Cyber Response Services – immediate access to cyber response teams with a
range of disciplines to immediately help prevent and/or recover from attacks/incidents.

These services can prove invaluable. When reviewing any Cyber insurance proposal a review of the additional services and response/ recovery support are as important as the premium offering

Summary

Cyber is now an established risk for all businesses. It poses a very real threat. The cost in time- and money to recover from an incident can be significant for SMEs. Cyber insurance can play an important role in both helping avoid and recover.
If you would like to talk through whether Cyber insurance can help you manage cyber risk please contact me – william.horvath@icib.co.nz