AN EMERGING crisis in the mental health of Australia is costing the economy between $43 billion and $51 billion a year, according to a draft paper by the Federal Government’s Productivity Commission. Leading employee assistance program provider AccessEAP has outlined the role workplaces must play in reacting to the Australian Government Productivity Commission’s Draft Mental Health Report.

The Mental Health, Draft Report revealed that beyond this alarming statistic of economic cost, an approximate $130bn additional cost is created by diminished health and reduced life expectancy for the one in five Australians living with psychological conditions.

The draft highlights the complexities around defining a mentally healthy workplace but acknowledges the recognised risk factors and stressors that can impact mental health in the workplace. The role of employee assistance programs (EAP) and the importance of investing in research and evaluating outcomes were also identified, according to AccessEAP CEO, Sally Kirkright. 

“Workplaces must take a stance against mental ill-health,” Ms Kirkright said. “While diseases and physical conditions tend to affect older generations, mental ill-health inhibits our working lives, limiting the ability to secure and retain employment.

There are four main job-related factors that exacerbate psychological conditions, including: job demand and control, caused by a lack of control over highly cognitively and/or emotionally demanding jobs; a perceived imbalance between effort and rewards; job insecurity; and exposure to trauma.

“Businesses need to be mindful of the impact they have on employees’ mental wellbeing through the job itself, workplace culture and organisational support including recognition, stigma and the physical environment,” Ms Kirkright said. “Employers should also support employees in the workplace and with external stressors, such personal issues and lifestyle needs.”

Ms Kirkright has outlined the lessons that businesses can take from the report, to improve the mental health of their workforces:

MENTAL HEALTH CODES

Almost half of all Australian adults will meet the diagnostic criteria for a mental illness at some point in their lives, showing the scale of the issue.

Bosses must create an open dialogue around mental illness, free from stigma and fear of discrimination and should be given it the same importance consideration as physical health and safety, when developing processes and health codes.

ABSENTEEISM AND PRESENTEEISM

Absenteeism from people with mental ill-health or their careers, is roughly five percentage points higher than the average worker. Additionally, presenteeism amongst this group can be anywhere between five and eight times higher.

This issue costs Australian businesses somewhere between $13bn and $17bn annually in lost activity, with potential further losses due to the secondary effects on colleagues. Allowing employees to take time off to manage their mental ill-health is essential in helping them to remain productive and to allowing managers to direct workflow.

EARLY INTERVENTION

Employees most commonly come to us for help with stress, anxiety and depression, which can all greatly benefit from early intervention and management. Worryingly, the report reveals that 40% of sufferers don’t seek professional help for their condition. This makes the role of the workplace in supporting mental wellbeing essential. Employers must train managers to identify and engage with mental ill-health sufferers and encourage them to get help from an Employee Assistance Program or other professional.

STIGMA

Stigma is one of the biggest barriers to getting help for psychological disorders, with the report highlighting that it reduces the efficacy of mental health programs. It also discusses the importance cultural differences around the issue.

In addition, we encounter mental health stigma regularly in male-dominated industries, such as construction and mining, which can harbour a ‘macho’ culture where asking for help is seen as a weakness.

Regardless of industry, it is also important that employees feel that they can trust employers enough to reveal their mental health conditions. The report found that a fear of discrimination and lack of support from bosses, has led to 38 percent of people living with psychological conditions choosing not to disclose them at work.

WORK AS THE SOLUTION

There are strong two-way links between employment and mental health, as it can provide a sense of identity, purpose, life satisfaction, increased social connection and regular opportunities to communicate with people outside of the immediate family and/or social circles.

It is important for people to be able to stay in work while they deal with any psychological issues, if their workplace does not contribute to the condition. Businesses should provide practical support, such as Employee Assistance Programmes (EAP’s). These organisations allow businesses to offer workers with a range of confidential psychological and counselling services via phone and face to face sessions, as well as a range of support materials.

An EAP will assist with health and safety practices for mental health conditions. It will also offer proactive training on creating a positive work environment, which is particularly important in preventing cases of psychological injury. The average mental health compensation claim is over $25k and will see employees miss an average of 16.2 weeks of work, compared to just 5.2 weeks for all other claims.

While the full report is yet to be issued, it’s clear that businesses need to tackle mental health head on, with a well thought out approach that includes organisational codes of practice and supported by expert psychologists.

www.accesseap.com.au

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By Michael Reid  >>

IS THERE A BOTTLENECK in your business that slows the flow from attracting interest to serving customers effectively? Is there a task you consider a ‘necessary evil’ in the course of your work? Is there a question your customers frequently ask but is never answered to their full satisfaction?

If you answered ‘yes’ to any of these questions, you may have an issue with one of your processes.

Almost every business has inefficiencies that cost time, money and opportunities. Often, business growth plans ignore process problems that could be fixed.

But sub-optimal processes can cost you customers, drain your time, frustrate your staff and slow your business growth. Not to mention that as you scale up, the problems often become bigger and more obstructive as well.

The problem with ironing out a process is that it often takes time and money to diagnose the issue and develop a viable long-term solution. There’s a case for investing in streamlining your processes, however: making an essential step or regular task in your business smoother or less troublesome offers the most benefit to your business because it offers improvement gains over a long period.

 

BAD PROCESSES AN OPPORTUNITY COST

Here’s a situation I’m intimately aware of: a supplier opened a trading account with a substantial credit limit – $500,000 – for a client.

The client asked if there was an on-boarding process to deal with ordering, rebates, credits, payments, accounts, pricing support and so on, but the answer was ‘no’ – the supplier’s only communication was to email the client their account number.

Things did not improve. This industry attracts rebates and has pricing support for major customers/projects, but the client was unaware of the necessary manual processes. The supplier’s credit department issued a ‘stop trading’ notice as they believed full payment had not been made.

This repeated itself over months until the frustrated client and the equally frustrated credit department reached a crisis point. The client then contacted some of the supplier’s other customers and found this to be standard practice – ‘you just have to work it out’.

At this stage, the client took the initiative. Armed with all the evidence and communication, they met with the supplier’s CEO to explain how things weren’t working.

The cost of this ongoing problem with the credit department was substantial and varied, from the $500,000 client closing their account and taking their business elsewhere, to the substantial labour costs of having the credit department rework credits and rebates, which were never reflected on the bottom line.

To their credit, the supplier hired a professional consultant to create an on-boarding process, complete with documentation and checklists.

The true cost over the years is unaccounted for because the problem had gone undetected for a long time.

How many other clients had taken their business elsewhere because of this issue? What was the opportunity cost of tying up the credit department with unnecessary work?

 

IDENTIFY THE ISSUE

The hardest part is diagnosing the problem. Because you go through the process every day as part of business-as-usual, it can be difficult to see what might cause angst for your staff or customers – they are likely to have accepted it as ‘the way things are’.

Look at the experience from your customer’s point of view. If you suspect there is a flaw, the first step is to ask them for feedback on what the process has been like for them.

I’ve found this to be an eye-opener.

Next, turn to your staff to find their pain points. Be aware that they might be using workarounds, which can be band-aid solutions that conceal the core issue.

Human nature may also cause them to minimise the issue, in case they are blamed for a breakdown or a poor process.

Data may also shed light on trends and identify inefficiencies. For example, if you are a service business, assess how your staff spend their time and see where efficiencies can be created. Track the journey of a new business enquiry to see where potential customers might drop off, get frustrated, or require a lot of your team’s time unnecessarily.

If you run a physical store, track which days and times are your busiest and then roster your staff accordingly to prevent paying for staff to do little, or being overwhelmed during peak when customers who wait too long may never return.

Sometimes the problem is industry wide. Perhaps the process was created in a different era and inherited without question by subsequent businesses in that industry. The drive for innovation is often about asking ‘why do it that way?’

 

COLLABORATE ON A SOLUTION

Once you’ve identified the issue, you need to collaborate on the solution. Because the process will affect a lot of people, involving these stakeholders to develop a fix will go a long way to making it work for all of them.

This prevents you from developing a ‘solution’ that makes things easier for the customer but harder for your team or vice-versa.

You may wish to turn to an outsider at this point. Specialist consultants in process improvement are few, but they give a big-picture perspective and ask, ‘why do it that way?’

Sometimes it is better that they aren’t attached to the detail and to the frustrations and aren’t likely to be defensive. Focus on solutions rather than complaining about the problems and you’ll come up with some excellent ideas.

Bring in your team at the fine-tuning stage to make sure the ideas will be do-able and are tailor-made to what they need to do their best work. This step also attains their buy-in; no one likes being told to change without having a say in how.

If, like me, you realise that the solution has a wider application beyond your business, then you have the opportunity to create a new business from your innovation.

This is what led me to develop the Measure & Quote app, which solves an industry-wide problem.

I noticed that measuring by tradies, using the traditional method, takes an average of 45 minutes on-site, plus all the time spent back at the office calculating and generating the quote.

So I created an augmented reality app that shaves that time down to just a few minutes and can accurately measure, calculate supplies and draw up quotes all in the same place.

Process improvement is not as glamorous as business development, but getting your processes as smooth and efficient as can be is essential to business growth.

Any cost savings will be multiplied over the long term and having sound processes will give you a strong foundation to pursue new opportunities as your business expands.

https://measureandquote.net/ 

 

About Michael Reid

Michael Reid has worked in the building industry for two-and-a-half decades and has been at the helm of AILD buying group for the past 10 years. Under his leadership, AILD has enjoyed tenfold growth as the group continues to improve ordering efficiencies between manufacturers and distributors. Michael Reid is a thought leader, director and visionary entrepreneur.

He is also the founder of the newly launched app, Measure & Quote AR, which is aiming to change the future of construction estimation. 

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By Colin D. Ellis >>

YOU NEVER FORGET your first toxic culture. It stays with you, night and day, weekday and weekend. It affects your work, your relationships, your life. Often, you’ve done nothing to create (or maintain) it, but like everyone else, you’re forced to live it.

For some, this is a daily routine with no way out. I scoff at ‘so-called’ experts who tell people that if they don’t like their culture they should leave. This is easy to say when you’ve never been in the position that some people – including me – have. 

In the last toxic culture I was part of, I was a senior executive with two young children. My wife was running our loss-making business in between parental duties and we just about made the ends meet.

Did I enjoy being part of the toxic culture? Absolutely not. But could I just resign and leave? Nope. So what to do? If you stay you make things worse, but if you leave, you may do likewise.

Of course, sticking with something that’s bad for you is never a good idea and make no mistake, toxic cultures are bad for everyone. They’ve been statistically proven to increase stress, anxiety, mental health issues and thus undermine engagement and productivity.

According to US research company Gallup, toxic cultures costs US businesses alone about $500 billion every year in lost productivity.

So they’re bad for people and bad for business too, yet some people seem to revel in them and some leaders choose to ignore them.

WHAT CAUSES A TOXIC CULTURE?

Toxicity in organisations is a result of a working culture that has stagnated. In these kinds of cultures everything stops. There’s no conversation, no challenge, no clear strategy or priorities, no consequence for poor behaviour or poor performance and no visible leadership.

There is plenty of fear and a distinct lack of safety.

When Google surveyed its teams in 2017 and asked them what their number one attribute of great teams was, psychological safety came out on top.

Amy Edmondson is the authority on Psychological Safety (PS) and I’ve followed her work for a number of years now. In a paper in 1999 she described it thus: “Psychological safety describes the collective belief of how team members and leaders respond when another member ‘puts themselves on the line’ by asking a question, reporting an error, or raising a difficult issue.”

In toxic cultures this doesn’t happen. Leaders ‘blame throw’ and look for scapegoats. They use power and authority and seek to make the simple complex. When faced with this scenario, employees have to do all they can to ensure that they did their bit to challenge these norms and to show courage in the face of toxicity.

LEAD WITH COURAGE

Toxic cultures are created as a result of low emotionally intelligent employees who feel little to no connection with what the team or organisation is trying to achieve.

Sometimes, where strategy or a decision is clear, this is understandable, however in my experience, it’s mostly a result of bullying behaviour from managers or else allowing certain individuals to become a disruptive influence. In order to address either of these issues, courage is required and in toxic cultures, courage in numbers provides greater psychological safety.

Now don’t get me wrong here, I’m not suggesting for one minute that people ‘gang up’ on those they believe are responsible for the toxicity. It’s critically important that they practice what they preach and approach the issue with empathy, seeking to understand the root cause of the toxic behaviour and presenting solutions to address it.

Whether this is being honest with a colleague or manager about their behaviour or – in the absence of acceptance that this is an issue or safety in doing so – then escalating the issue to those that can help.

Throughout this process conversations must be had and notes must be taken. Email should only ever be used to confirm understanding and action, never as an outlet for frustration or discussion.

MOVING FROM TOXIC TO VIBRANT

For a culture to move from toxic to vibrant, people have to be called to account for their behaviours or performance. The best teams do this really well so that managers never have to do it.

And in order to be able to hold each other to account, time needs to be spent discussing what works well in the team and what doesn’t. Then a set of behaviours and principles need to be agreed that can serve as the foundations for better working conditions.

Without this, people lack the foundations from which courage and discipline can rise and the toxic culture will remain.

It is vital that individuals who have identified their culture as being toxic, take meaningful action. Simply waiting it out and hoping that it corrects itself is not an option.

To get rid of a toxic culture, the staff have to define what vibrant looks like and then have the courage and discipline to hold themselves to account to it.

If nothing changes then leaving and finding a place that allows you to do your best work may be the only option you have. 

 

Colin D. Ellis is a culture change expert, an award-winning international speaker and a best-selling author. His latest book ‘Culture Fix: How to Create a Great Place to Work’ (Wiley $29.95) has seen him travel all over the world to help organisations transform the way they get things done.  For more information about how Colin can help your team visit www.culturefix.xyz

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AUSTRALIA is no stranger to natural disasters and as summer edges closer, bringing on drier, warmer days – especially in southern regions – bushfires are sure to become a more prominent risk.

As such events impact entire communities, including organisations, their employees and families, the disruption to daily life can be harrowing.

As many people may be forced to evacuate their homes and workplaces, and leave cherished possessions behind, they turn their energy towards survival.

AccessEAP clinical director, Marcela Slepica knows only too well how a tragic disaster, such as a bushfire, can have damaging and often long-lasting impacts on people.

“It is common to experience a range of intense emotions following a traumatic event like a natural disaster,” Ms Slepica said. 

“The immediate loss of control and personal safety is frightening, and can lead to severe and acute shock, distress, and anxiety.”

The risks of business leaders facing such crises are, sadly, likely to rise rather than diminish in the future. Bushfire seasons are widely believed to be lengthening and becoming more intense, and seemingly starting much earlier than usual.

Bushfires have already left families homeless this year and seen hundreds evacuated from their houses, as more than 50 fires recently burned across New South Wales and more than 15,000 hectares burned in Queensland in September, as reported in a feature article in The Conversation.

Ms Slepica said the memories and associated fear that a similar event will re-occur can be long lasting, so it is important that managers are sensitive in how they deal with staff members who have been affected.

AccessEAP has documented insights into how managers can support their employees through this difficult time, based on both research and experience, Ms Slepica said:

 

Welcome people back to work

Having a sense of purpose and connection is essential to recovery and often work offers this, as it provides a sense of control, routine and security. As the recovery process takes time and each individual will be coping at different speeds, with setbacks cropping up along the way, it’s important to remember to be patient and understanding.

 

Normalise reactions

It’s important to remember that people will be experiencing a range of emotions, and that once the event is over, it will take time to come to terms with these feelings. Outbursts of emotion, or people isolating themselves from the rest of the staff, are signs that managers should look out for. Acknowledge that all emotions are okay and that it will take time to grieve. Reassure people that intense feelings are normal, given the disaster.  

 

Ask ‘how can I help?’

Ask if there is anything, as a manager, that you can do to assist employees or if there is anything that they may need to help make this process easier. Flexibility will be incredibly important during the immediate aftermath of a bushfire. Staff may need to work different hours, or from home, to oversee repairs to their properties or to support loved ones. They also may need assistance with transport and getting to and from work, and with organising childcare. Catch up with senior managers to discuss what the business can do to recognise employees that may need help and put a strategy in place to meet their needs.

 

Encourage people to talk, but avoid probing

Curiosity is a part of human nature. However, by asking people for details of a traumatic experience, it may trigger painful emotions that they are not ready to share. Instead, gently encourage people to talk about how they are feeling and let them lead the dialogue. Some may be more eager to share than others, as there may be more important things to focus on at that time, so check in regularly.

 

Advise those suffering to speak with their confidential EAP service

As a manager, there are times that you can only do so much to support people, so make sure your business has other support networks in place too. An employee assistance program (EAP) can offer help in person or over the phone, offering coping strategies and counselling for any problems, without judgement.

www.accesseap.com.au

 

About AccessEAP

AccessEAP is a leading employee assistance program (EAP) provider assisting companies across Australia, New Zealand and South East Asia since 1989 in supporting a mentally healthy workplace. As an Australian owned not-for-profit provider, surplus profits are directed into programs to assist children at risk in the community through direct donation and via The Curran Access Children’s Foundation.

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By James Lee >>

WHEN A BUSINESS organises its activities around shared, motivating ideals, the effect can be as galvanising as a baton in the steady hand of a conductor leading a symphony orchestra.

One need look no further than Arturo Toscanini, the celebrated maestro and champion of human rights, to see the close connection between inspired leadership and indelible purpose.

Not perhaps since Cicero has an exile received such fanfare upon his triumphant homecoming to the Italian peninsula. When Toscanini took centre stage in 1946 at Italy’s premier opera house after eight years living abroad, he lifted not only his baton but also the hopes and aspirations of a war-torn nation.

Loudspeakers atop buildings and lampposts amplified the concert through the streets of Milan, heralding the return of civilisation itself to a beleaguered continent — and bringing Italians to their feet in a thunderous crescendo of applause and renewed spirit. 

As a concert pianist and classical music aficionado, I suspect the world may never again witness a conductor as consequential as Toscanini.

But as the chief operations officer of SAP Ariba and SAP Fieldglass — the premier global business networks for the procurement of goods and services, respectively — I recognise in the maestro’s legacy an ethos of conscience and purpose that lives on.

It is a legacy we all can emulate. For technology makes it easier today than ever before to align values with actions, particularly in the commercial sphere.

UP TEMPO BUSINESS

In operations management, the objective is much the same whether conducting an orchestra or running a cloud software business: ensure harmony among disparate yet complementary participants, minimise risk to synchronised production, and maintain the flexibility necessary to accommodate shifting customer demand.

But Toscanini understood that these structural fundamentals were insufficient to create beautiful music.

The woodwinds and strings may be perfectly attuned. The brass and percussion may echo a flawless counterpoint. The musicians’ technique may be first-rate. But what if there’s no passion? What if the orchestra lacks a unifying, uplifting purpose?

The absence of passion — the ambiguity of purpose — can sully any worthwhile endeavour, whether in music, business or human relationships.

Musicians infuse passion into their playing by summoning their deepest emotions. Similarly, businesses instill purpose into their operations by embracing the brand values held dear by their customers, investors, employees and other stakeholders.

But can purpose be measured? Fortunately for business leaders, it can. 

GO DIGITAL ON PURPOSE

Digital networks provide precisely the mechanism they require, particularly when seeking to gauge the ethical, sustainable business practices of their trading partners. Aided by cognitive technologies, these networks are transforming business-to-business commerce, lending newfound transparency to the interconnected operations of buyers and suppliers.

At the same time, operations leaders are harnessing the power of data to gain visibility not only into traditional business metrics such as inventory turns, cycle times and utilisation rates, but also into socially pressing questions such as:

Does a potential trading partner keep its supply chain clear of forced labor? 

Has it established a record of responsible stewardship of the environment?

To what extent does the company award business to firms owned by historically underrepresented groups?

How consistently does it uphold humane working conditions in the various parts of the world in which it operates?

The transparency afforded by cloud-based networks answers these and dozens of other compliance-related questions. Meanwhile, this same visibility enables trading partners to collaborate in real time, extend competitive advantage, and innovate to create mutual value, even when the value chain stretches to far-flung corners of the globe.

No matter the physical distance it spans, a digital network — not unlike an orchestra conductor — marshals the precision, intricacy and capabilities of participants to create value far greater than the sum of the constituent parts.

Best of all, digital networks, unlike business leaders or musicians, never deviate from the task at hand.

Toscanini once observed, “After conducting a concert in a small town, I received the following note from a farmer who had attended the performance: ‘Dear sir, I wish to inform you that the man who played the long thing you pull in and out only did so during the brief periods you were looking at him.’” 

Visibility, whether across an orchestra’s musicians or a digital network’s millions of buyers and suppliers, is essential for any leader to produce consistent, harmonious, purpose-driven results.

When it comes to connected commerce, real orchestration is required to lend enterprises the digital capabilities necessary to broaden their insights and achieve superior outcomes.

Now that’s conducting digital business at a whole new tempo.

www.ariba.com

www.fieldglass.com

James Lee is chief operating officer for SAP Ariba, the world’s largest business network, linking together buyers and suppliers from 3.6 million companies in 190 countries, and SAP Fieldglass, a longstanding leader in external talent management and services procurement used by organisations in more than 180 countries. He is also an accomplished concert pianist. SAP Fieldglass describes is role as being ‘ to find, engage and manage all types of flexible resources’. 

 

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By David Sharrock >>

IN MY NEIGHBOURHOOD, there are a multitude of cafes and restaurants that open their doors, following hugely expensive fit outs and massive set up costs. As the weeks turn into months, many of them just see a trickle of customers.

There is nothing wrong with their food, service or décor and ambience. The new owners stand by, ready for the rush of customers, displaying increasing anxiety and disappointment as this fails to happen.

Sadly, and all too often, their dreams turn to dust and their doors close for the last time, usually without warning. Only the shell of the shop remains.

I then muse about where those owners have ended up and am concerned about their financial and emotional state, having been forced to walk away. I can only imagine their heartache, pain and trauma. 

RESPONSIBILITY FOR MISTAKES

It is frightening to think that any business can fail at any time, for any reason. Whenever a business opens its doors, it needs to grow in order to survive.

In fact, mere survival is not an option because this means that the business will simply atrophy and eventually close its doors. The aim is for the business to thrive, preferably by growth that is sure, steady and manageable. 

When a business fails, be it start-up or established, there is only one person responsible: the business leader. He or she has faced a multitude of issues and has made mistakes in deciding what to do or what not to do, causing stymied business growth. This is the hard truth.

COMMON MISTAKES TO AVOID OR REDRESS

The good news is that business failure might well be averted if the business leader addresses the following common mistakes:

Struggling personally with emotional, physical, inner well-being or relationship issues which have a negative impact in the workplace;

Finding it hard to face and overcome problems in your business, just wanting to give up;

Running the business by the ‘seat of my pants’, flying from one issue to the next, highly stressed, and never quite sure about who is doing what;

The business lacks vision for its preferred future;

There are no articulated values or the values mean nothing, with internal behaviour unpredictable and random;

Workplace culture is toxic, dysfunctional or less than ideal;

Leadership skills are lacking;

The business does not have the right people on your team with the right attributes, tolerates problem team members and suffers mediocre performance;

The business primarily exists to get what it can from customers and to sell, sell, sell;

No new ideas, failing to innovate with new and different products and services;

No new business opportunities and gets no return from advertising and marketing;

Dated, inadequate equipment and infrastructure;

A haphazard strategy at best, with little to no effective planning for the future;

Operating in the red, struggling to pay suppliers, a lot of slow paying or defaulting customers, and marginal profit.

AVERTING COMMON MISTAKES

As the business leader, instead of making such mistakes, what might you do to facilitate business growth and see your business thrive?

Undertake a candid self-appraisal of every aspect of your personal life, getting help to overcome personal struggles while forging life-giving relationships;

Develop resilience whenever facing problems or adversity, characterised by persistence, determination, courage, steadfastness and sheer indefatigability;

Establish a business system, with your whole team working to the system for the sake of consistent best practice;

Create and cast an inspiring vision of the future;

Ensure that values become prominent so that behaviour is consistent with core beliefs;

Introduce a vibrant workplace culture by tackling and replacing wrong behaviours, attitudes,  communication, relationships and decision-making;

Learn the skills necessary to become a highly effective leader;

Recruit for potential to build a high-performance team while showing the door to problem team members;

Ensure the business becomes obsessively customer centric at each customer touch point;

Become more entrepreneurial, creative and innovative, coaching for those traits in your team;

Discover and create new business initiatives galore;

Gradually improve and update equipment and infrastructure needs, starting with the most important for greater efficiency and effectiveness;

Set a strategic direction for your business and work to a detailed strategic plan;

Consolidate debt, tighten credit control processes and seek professional guidance about profitability and pricing.

The responsibility for minimising or preventing mistakes in any business is that of the business leader who must accept that responsibility and take action.

The very survival of your business is at stake. 

www.fightingforenterprisesuccess.com

 

About the author

David Sharrock is the managing principal of Sharrock Pitman Legal, a Melbourne based, boutique commercial law practice. He is an accredited business law specialist, an accredited mediator, public speaker, and author of a new business workbook titled Fighting for Enterprise Success: through the eye of the tiger. www.fightingforenterprisesuccess.com    

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By Paul May >>

THE ENVIRONMENTAL cost of natural disasters is now an almost daily feature on the news agenda, yet many businesses are still doing little to address their own vulnerability.

It’s not difficult to see why natural disaster management often falls by the wayside. By its very nature, an unpredictable event is not something your business can control. In the face of more pressing issues and the next earnings season, it’s easy for events like natural disasters to be relegated to the end of a ‘to do’ list.

But these assumptions, like the weather, are changing as extreme events make the threat increasingly impossible to ignore. Just this year there’s been a mass fish death, floods in Townsville, bushfires across Tasmania and we recorded the hottest month in our national history. 

Some of our biggest local brands are already factoring in this risk. Telstra is preparing for the impact of bushfires on phone towers, Crown is flood-proofing its casinos and BHP is protecting itself against cyclones that could seriously disrupt its iron ore exports.

The rising number and severity of extreme weather events looks sure to continue. According to the CSIRO’s 2018 State of the Climate report, Australia will see more extreme flooding caused by rising sea levels, wind and rain damage from tropical cyclones and increased bushfires thanks to drier weather.

Climate change is no longer just a political talking point – it’s a business reality. Mitigating the potential impact means tackling it head on.

A CONNECTED WORLD

The increased risk of natural disasters caused by climate change isn’t limited to Australia’s borders. Thanks to the global nature of supply chains, those risks spread across the region and around the world regardless of the industry your business operates in.

Given its proximity, Asia plays a key role in many Australian supply chains, particularly when it comes to low-cost manufacturing. This region encompasses some of the most disaster-prone areas on the planet – from typhoons in Hong Kong to flooding in Thailand.

While they impact every part of a business, the extended supply chain is not always the first thought when it comes to climate risk mitigation.

But it should be.

The potential financial and economic implications of natural catastrophes include a long-term negative impact on your business growth, financial security and even brand reputation.

A MATTER OF WHEN, NOT IF

The onus is on your business to assess natural disaster risk and ensure adequate resilience. This responsibility usually rests on the shoulders of executive directors and, as climate change risk becomes more obvious, this liability is fast becoming more personal.

In a landmark opinion, Sydney-based senior counsel Noel Hutley and barrister Sebastian Hartford Davis have written that there are now “significant and well-publicised risks associated with climate change and global warming that would be regarded by a court as foreseeable … large-scale firms would be expected to invest seriously in capabilities to monitor, manage and respond to climate change risks”.

They further argue that individual directors could be exposed to climate change litigation if they’re not appropriately managing risk.

It will also impact business more generally. There has been an increase in shareholder activism, where groups of advocates pressure businesses to change their approach to climate risk.

The Australian Centre for Corporate Responsibility and other groups have called for Australia’s biggest banks, utilities, insurers and miners to improve disclosure and improve risk management.

WHAT CAN BE DONE

With this growing liability, how should your business manage the increased risk posed by climate change? Rigorous analysis is key.

Understanding the vulnerabilities means decision-makers know where to act. Loss prevention measures taken proactively as part of capital allocation decisions help to futureproof your business.

Tools will come in handy here, including FM Global’s Global Flood Map. This provides a worldwide view of moderate and high-hazard flood zones but, rather than using historical and statistical data, it is based on scientific fact using parameters such as rainfall, evaporation, snowmelt and terrain.

These considerations are increasingly important as natural disasters caused by climate change continue to grow in both frequency and ferocity. As the world moves into a new era of risk, your business directors have a responsibility to ensure they’re managing it appropriately.

The likelihood of natural disasters impacting your business has never been higher. It’s time to be prepared.

www.fmglobal.com.au

Paul May is the operations engineering manager for FM Global, an international insurance group that focuses specifically on commercial and industrial property insurance and assists its client businesses to become more resilient and better prepared for natural disasters and business interruptions.

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