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Reckon AI is coming? So is super-intelligence.

Technology research group Nakano’s chief analyst, Andrew Sheehy, is part of a movement to increase the business community’s understanding of what artificial intelligence (AI) is and what positives can come out of utilising AI in business. In this opinion article, he takes it a step further: superintelligence. >>  

GIVEN that the field of machine intelligence, or artificial intelligence (AI) is still clouded by controversy, then it might seem a little premature to say that ‘superintelligence’ is inevitable.

After all, many people would argue that we still do not know what human intelligence or artificial intelligence really are.

The approach I’m going to use here is to bypass completely the conventional arguments about machine intelligence and try to think about the subject in an unconventional way.

The starting point is an assumption that machine intelligence exists. The strength of the machine intelligence could be extremely weak and it could also be very limited but at this stage all we need to do is to accept that advanced AI systems like IBM Watson, or AplhaGo do indeed demonstrate at least some level of genuine intelligence.

But the moment we assume that AI systems like Watson and AlphGo exhibit some level of intelligence then we should immediately ask where that intelligence comes from?

An AI system can be divided into two parts: hardware and software.

The hardware is easiest to understand. Even the most complex computer system is untimely just a collection of semiconductors, circuit boards, passive components, plastics and metal.

It would be very hard to argue that the computer hardware itself possesses any intrinsic intelligence:

We could say that the hardware is intelligent in a way because it is the result of collective human intelligence – which was needed to conceive the design and figure out how to convert the input raw materials into the finished computer. And so if we added up all of the intelligences needed to produce the finished computer then the hardware could be said to embody that intelligence.

The problem with this is that the computer hardware, by itself, does not actually do anything, and nor can it do anything. If it cannot do anything by itself then it cannot exhibit any behaviour which we might deem ‘intelligent’.

In essence, the hardware is like a person the moment after death: intelligence was present, but it no longer is.

Hence, computer hardware as we presently understand it cannot possess intelligence.

The very most we can say about the hardware is that it is the physical environment where machine intelligence can reveal its presence.

The other part of the computer is of course the software.  But first, what exactly is ‘software’?

If this seems like a silly question then consider the following definitions:

  • Software is the part of the computer that is not physical.
  • Software refers to the programs and data used by a computer.
  • Software is encoded information and computer instructions.

But while all of these seem to be reasonable definitions, none clearly define what the software actually is.

Let’s think about this a bit more carefully.

Programmers spend their time creating software which looks like:

  function __construct($settings) {

    $this->host = $settings['host'];

    $this->db   = $settings['db'];

    $this->user = $settings['user'];

    $this->pass = $settings['pass'];

    $this->charset = $settings['charset'];

    $this->connect();

  }

  function connect() {

    try {

      // connect to database

      $this->dsn = "mysql:host=$this->host;dbname=$this->db;charset=$this->charset";

      $opt = [

          PDO::ATTR_ERRMODE  => PDO::ERRMODE_EXCEPTION,

          PDO::ATTR_DEFAULT_FETCH_MODE => PDO::FETCH_ASSOC,

          PDO::ATTR_EMULATE_PREPARES   => false,

      ];

      $this->conn = new PDO($this->dsn, $this->user, $this->pass, $opt);

      $this->status = true;

    } catch (Exception $e) {

      print "Cannot connect to database, error was: ".$e->getMessage();

    }

  }

 

=========================================

But if we think about this carefully then it becomes clear that these are simply two examples of the many ways in which the software can be represented in our physical reality.

Now I know what you’re thinking, which is that the actual software resides in the memory of the computer where it ultimately exists as a series of electronic charges, comprising electrons, that sit on the gates of millions of transistors.

But this isn’t right either.

What happens when we copy the ‘software’ from one computer to another and run the software on the second computer? At first it seems we now have two copies of the software, but do we really have two copies of the software, or merely two physical representations of the same software?

After all, given that the copy of the ‘software’ exists inside the memory of the second computer (which could be in a different country) then it must be represented by a different set of electrons.

Because none of the electrons that represented the original version of the software form part of the copy (the original electrons are still on the original computer) we can be sure that whatever the software really is, it has nothing to do with electrons.

There’s more...

Even when the software is executed on the original computer the electrons that represent a given instruction in the computer’s memory are not the same ones that are used to represent the software when that instruction is executed in the microprocessor.

Again, we see that the software is different to how it is represented.

So what, exactly, is software?

The answer is that software does not exist – at all:

Software is simply a human intellectual construct, just like mathematics.

Software can only be represented in our physical reality, say by projecting something on a computer screen, printing characters on a paper page, storing a set of electronic charges in a memory chip. Or even as oranges arranged in a particular way in a park.

This rather abstract finding is important for the following reason:

If software is just a human intellectual construct then this means that machine intelligence must be a derivative of human intelligence.

Machine intelligence is where human intellect is repurposed in a way that allows it to exist within a computer, rather than a biological brain.

By necessity, machine intelligence must be very different to human intelligence:

  • we are representing it using an imperfect intellectual construct (software)
  • we are enhancing certain aspects (by taking advantage of the computer’s ability to process large volumes of data)
  • we are ignoring certain aspects completely (like emotion etc.)
  • we are then constraining it further by it by realising it in the form of multiple, wholly independent intelligence domains (different AI systems operate within their own closed domains)
  • we are further restricting it by not providing any meaningful ability to interact with the surrounding environment

There is no way that machine intelligence is remotely like human intelligence in nature – even though it is derived from it, and – in a very restricted sense– can exhibit a degree of autonomous action or ‘free will’.

But, nevertheless, the nature of the intelligence we are creating in machines – while very different to ours – is absolutely as real as ours.

What is currently happening in the field of AI is that scientists and engineers are working with experts that have deep domain knowledge to aggregate, magnify and then commoditise their collective intelligence.

Because of the intellectual complexity of this task things are proceeding slowly on a domain-by-domain basis, but the end point is clear:

AI systems will eventually have been developed for all human intellectual domains.

We can easily imagine that these systems will be connected together into a network – rather like the internet – but where questions and answers will be relayed between the nodes, instead of data packets.

The resulting level of collective machine intelligence will be greater than the collective human intelligence that was required to build the network. This will be because the intellect of each ‘AI node’ will already be supra-human while network effects will mean that the collective intelligence of the whole network will be exponentially greater than the sum of the individual intelligences.

Even if some aspects of human intelligence – such as emotion, worry and irony, or even sentience as we understand it - remain absent from the ‘AI web’ then the resulting structure will still be extremely powerful, or ‘superintelligent’.

As soon as we realise that machine intelligence is simply a derivative, superior form of human intelligence then the inevitability of superintelligence is clear, even if the timescales and implications are not.

 

Ends

Oil and gas industry research boost

TWO new research initiatives are designed to assist Australian researchers to collaborate with the oil and gas industry to help strengthen Australia’s competitive advantages in the sector.

The ARC Research Hub for Offshore Floating Facilities and the ARC Training Centre for Liquefied Natural Gas Futures were recently launched at the University of Western Australia. 

The Hub and Centre have been provided with $4.9 million and $4.5m respectively in ARC funding under the Australian Research Council’s Industrial Transformation Research Programme.

ARC chief executive officer, Aidan Byrne, said the interrelated Hub and Centre, both based at the University of Western Australia, would drive stronger innovation in Australia’s energy sector.

Professor Byrne said industry-research partnerships would focus on strategic technologies specifically relating to floating offshore developments and liquefied natural gas (LNG) production.

“The ARC Research Hub for Offshore Floating Facilities will tackle critical engineering challenges for offshore oil and gas projects in remote deep water locations by creating improved designs and operating procedures, leveraging Australia’s competitive advantage in floating LNG facilities,” Prof Byrne said.

“Researchers at this Hub — working with leading global gas and oil industry organisations  Woodside, Shell, and partner organisations Lloyds Register and Bureau Veritas — will develop new technologies and analysis methods required for safe and efficient offshore projects, such as ocean forecasting, vessel motion and offloading analysis, riser and mooring longevity, and novel anchoring and subsea foundations,” Prof. Byrne said.

“The ARC Training Centre for Liquefied Natural Gas Futures — with support from industry partners Chevron, Shell, Woodside, Samsung, Daewoo, GE, Clough, Guodian, and VMG —will train the next generation of researchers in the industry, who will work closely with experts in a conducive industry setting, ensuring they have the right skill sets to make a difference in their field.”

www.uwa.edu.au

 

ends

Bond adventure: the amazing case of David Wallader

A BOOK on the intriguing and extraordinary 2008 US$1.5 billion ‘counterfeit’ trial and conviction of David Wallader – followed by his urgent  re-trial and quashing of all international fraud charges for ‘no conviction recorded’ – is now in production  by Australian publisher Screamer Media.

David Wallader’s story has all the hallmarks of an international espionage novel, or perhaps an Indiana Jones movie – trillions of dollars of 1934 US Treasury bonds, housed in elaborate once-only access plaster of Paris boxes, sealed under glass with Do Not Open warnings of poisonous gas within; and all hidden in deep underground caves to protect them from the Japanese invasion of 1942. 

Except, until now, the back story of the Australian Federal Police astonishingly accusing him of trying to ‘sell’ an alleged US$1.5 billion worth of ‘counterfeit’ US Treasury Bonds in his possession – which he had been asked to try to authenticate – to the Turkish Government has not been told.

Mr Wallader said, at first, he had laughed when he had heard the peculiar charges raised against him – but they proved no laughing matter as his life was sucked into a whirlpool of damning false accusations, flimsy evidence, clumsy defence and possible perjury of a person in the witness stand against him. This maelstrom led to his initial custodial conviction.

Even as he was being hauled off to Numinbah Prison Farm, he could not understand, or believe, the circumstances that had led to this cataclysmic downturn in the 62nd year of his life.

The former Westpac bank manager had branched out from that increasingly inhibited world, after progressing to the leading ranks of bank management, to join the agriculture industry in the late 1980s – and things were going well at his innovative Colinton Station property in Queensland by the early 2000s.

Perhaps because David Wallader had a wealth of banking experience – he had handled the coupon interest payments of Commonwealth bonds, so he knew what genuine bonds looked like and how they operated, plus he had written a thesis on trading securities and bonds – that a friend in the Philippines asked him to take a look at these intriguing ‘US Treasury bond’ caches. Mr Wallader was also sceptical, as he knew the Philippines’ reputation for creating intricate and elaborate counterfeits of currency.

But he nevertheless agreed when his friend, a Canadian dentist and business owner, made the request out of the blue while Mr Wallader was in the Philippines on holiday in 2001. Intrigued by photographs, Mr Wallader agreed to travel to Mindanao and was shown a broken security box filled with bonds, brought to him on the back of a pick-up truck. All the local people wanted, they said, was David Wallader’s opinion on the bonds’ authenticity.

If they were counterfeit, Mr Wallader discovered, the tell-tales were beyond his experience at the time.

The main cache was said to be still buried in the untouched glass-sealed cases deep underground somewhere on the island of Mindanao. The locals claimed these ‘bonds’ were part of a trove that was a wartime guarantee for the Philippines’ support of US forces against the Japanese, set to mature in 1964.

“Before David explained to me the nuances of one of his current businesses, IFO, which funds infrastructure through a unique Europe-based trading platform, he insisted on showing me evidence of this horrendous period of his life – and especially, of course, his Crown pardon,” Business Acumen editor and author of the new book, Mike Sullivan said.

“I was astonished – it really did sound like an Indiana Jones script: unearthed ‘treasure’, David’s quest to have the bonds verified, which eventually led him to a currency expert in Turkey, then the out-of-the-blue raid on David’s home in Queensland by Federal Police.

“David was clearly worried that I might write him off as some type of nutter, but it had quite the opposite effect as I viewed his compelling evidence,” Mr Sullivan said.

“In fact, I think it made me take his innovative infrastructure financial platform more seriously as I realised how savvy, honest and methodical this man really was – and how he had been brought almost to the point of suicide by the trials and his temporary jailing. A lesser man would have succumbed to this vast arsenal of malicious legal power against him.”

How and why did this happen to David Wallader? In hindsight, and with the benefit of archived evidence that has only recently come available, the answer may be found in the tense geo-political and international financial tumult of 2007: the Iraq War neighbouring Turkey and the onset of Sub-Prime Mortgage crisis dragging the US into its ‘Great Recession’.

Finding answers to these questions is what this book is all about, according to its editors.

“It cannot be ignored that there was a war going on in Iraq at the time – a war in which the US needed Turkey’s assistance – and Turkey was heavily in debt to the US,” Mr Sullivan said. “A scenario in which – brought to Mr Wallader by a financial business executive in Turkey – that country’s government could possibly obtain such bonds for millions of dollars. That is, assuming they turned out to be authenticated, Turkey might trade them back to the US for trillions. Such a scenario would have been very, very uncomfortable at the time.

“Perhaps as significant, David Wallader found himself on the precipice of another unexpected event, the sub-prime meltdown of the US financial sector. Remember, this was 2007 … and the Great Recession and its near destruction of Wall Street was germinating. The last thing the US would have wanted at that stage was the appearance of trillions of dollars of mature US Treasury bonds.”

Whatever the geo-political factors at play, this awful period in David Wallader’s life makes fascinating reading. The very District Court judge who convicted him, Charles Brabazon QC, realised on the night after the trial and Mr Wallader’s custodial sentencing, that he had made “a grave error in law”.

That night, the judge began the application to set that judgement aside and, eventually, set Mr Wallader free and overturn his conviction.

David Wallader has the stamped Crown judgement paper to prove it.

Significantly, the appeal trial came just 28 days after sentencing – a rare rapid timeframe indeed.

“Oh, and he still has that handful of ‘US Treasury bonds’ that he took to Turkey to have assessed as fake or genuine,” author Mike Sullivan said. “I’ve seen them and we have very clear photographs of them within this book …

“Except now they have ham-fisted black ink stamps placed all over them, I’d assume by the Federal Police, which proclaim THIS IS A FICTITIOUS DOCUMENT.

“Why would Australian Federal Police do such a thing? The re-trial and appeal was won on the grounds that these ‘bonds’ could not be proven as counterfeit beyond reasonable doubt – and the prosecution could not produce a genuine example for comparison.

“If anything, those stamps raise more questions, particularly as they seem much more like a graffiti than an official announcement, compared with the quality of the paper, the rich inks and watermarking of the ‘bonds’.

“The biggest question of all is why he was accused of trying to sell those ‘bonds’ to the Turkish Government, when Mr Wallader said there was no such offer on his part – he had taken them to Turkey to see if a regional expert in bonds and currencies he knew could authenticate them,” Mr Sullivan said.

“An extremely dark episode in David Wallader’s life – one which still unfortunately impacts his business reputation, thanks to the anomalies of Google searches and one-sided press coverage of the time – makes for fascinating reading today. This is why we have taken the decision to present David’s story in a well-illustrated blow-by-blow account.”

Wallader’s Word is Whose Bond? is the working title of the book, planned for publication in 2017 by Screamer Media, publisher of Business Acumen magazine.

www.businessacumen.biz

ends

Wealth inequality changes luxury travel finds MyTravelResearch

INCREASING inequality in wealth is one of the factors changing the nature of luxury travel, according to MyTravelResearch.com co-founder and luxury travel expert, Carolyn Childs.

Ms Childs told a seminar at the recent Luxexperience exhibition in Sydney that social and political forces such as the Occupy Movement and government austerity cuts were driving many wealthy people to spend more privately.

She said a counterpoint was that the same forces had also encouraged the rise in socially responsible luxury travel activities. 

“The trend to private consumption away from public scrutiny can be seen in the increase in purchases of mega yachts and private islands,” Ms Childs said. “Technological change and its impact on workplace communications has also triggered a counter demand among the rich to de-tech completely while on holiday.”

Ms Childs told the audience of 500 high-end travel buyers, sellers and advisors at the Luxperience Thought Leaders seminar that the international Occupy movement – which grew out of the Occupy Wall Street event – like the French and Russian Revolutions before it, had changed the psyche, moral reference points and consumption patterns of well-off people.

“We now see the rise of responsible resorts such as El Nido in the Philippines where high end travellers are both pampered and give back to the community,” Ms Childs said.

“Luxury travel is now increasingly defined by a rising commitment to people, planet and self-improvement as much as indulgence, pampering and conspicuous consumption.”

Ms Childs told the audience that wealth disparity has been on the rise since around 1980, with the richest 1-10 percent in North America, Europe and Australia now owning over 70 percent of society’s wealth.

Ms Childs observed that the rise in the nouveau riche, particularly in China, India and the G7 economies, has seen luxury consumers around the world splinter into personality types such as philanthropist, dynast, lotus eater, hedonist, pioneer, jet setter, enrichment seeker and replenisher.

Ms Childs said the luxury travel sector had also seen the rise of “aspirational consumers who will splash the cash” depending on three factors: the occasion, such as a honeymoon or anniversary; the experience, such as a trip to Antarctica; and the traveller’s ability to trade up or down – for example, enjoying a three-star holiday but taking a helicopter ride to a spectacular dinner on the last day.

One key aspect of modern luxury travel came embarrassingly to the fore in Australia with the events surrounding the unauthorised importation of two dogs by Hollywood movie star Johnny Depp staying on the Gold Coast while filming the latest instalment of Pirates of the Caribbean.

Ms Childs said luxury travellers now relied on elite travel agents, or advisors, that she called “magicians”.

“These Gandalfs and Merlins are completely service-minded, very creative control freaks who try to anticipate the psychological and physical needs of their clients,” Ms Childs said.

“They have to deliver magic. They dread saying ‘no’ to a customer who is only used to hearing ‘yes’.

“When it goes wrong the results can be high profile,” she said, citing Mr Depp’s terriers Pistol and Boo, who faced being put down when the actor brought them into Australia in defiance of quarantine regulations.

In December, Ms Childs will publish an in-depth study of trends and changes in the luxury travel economy in partnership with Luxperience

www.mytravelresearch.com

www.luxperience.com.au

ends

 

Consumer confidence on rise?

EXTRA >> RESEARCH from an unusual source ‘close to the coalface’ of consumer spending is predicting steady growth in Australian consumer confidence – and therefore retail spending – leading up to Christmas 2015.

The founder of Cashrewards, the Australian cashback website, with more than 700 retailers on its shopping platform, Andrew Clarke, said about 58 percent of consumers expected to spend more in 2015 over last year and shoppers in the 18-24 years age bracket were still driving the majority of online sales. 

“The outlook for retailers through until the end of 2015 is looking very positive,” Mr Clarke said. “Spending has always been a barometer of consumer confidence in the economy, and low interest rates may be a contributing factor towards the positive sentiment about spending.”

He said the 58 percent increasing their spend – not including groceries – for 2015 would do so in both online and in-store shopping. The 2015 spend trend is dominated by the 18-24 age bracket, with 64 percent of that group expecting to spend more this year than last.

The young age bracket, not surprisingly, also plans to increase online spending the most by the end of 2015 (38% of respondents), in contrast to the over-55s, where 37 percent planned to spend more in-store.

Mr Clarke said in line with the increased online spending by younger demographics, the survey revealed the 18-25s age bracket was the one most motivated by online cashback incentives (59%), followed by 25-44s (55%), then 45-54s (49%), and over 55s (38%).

The Cashrewards survey panel of 1000 Australians reflected consumer confidence and good news for the Australian economy in the lead-up to Christmas, Mr Clarke said.

The survey found NSW residents were slightly more confident about the economy than those in other states, with 61 percent saying they would spend more this year, followed by 58 percent of Victorians, Queenslanders (58%), West Australians (56%) and South Australians (56%).

 “The fluctuating employment rate and Australian dollar certainly don’t seem to have deterred spending by the 18-25s, which may indicate that this age bracket isn’t as affected – or just that they don’t allow it to affect their planned spending,” Mr Clarke said.

“This could be because they’re very savvy with their online shopping and look for discounts and cashback for all their purchases.”

A key insight from the survey showed that across demographics, 90 percent buy on sale or through a promotion. Shoppers are mostly enticed by discounts (73.8%), coupons (32.3%), and rewards (38.9%).

“Having said that, when it comes to online shopping, 49 percent prefer online cashback over points schemes,” Mr Clarke said.

www.cashrewards.com.au

 

Cashrewards backgrounder

The online cashback concept works like this. With over 700 retailers across categories, Cashrewards claims to offer Australia’s highest cashback rates. It’s free to join and members can browse, compare prices, and get on average (it is claimed) 10-20 percent cashback on every item purchased; adding coupons to special discounts, shoppers are said to be able to save up to 50 percent.  Shoppers click through cashrewards.com.au to the retailer website of their choice to purchase as usual, then Cashrewards credits the cashback directly into the shopper’s nominated bank account. Where it varies most from points schemes is that actual cash comes back to the shopper, rather than waiting for points to accrue for a reward.

Cashrewards says new deals are available daily, from Australian and international retailers including Woolworths, Coles, eBay, Chemist Warehouse, Priceline, The ICONIC, ASOS, David Jones, Saks Fifth Avenue, Lorna Jane, Virgin Australia, Telstra, Vodafone, Booking.com, Avis, Microsoft, Sony, Groupon, Living Social, Dan Murphy’s, Uber, Menulog and EatNow.

The Survey

* Survey of 1000 Australian respondents on online shopping habits, conducted by Pure Profile for Cashrewards, August 2015. 

ends

NSW hub for research into Asia-Pacific's ageing challenges

A NEW Asia Pacific-wide Population Ageing Research Hub has been established at the University of New South Wales (UNSW), providing a regional forum for research collaboration on population ageing.

Asia is the world’s most rapidly ageing region, according to UNSW deputy vice-chancellor for research, Les Field. 

Led by the ARC Centre of Excellence in Population Ageing (CEPAR), the Association of Pacific Rim Universities (APRU) Population Ageing Research Hub was formally launched by Professor Field, who is also the vice-president of UNSW, where CEPAR is based.

Prof. Field spoke at the inaugural Hub conference last week, which hosted more than 40 researchers from more than 20 countries in the region.

"Population ageing is generating increasing research and policy attention, and this dedicated Research Hub will focus on improving collaboration amongst experts to address one of the greatest social challenges of the 21st century," Prof. Field said.

"UNSW is proud to have taken the initiative to establish this Hub."

CEPAR director John Piggott welcomed the opportunity APRU now presents "to bring together world class researchers from different disciplines to consider the social and economic impacts of key demographic changes".

“It is absolutely vital that we understand the changes taking place in our region and their implications both for the countries involved and for Australia," Prof. Piggott said.

"The significant rise in ageing populations throughout Asia will create greater pressure on the capacity of both families and governments to provide support for the ageing demographic.

"CEPAR is looking forward to contributing to collaborative research initiatives with global significance across the APRU network. 

"By building and delivering insight into socio-economic and health and aged care impacts, we can help policy makers and service providers to identify needs and develop resources to meet them," Prof. Piggott said.

CEPAR is a unique, independent, ARC-funded research centre bringing together academia, government and industry to address one of the major social challenges of the 21st century, he said.

www.cepar.edu.au

ends

Australian family businesses struggle with succession, cybersecurity

CYBERSECURITY and succession planning are two of the main strategic deficiencies in Australian family businesses, a global business report by EY has flagged.

EY’s Oceania family business leader, Ian Burgess said the report was a warning that family businesses, as an essential source of prosperity and stability to both local and global economies, needed to ensure they were not “putting their heads in the sand” when it came to the two critical areas of succession planning and cybersecurity. 

“Australian family businesses have a generally positive outlook when it comes to business conditions, with over two-thirds believing that their markets will expand in 2015 and over half expecting to expand their workforce,” Mr Burgess said.

“While it’s heartening that Australian family businesses have a generally positive outlook, they’re behind on two key issues that they should be addressing to ensure their continued sustainability and growth into the next generation and beyond.”

The Staying power: how do family businesses create lasting success? report, launched by EY and Kennesaw State University’s Cox Family Enterprise Centre in June, surveyed 25 of the largest family-owned businesses in each of 21 global markets, including Australia.

ONLINE RISK

The report revealed Australian family businesses were lagging behind their global counterparts when it came to their awareness of cyber risk.

About 41 percent of Australian family businesses reported having no knowledge of the impact of cyber risk on their company – much higher than the global average of 25 percent.

Even Australian respondents who were aware of the risks were fairly evenly divided about the scale of its potential impact on their business, with 32 percent rating it as low and 27 percent rating it as medium to high.

Mr Burgess said in an increasingly connected, digital world, family businesses needed to place greater emphasis on their cyber security.

“Even with the near-constant news of cyber breaches, leaks and the resulting financial losses, Australian family businesses seem to be worryingly relaxed about the risk of cyber threats and potential impact on their business,” he said.

“By their nature, family businesses face some particular increased risks beyond the usual hacking and data breaches, such as social media risks, reputational risks and personal safety concerns. For this reason, cybersecurity should be at the top of the agenda for any family business.

“Around the world, there are thousands of cybersecurity breaches each year – it’s the new reality of doing business. The biggest hurdle to family businesses in this space is recognising the most critical threats and understanding how to address them,” Mr Burgess said.

“The good news is that, due to their concentrated ownership, once family businesses are aware of the risks they have the advantage of being able to make and implement decisions quickly. This allows them to put effective plans in place to help minimise cybersecurity risks.”

EY’s Asia-Pacific information security leader, Mike Trovato said learning to anticipate cyber-crime was critical when it came to organisations transforming themselves from easy targets for cybercriminals to more formidable adversaries.

“Too many organisations fall short of mastering the key components of cybersecurity,” Mr Trovato said.  “Organisations lack focus at the top and the right procedures and practices to anticipate new threats. This is a major concern.”

WHO LEADS THE FUTURE?

EY’s Oceania leader for family office services, Richard Boyce said, with half of all the Australian family businesses surveyed still in the hands of the first generation, having a strong and clearly defined succession plan in place is essential to their continuing success

“Succession is arguably the most critical issue a family business has to face, yet it is often one of the most difficult to navigate,” Mr Boyce said. “Complicated family dynamics and the emotional connection that business leaders and family members feel towards their companies can make addressing the issue a potential minefield.

“Our survey found that Australian family businesses most commonly left succession planning in the hands of the CEO (42%), followed by owners or family council (32%). This is in contrast to the global results, where 44 percent of businesses surveyed said their board of directors had primary responsibility for succession planning.”

“If the intention is for the business to remain in family hands, succession must be considered a process, not an endpoint. It needs to be embedded into the day-to-day operations of the business, through training and education of the next generation.

“Succession is also about creating an enduring business model that can evolve and innovate, therefore the leadership required to be able to last through generational change is far more sophisticated and experienced than ever before.

“Family members must be willing to address the issue of succession planning head on through an open and ongoing dialogue. Getting this right will free up the CEO, board and council to focus on the wider business,” Mr Boyce said.

SHAPE OF FAMILY BUSINESS

The Staying power: how do family businesses create lasting success? Report also revealed a great deal about the shape of family business in Austalia.

About 50 percent of Australian family businesses currently have a first generation leader, 25 percent second generation, and 13 perent are led by third and fourth generations.

Australian family businesses rank lowest in terms of the number of countries they operate in, with an average of 2.3 compared to the global average of 15. In contrast, family businesses based in Germany operate in an average of 39.4 countries, Canada in 13.8 and China in 19.3.

About 90 percent of Australian family business respondents were satisfied with the performance of their board of directors, rating it as either good (60%) or excellent (30%).

Average return on equity for Australian family businesses is about 5 percent – on par with Spain and South Korea.

Corporate social responsibility and giving back to the community is important to Australian family businesses, with 73 percent engaged in philanthropic activities.

www.ey.com/au

ends