As COVID-19 swept the world earlier this year, the Australian and New Zealand governments took early action to contain the disease. New Zealand closed its borders to nonresidents and imposed a strict lockdown. Australia also closed its borders, although it took a more relaxed approach to lockdown than its neighbour. For example, while New Zealanders could only leave their homes for groceries, medical help, or local exercise, Australians in most states were still allowed to meet a friend for coffee.
Despite their varying approaches, by the end of May, it was clear that both countries had been successful at suppressing community transmission of the virus. Australia had recorded a little over 100 deaths while New Zealand’s death toll stood at just 22. Furthermore, as both countries steadily emerge from restrictions, economic activity is recovering.
In recent videoconferences, members of the Association of International Certified Professional Accountants shared their perspectives on how organisations in Australia and New Zealand plan to instil sustainable resilience in their businesses going forward. These were their main observations:
1. Anticipate budget cuts
The governments of both Australia and New Zealand launched large stimulus packages to help shield individuals and businesses from the financial impact of COVID-19. To pay for these packages, they are likely to reduce public expenditure in other areas. A public-sector finance professional in New Zealand said they are anticipating a substantial cut in central government funding. As a result, local government authorities are revising their business strategies and considering putting some major projects on hold, including climate-change initiatives. Other measures include asking staff to take pay cuts on a voluntary basis and considering whether jobs could be saved if people are willing to take unpaid leave for two months.
It is not just organisations in the public sector that will be expected to tighten their belts, however. In the private sector, businesses are also looking for opportunities to save money — especially if costs have increased in certain areas. For example, some companies have invested heavily in cloud software and licences to help transition into the large-scale shift of remote working. Others are looking at switching to locally based suppliers to strengthen their supply chains even though this could be notably more expensive than sourcing from overseas. Finance can play an important role in doing the cost/benefit analysis around supply chain restructuring. Many organisations have implemented a hiring freeze to control their workforce-related costs, noting that sometimes this has led to more efficient and effective workload sharing between resources.
2. Position the business to exploit growth opportunities
Australia and New Zealand are both facing looming recessions as a result of COVID-19. Unemployment rates have climbed, and large businesses in both countries have announced heavy job losses. For example, Air New Zealand has reduced its workforce and predicts it will take two years to get back to 70% of its former size.
Businesses in certain sectors — such as aviation, hospitality, and tourism — are likely to face significant challenges for the foreseeable future. Nevertheless, there are opportunities emerging for organisations operating in other sectors and for those that can pivot their business models. In May, the New Zealand government added another $3 billion to its infrastructure budget as it sought out “shovel-ready” projects that could boost the economy. Online education could also be a big opportunity for organisations able to offer relevant products and services.
Innovation will be key to driving growth and challenging previously accepted norms. Reimagining strategy and aligning to a more digital landscape to tailor towards customers changing desires will hold an organisation in good stead to brace itself for the technology challenges ahead. An Australian-based finance leader revealed that demand for his company’s digital signature software had skyrocketed during the COVID-19 pandemic. The whole business had therefore reoriented itself around marketing and selling this particular product. When planning its strategy, the company combines external insight with internal information so that it takes the right decisions.
3. Support your people by establishing new practices
The companies that will emerge from the COVID-19 crisis in the strongest position will be those that manage to hold on to their talent and invest in their people. One way of doing this is by providing employees with flexibility. The finance leader from the Australian technology company explained that his management team was promoting three concepts — flexible hours (where people choose their own working hours within a day); flexible days (where people might work longer on certain days and take another day off); and meeting-free time that gives people the time and mental space to focus on their work. This flexible approach is particularly appreciated by parents who are juggling work with childcare and would overall improve staff morale and trust.
4. Resist the temptation to go too far, too fast
Some businesses might perceive that the worst of the COVID-19 crisis is over. This, in turn, may be causing them to be overly optimistic about the future and to believe that conditions have returned to normal when they haven’t. One finance professional based in Australia said the likelihood of ongoing volatility meant she was cautioning her clients against taking big decisions over the next quarter. Any decisions made in a rush now could have significant implications later, and it is important to understand the possibilities of history repeating itself.
5. Prepare for a second wave of the virus
European countries have already been warned by a World Health Organisation official that they should brace themselves for a second wave of COVID-19 infections later this year. Australia and New Zealand are at lower risk of suffering a second outbreak this year because of their low transmission rates. Nevertheless, the cautious approach they have taken to reopening their economies, and their tight border controls, suggest they have not discounted the risk altogether. Organisations in the two countries are also vigilant, with many taking a phased approach to sending staff back to workplaces. This will allow them to quickly switch back to remote-working practices if a further lockdown occurs.
The experiences of Australia and New Zealand will serve as best practice and inspiration for other countries as they reopen their economies while guarding against the health risks of COVID-19. Going forward, for example, there are plans for a “trans-Tasman travel bubble”, which would allow Australians and New Zealanders to fly between the two countries without having to abide by a 14-day quarantine period. Meanwhile, New Zealand Prime Minister Jacinda Ardern has suggested that a four-day working week could be a way to boost domestic tourism in her country. Finance professionals around the world will also be paying keen attention to how their peers in Australasia are addressing critical business challenges as they arise.
For more news and reporting on the coronavirus and how management accountants can handle challenges related to the outbreak, visit FM’s coronavirus resources page.
— Andrew Harding, FCMA, CGMA, is chief executive–Management Accounting, and Venkkat Ramanan, FCMA, CGMA, is regional vice-president–Asia Pacific, both at the Association of International Certified Professional Accountants. To comment on this article or to suggest an idea for another article, contact Alexis See Tho, an FM magazine associate editor, at Alexis.SeeTho@aicpa-cima.com.