Sovereign Risk

With a possibility of a change in government in Australia at the next election, there is a very real chance that support for renewable energy projects, and a range of other federally funded environmental initiatives, will be wound back. Six months ago this would have been unthinkable. Right now we’re sitting on the cusp of an environmental catastrophe where we need to be even more focused on conservation, reducing environmental impacts and sustainability of our human endeavours.

On the 29 January 2025 the Bulletin of the Atomic Scientists moved the Doomsday clock forward one second to 89 seconds before midnight:

“In 2024, humanity edged ever closer to catastrophe. Trends that have deeply concerned the Science and Security Board continued, and despite unmistakable signs of danger, national leaders and their societies have failed to do what is needed to change course. Consequently, we now move the Doomsday Clock from 90 seconds to 89 seconds to midnight—the closest it has ever been to catastrophe. Our fervent hope is that leaders will recognize the world’s existential predicament and take bold action to reduce the threats posed by nuclear weapons, climate change, and the potential misuse of biological science and a variety of emerging technologies.”

Some have suggested that in the first months of 2025 the clock may few seconds closer to midnight.

We support governments that prioritise environmental sustainability and clean energy.

Diversity Risk

Recently we have heard about different U.S. companies abandoning diversity, equity and inclusion policies in favour of strictly merit based appointments.  The Australian opposition leader appeared to support this policy shift in a speech at the Liberal Party’s Menzies Research Centre in Sydney on 31.1.2025.  He was referring specifically to positions within the Australian public service. 

Australia has come a long way over the last few decades with anti-discrimination and equal opportunity legislation at both the federal and state levels.  Merit based selection is a sound approach provided we make space in our major organisations for those who might be regarded as diverse.  There is a wealth of evidence that organisations with inclusive cultures, that value diversity, benefit from higher staff morale.  Greater diversity brings with it a broader range of ideas and innovation, and organisations are healthier for it. 

These questions go right to the heart of how we see ourselves as peoples and nations.  Equity is a long held and shared value in Australia and New Zealand.  Can we continue to foster a caring and inclusive society if we fail to include those who would identify as diverse from significant institutions and meaningful roles?  The answer is an unambiguous “No”.  There have been cracks for a long time now driven by financial pressures.  Consider the way successive governments have treated welfare recipients, those with significant disabilities and refugees.

Right now we need to take stock and not simply follow the lead from other countries who may have a less compassionate ethos than our own.  We need to foster education for all, support our institutions to be diverse and inclusive, encourage research and development, and perhaps most of all, put the community at the centre of our focus.  

Public Sector At Risk

In Australia the Commonwealth Public Service has been used as a political football for as long as anyone can remember. Successive governments of all persuasions either increase of decrease the size of the public sector depending on their philosophy. This creates an environment of uncertainty in the Sector when elections loom every three years.

Public servants no longer have the security of tenure that they once had. Free and fair advice to ministers is at risk. Recipients of services also face uncertainty as governments cut programs. Critical front facing services under the umbrella of Services Australia are often stretched to the limit and accessing timely and effective support can turn into a nightmare for those in need.

We have some outstanding institutions at the heart of our Federal Government Sector. Consider the Australian Broadcasting Commission (ABC), CSIRO, APRA, ACCC, ASIC, Fair Work Australia, to mention just a few. We need to let them get on with there very important work in an environment of organisational certainty.

We often hear governments criticized for using external consultants to conduct various reviews. But “Right Sizing” operational government departments is one area where external advisors can add real value. The challenge for any government is to get this right and stop playing games with the public sector. All Australians have a right to timely and effective government services.

Regulatory Risk

In Australia the compliance demands on directors are extraordinary. The array of legislative and regulatory requirements has grown exponentially over the last decade. Just consider the impact of the 2018 Banking Royal Commission and the subsequent APRA CPS 511 regulating executive remuneration. Another impost on the banks and other financial institutions which does nothing to enhance customer experience. It was a regulatory requirement entirely of their own making. And one that would have been avoided had bank boards not uncritically adopted executive remuneration models from other parts of the world.

Sometimes the regimented nature of board meetings gets in the way of strategic thinking and innovation. Whilst accepting that some formality is required, flexibility might be appropriate in some instances.

If governments are serious about boosting the effectiveness and sustainability of both the public sector and our private sector institutions then compliance requirements need to be reduced. In return boards, CEOs and executive leadership teams need to lift their game and ensure that all their activities are guided by a real commitment to ESG principles. Not tokenistic and superficial efforts.

Reputation Risk

Recent inquiries, in particular the Banking Royal Commission and the ACCC Inquiry into Supermarkets, have cast significant doubt about the credibility and integrity of boards, CEOs and executive teams of some of our major institutions. Shareholder primacy has been found to be alive and well, even in the face of espoused ESG principles.

The 2025 Edelman Barometer showed that trust in Australian Government, business institutions, the media and NGOs dropped from a rating of 51% trusting to 49% over the last 12 months. This means that only 49% of the Australian population have confidence in our major institutions. A sorry state of affairs.

Again it’s critical that board, CEOs and executive teams place Reputation and Credibility high on the corporate and governance agenda. Once a reputation is damaged, through real or perceived misconduct, it’s very hard to regain credibility. Just look at the recent Qantas experience. It will take years to re-build. Reputation is a fragile asset. Some commentators assert that up to 25% of a company’s market value is tied up in its reputation. It takes many years to build company reputation and only one incident to destroy it.

Artificial Intelligence Risk

Imagine living in a world where you no longer had to explore the depths of philosophy and science to find the answer to the most fundamental questions of our time. Just type a question into ChatGPT or DeepSeek. Where the creative spark that produced the great works of art and literature could be accessed at the push of a button. Where the genius of the world’s great composers could be re-imagined, producing music scores that are resonant with the original work.

“The technological singularity—or simply the singularity —is a hypothetical future point in time at which technological growth becomes uncontrollable and irreversible, resulting in unforeseeable changes to human civilization. According to the most popular version of the singularity hypothesis, I.J. Good's intelligence explosion model, an upgradable intelligent agent will eventually enter a "runaway reaction" of self-improvement cycles, each new and more intelligent generation appearing more and more rapidly, causing an "explosion" in intelligence and resulting in a powerful superintelligence that qualitatively far surpasses all human intelligence.” https://en.wikipedia.org/wiki/Technological_singularity

AI has the potential to benefit humankind in many ways. But let’s not forget who it is intended to serve. Board’s and CEOs need to be vigilant and ensure human centered values and a commitment to ESG principles guide their policy decisions.