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JNW Strategic Consulting’s 2019 Risk Landscape

1. Disruption through technology and new operating models

Boards need to identify emerging operating models, technological trends and new start-up competitors.  Companies like Uber have transformed long established industries.  It’s time to strategically plan for disruption.

2. Economic slowdown (global instability/political uncertainty)

2019 is likely to bring significant financial insecurity.  The RBA recently said “the Australian economy is in uncharted waters”.  A federal election is looming and the impact of the Banking Royal Commission on lending will impact consumer confidence. There are also global factors, like the trade war between the US and China and Brexit, that will continue to create economic and political uncertainty.

3. Cyber theft or breach of data privacy legislation

Large-scale attacks and disruptions of computer networks using computer viruses, or physical attacks using malware, continues to cost organisations (extortion/data recovery costs/regulatory penalties), including the embarrassment of explaining the data loss to those effected.  IT security controls and business continuity plans (covering loss of key staff/supplier/customer/IT system and terrorism) need to be regularly stress tested.

4. Culture and conduct (fraud/customer trust deficit)

As we have witnessed through the Royal Commission, nothing destroys brand value quicker than acting unethically.  Lack of strong governance and leadership can lead to breaches of regulatory requirements, fraud, loss of customer trust and ultimately, sustainability. Culture and conduct will be key issues in 2019.

5. Social issues (mental health, diversity, climate change)

These are challenging times.  Rising energy costs, mental health issues, addictions (drugs/alcohol/gambling), housing affordability, social media pressures, MeTwo movement, gender equality and climate change all have impact on our lives.  It is time to focus on more than just profit!

And

6. Miss watching the Hawks …..

Just a reminder to turn risk into opportunity in 2019 and enjoy life.

A sincere thank you to those that have supported JNW throughout the year.

From my family to yours, Merry Christmas and have a safe and fun 2019.

Jeff Webb
Managing Director
JNW Strategic Consulting

ASIC berate boards with APRA/CBA report

Whilst the obligations for board members has not changed, the spotlight is being shone on practices that may have slipped down in agenda priority – oversight of risk, culture, roles and responsibilities and remuneration structures. To ensure a balanced response, JNW recommends that the Executive Team conduct a Self-Assessment HealthCheck against the APRA findings. Ideally this is complimented by a fresh Board Performance Assessment. This information should be leveraged to create a Governance Improvement Roadmap that strengthens the focus on strategic objectives and stakeholder trust.

https://www.afr.com/leadership/asic-berate-boards-with-apras-cba-report-20180608-h115jt

JNW assists Executive and Boards to enhance their processes.  Read about our experiences. http://jnwstrategic.com.au/services/board-governance/

Corporate Governance – How to save brand damage and have a happy new year

As 2017 draws to a close, we reflect on what constitutes Good Corporate Governance and challenge everyone, as a resolution for 2018, to ask the hard questions on whether their organisation is doing the right thing! Please enjoy our insights into how to save brand damage. I have also added a little bit of cheeky Christmas fun at the end.

From the team at JNW Strategic Consulting, we would like to wish you and your family a very Merry Christmas and a happy and safe New Year.

We appreciate your support and look forward to working with you in 2018.

Jeff Webb, Managing Director.

Tips for Completing a Rate Variation Application

Financial Areas of Focus

Local council expert Jeff Webb from JNW Strategic Consulting, who assisted the Essential Service Commission (ESC) with the development of the rate capping framework and is assisting Frankston City Council develop a Service Planning Costing Methodology, recommends all applications needs to be clear on purpose and be financially congruent to both current and past financial data.  In relation to completing your variation application, some simple financial tips that could strengthen your variation application are detailed below:

  1. To support the reason a variation from the cap is required the ESC will be seeking an understanding of why the Council could not financially deliver its services with only a 2.5% rate increase.  This will require you to clarify the dramatic change from the prior year, for example expanded services, or new infrastructure.
  2. Your application will need to clearly identify what the additional funds will be used for, including the impact of not obtaining the extra revenue.  Consequently two financial models will need to be developed to provide transparency about the genuine need that will be addressed through the use of the variation monies.
  3. Ensure the rate variation requested is consistent with your Council’s revenue strategy and policy on funding and financing.  This will require you to demonstrate that the variation provides “value for money” by documenting how you have considered:
    1. Service priorities, i.e. the costs and benefits of delivering all the services you currently deliver has been evaluated.  The application should show you have assessed your service delivery productivity and factor in the value of identified efficiency improvements
    2. The question of “Should Council provide all the existing services?”  This evaluation should identify “discretionary” services and assess the savings and risks of not providing them
    3. Other funding options, i.e. the impact of leveraging and reprioritising funding from other services has been analysed.  Reasons for not proceeding should be included in your application
    4. The principles of “Best Value” such as output quality, responsiveness to community needs, service accessibility, effectiveness and efficiency of service delivery and how the major services you deliver provide “value for money”.  These factors should be clear in the cost of the services.
  4. To demonstrate “value for money” ideally the Council can provide service cost benchmarks against peers or private sector.   Councils may need to outline how service costs have been calculated, which may be require developing a Service Planning Costing Methodology that details the approach for allocating direct and indirect costs and revenues to each service benchmarked.
  5. The application needs to demonstrate that your service prioritisation and funding determination has taken account of ratepayers’ and communities’ views, including:
    1. Funding trade-offs have been transparently communicated, i.e. provide both with and without variation scenario’s/business cases outlining the operational and financial impacts and cost-benefit analysis
    2. Demonstrate the community feedback process and how their concerns have been addressed. Ideally, to address the recommended community engagement principles set down by the ESC the Council will develop a Community Engagement Strategy covering community feedback loops such as surveys of a sample of rate payers or people’s panel and leverage social media platforms.
  6. Integral to the application is that the financial and operational impacts of the variation amount requested be included in the Council’s long-term strategy.  As such, Council’s relevant planning instruments including the Strategic Resource Plan, Service Delivery Plans, Asset Management Plans and the Long Term Financial Plan should be updated to present the with and without variation numbers.
  7. As the ESC will compare your data against baseline data and available historic information, including data from the Local Government Performance Reporting Framework and Grants Commission, your application will need to be fully supported by financial data, ideally reconcilable back to either audited financial statements or Grants Commission figures.  Any unexplained data inconsistencies with the ESC baseline information may result in queries from the regulator.
  8. Ensure your information is auditable.  This means establishing governance procedures around record keeping, audit trails and independent review and formal application sign-off.

Should you require any further information or wish to discuss these tips, please do not hesitate to contact Jeff Webb on 0437 539 015.  The JNW Strategic Consulting team can assist Councils:

  • Create risk intelligent rate capping response frameworks
  • Develop service planning costing methodologies
  • Prepare rate cap variation applications
  • Conduct service delivery efficiency reviews or implement continuous improvement programs
  • Complete financial risk due diligence on potential new revenue streams
  • Reporting – new Council plan/Long Term Financial Plan/Service Driven Asset Management Plans.

For more information about our team and our council experience, please visit our website:  www.jnwstrategic.com.au