The Australian Institute of Company Directors (AICD) has released the findings of member survey, conducted over the period 18 May 2020 to 2 June 2020, into the impacts of COVID-19.  

The survey is broken into two parts.

• The first is focused on how organisations responded to the pandemic and member attitudes to the usefulness of various support measures.  
• The focus of the second is on members' outlook for the period June to December and on member views about how the COVID-19 recovery should be managed, including how support measures should be wound down, and where policy efforts should be focused to best support organisations in their own recovery efforts.  

Response to COVID-19 disruption

Top COVID-19 challenges?

• Survey participants ranked: 1) the impact of the government lockdown; 2) disruption to the workforce; 3) changes in behaviours of staff/clients; 4) managing workplace health and social distancing requirements; and 5) managing legal and regulatory requirements as the top five challenges their organisations have faced.   
• Almost all (90%) respondents viewed the impact of the government lockdown as the most challenging issue their organisations faced.  
• Though managing legal and regulatory challenges ranked as the fifth greatest challenge for organisations, with almost three quarters of respondents (72%) indicating they found it challenging to some degree, 38% of respondents indicated in a subsequent question that their organisation faced no major regulatory challenges.  The AICD suggests that this may be explained by the swiftness with which emergency measures were implemented by both government and regulators.  Otherwise, respondents nominated complying with employment and WHS laws and industry specific regulation as their greatest regulatory challenges.  
• Interestingly, reduction in turnover and demand was ranked near the bottom of the list, with 20% of respondents indicating that they did not consider this challenging and 40% of respondents indicating they viewed it as only 'somewhat challenging'.   
• The technical/logistical challenges of remote working were seen as the least challenging issue (of the available list of options).  32% of respondents did not view the issues as challenging and almost half (49%) viewed it as only 'somewhat challenging'.  

Impact on staffing

The majority (60%) of organisations have implemented cost saving measures of some kind.

• Over a third of respondents (34%) said their organisation had reduced staff hours and almost a quarter (24%) said that their organisation had reduced executive remuneration.  
• 16% of respondents indicated that director fees had been reduced.   
• Less than a quarter of respondents (21%) said that staff had been stood down and 15% said that staff had been made redundant.  Redundancies were a more common measure taken by listed companies as compared with large private companies, SMEs or NFPs.  
• Positive impact: A relatively small proportion of respondents overall (10%), mostly in the government/public sector, said that more staff had been hired and 9% indicated that staff hours had been increased.  The report suggests this is reflective of the increased demands on government during the pandemic.  
• Zero impact: 40% of respondents indicated that the pandemic has had no impact on staffing levels and is not expected to have any impact.  The figure is higher in the public sector/government at 49%.  The AICD considers this to evidence of the effectiveness of the JobSeeker scheme in assisting organisations to weather the 'the worst of the impact'.

Going concern and solvency

• 50% of respondents indicated that they had no concerns about making going concern or solvency assessments because of the impacts of COVID-19 disruption on their organisation.  However, 39% were somewhat or very concerned.  

Impact of temporary insolvency relief measures

• 50% of respondents do not consider that the temporary six month relief from personal liability for trading while insolvent has had no impact.  
• 12% of respondents consider it has to a moderate or great extent influenced their board's decision making on whether to trade through.  The proportion is higher among SMEs at 16%.  

The AICD considers the results to be an indicator that the temporary measure has achieved its policy objective in providing a 'safety net for directors', though the report also flags that many companies are likely to face difficult decisions when the government's temporary relief measures (eg JobKeeper) expire in September.  The report suggests that, 'the temporary relief may also provide impetus for a broader rethink of Australia’s insolvency settings as the economy looks to recover from the COVID 19 shock'.

Financial Reporting

• Though only 6% of respondents nominated managing financial reporting obligations, including reporting deadlines, as a key regulatory challenge for their organisation, 28% of members from organisations with 30 June financial year ends (and 33% of listed companies) indicated that they anticipate 'some or significant problems' with meeting their reporting obligations due to COVID-19.  
• 72% of respondents anticipated no problems with meeting financial reporting obligations

Most effective COVID-19 support measure

• The top ranked measure was the JobKeeper scheme: 44% of respondents nominated that the JobKeeper scheme, of all COVID-19 policy measures, to have been the most effective (ie to have provided the greatest relief) during the pandemic.  This figure was higher among SMEs and NFPs with 47% of SMEs and 51% amongst NFPs nominating it as the most effective relief measure.
• 37% of respondents said that the government's policy measures had made little or no difference to their organisation.
• 7% of respondents from listed organisations, and 9% from large private organisations identified that Reserve Bank of Australia (RBA) policies aimed at lowering borrowing costs and maintaining supply of credit had been the greatest assistance.

Outlook for June to December 2020

Top challenges facing organisations over the next six months

• Respondents nominated: 1) uncertainty about the Australian economy (64%); 2) managing new health/safety requirements when staff return to work (44%); 3) uncertainty about the global economy (36%); 4) uncertainty about state/territory policy settings (34%); and 5) uncertainty about national policy settings (29%); as the top challenges.  
• Respondents are least concerned about: insolvency/risk of insolvency (11%), financial reporting (5%) and director liability promoting risk aversion (5%).  

Workforce: outlook over the next six months

• On average, respondents said that they expect their organisations to run at 84% capacity over the next six months, compared to pre-COVID-19 levels.  
• 44% of respondents expect to reduce staffing levels over the next six months, with 31% of respondents indicating that staffing levels will be between 75-99% as compared with pre-COVID-19 levels.  8% of respondents anticipate that staffing levels will be reduced by between 50-75%. 
• 38% of respondents said they expect staffing levels to remain unchanged/be maintained at 100%.
• 6% of respondents said that it was too early to tell.  
• 13% of respondents (increasing to 26% for public sector/government respondents) expect their organisation to increase staffing levels over the next six months.  

Strategic priorities over the next six months

• Respondents ranked: 1) addressing uncertainty around cash flow and customer demand (27%); 2) adapting workplace/office conditions for physical distancing and health requirements (17%); and 3) relationships with customers (14%) and transforming operating models (also 14%) as their top strategic priorities over the next six months.
• Diversifying product/service offerings (9%), lifting technology/innovative capability (6%) and workplace relations (including adjustments to workforce levels/hours) (3%) were seen as less of a priority.  
• Diversifying supply chains and lifting technology/innovative capability tied for last place, with only 2% of respondents nominating these challenges as their top priority over the next six months.

Where should the government focus its efforts?  

• The top three priorities were: 1) the introduction of pro-growth, pro-innovation policy settings (69%); 2) the option to hold virtual meetings: 47% of respondents overall, and 59% of respondents from listed organisations, want the government to permanently amend the Corporations Act to give them the option to hold virtual AGMs on an ongoing basis; and 3) a 'pause on all new regulation' (42%).
• 28% of respondents consider that a 'rethink of director liability settings' should be prioritised.
• 21% of respondents nominated the expansion of the insolvency safe harbour.
• A ban on securities class actions (10%) and the removal of the two strikes rule (5%) were ranked at the bottom of the list

Approach to COVID-19 recovery – gradual phase-out/wind down is the preferred approach

• The majority (79%) of respondents support a gradual phase out of government health restrictions to minimise the chances of outbreaks as opposed to rapidly lifting restrictions/support measures.
• 81% of respondents would prefer to see a gradual phasing out of government support/relief measures eg JobKeeper.  
• Support for the government adapting its pre-pandemic agenda to align with the new environment:  68% majority considered the government should 'radically rethink its agenda' to ensure Australia's economic policy approach is aligned with the needs of the post-pandemic environment.   Only 4% of respondents believe the government should try to delivery on its pre-COVID-19 policy agenda (as opposed to adapting to the new conditions).  28% of respondents overall, and 36% of respondents from listed entities, consider that the government should implement long-standing economic reforms that have not, to date, been implemented for lack of political will eg reducing corporate tax, lifting the GST. 

Commenting on the survey results, AICD CEO and Managing Director, Angus Armour said the results underline the need for government to ensure policy settings are targeted at supporting a strong and sustainable recovery.  Mr Armour said,

'Now more than ever, Australia needs a policy agenda that supports sustainable growth - including energy/climate change policy and tax reform - and a regulatory environment that encourages risk-taking and innovation.'

'We need to actively create an environment where diligent directors are enabled to pursue new business models and technologies, accepting the risks involved. Our current director liability framework, which is burdensome by international standards, works against this. Our position as the second most attractive market in the world for litigation funders also works against directors and companies taking sensible risks to grow their organisations.'