Welcome to Edition 47 of Boardroom Brief.

This is a service specifically targeted at the needs of busy non-executive directors. We aim to give you a “heads up” on the things that matter for NEDs in the week ahead – all in two minutes or less.

We start 2018 with a number of positive indicators for the year ahead, in both developed and developing countries. Yet this also looms as a potentially volatile year, as the US seeks to return to a more normal interest rate environment, cryptocurrencies add a “wild card” element to the world monetary order, and geopolitical uncertainties (this time, focused on our part of the world) refuse to go away. This will create a challenging environment for Directors to navigate.

KEY BOARDROOM BRIEF

Cryptocurrency crash. This month, bitcoin’s value - the world’s biggest and best-known cryptocurrency – fell to half its record peak of almost $US20,000 in December 2017 (with other major cryptocurrencies suffering even greater drops) due to concerns that South Korea will ban cryptocurrency trading. South Korea’s announcement reflects the push globally for greater regulation of initial coin offerings (ICOs) because of the highly speculative nature of such investments; with China having already banned ICOs, Australia amending its Anti-Money Laundering and Counter-Terrorism Financing Act to regulate activities relating to digital currency, and ICO regulatory proposals tabled for discussion at the G20 summit in March 2018.

Mandatory data breach notification. From 22 February 2018 onwards, the Privacy Amendment (Notifiable Data Breaches) Act 2017 will require many companies to report eligible data breaches to the Office of the Australian Information Commissioner and affected individuals as soon as practicable upon becoming aware that “there are reasonable grounds to believe that there has been an eligible data breach”. Failure to comply can result in fines of up to $1.8 million. In broad terms, the legislation will apply to many Australian Government agencies and private sector organisations with an annual turnover of more than $3 million as well as certain credit providers, credit reporting bodies and holders of tax file number information. Exceptions apply to the notification requirement (including, for example, where the company has taken sufficient remedial action in response to the data breach before it causes serious harm). The reputational and related commercial damage of data breaches can be severe. Conversely, being known to have good cyber-security can be a competitive advantage. Sound cyber-risk management is a governance issue that should involve the boardroom since Directors will most likely be in the spotlight if there is a preventable failure. Directors should ensure that they are well briefed on their organisation’s cyber-risk exposure and that a coherent, regularly reviewed, cyber-security strategy is in place. You can read more on this new data breach reporting obligation here.

THE WEEK AHEAD

2018 Outlook for China’s Economy. A raft of recently published data shows that China’s economy had a stellar year in 2017. A slight slowdown in growth in 2018 is anticipated as a result of the Chinese Government’s focus on control of outbound investment, and other credit-related measures. Westpac expects annual GDP growth to dip from 6.9% for 2017 to around 6.2% for 2018. However, that is still a very healthy rate of growth for the world’s second largest economy.

Corporate activity. January is normally a quiet month in the corporate world, however if the strength of the ECM and M&A markets in the opening few weeks of the year are anything to go by, 2018 could be a very active year. A number of junior miners have taken the opportunity to top up the coffers to take advantage of the return of risk appetite at that end of the market. It will also be interesting to see the rate of take-up of the Federal Government’s junior explorer incentive scheme, reported on in previous editions of Boardroom Brief. Directors should remember that in the current year there is a limited window to take advantage of the scheme: you can read more on the timing issues here.

Income recession over? The AFR is reporting that two of Australia’s top economists, Chris Richardson and Saul Eslake, are of the view that the primary drivers of wages growth are now in place, potentially marking the end of the “income recession” that has, among other things, made the task of budget repair so difficult for Governments across the country. The national accounts for the September Quarter (released in December) showed that real net national disposable income per capita rose 3.6% in 2016-17, after falling in each of the previous four years.