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FT–ICSA Boardroom Bellwether 3 · PDF file dr 3 2 The FT–ICSA Boardroom Bellwether is a twice-yearly survey which seeks to gauge the sentiment inside UK boardrooms. The aim is

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  • FT–ICSA Boardroom Bellwether 3 July 2013

    www.icsaglobal.com

  • FT–ICSA Boardroom Bellwether 3

    w w w . i c s a g l o b a l . c o m2

    The FT–ICSA Boardroom Bellwether is a twice-yearly survey which seeks to gauge the sentiment inside UK boardrooms. The aim is to develop a definitive business barometer, which shows how boards are positioning themselves to address the challenges of the economy, and the wider business and social climate in which they operate.

    The survey canvasses the views of the company secretaries of the FTSE 350, and the data is analysed in an aggregated and anonymised form. Questions cover a range of general business and topical issues, as well as more specific governance matters. While some questions change from survey to survey, the core remains the same to allow for trend analysis.

    This report summarises the key findings of the third survey, and has been generated by responses from 53 companies from 20 sectors. The findings are considered representative of business sentiment across the FTSE 350, although circumstances differ from company to company.

    The commentary that follows highlights some key areas of interest, and confirms the ongoing complexity of businesses’ operating environments, as companies seek to deal with issues of wider public policy at the same time as satisfying investors.

    Company secretaries, in their role at the heart of the boardroom, enjoy a unique perspective of the way their boards are thinking and, through the advice that they offer, help their boards to navigate complex and sensitive issues.

    We would like to thank everyone who made time to complete the survey, and welcome comment on the findings.

    Seamus Gillen FCIS Director of Policy, ICSA policy@icsaglobal.com

    About the FT–ICSA Boardroom Bellwether 3

  • w w w . i c s a g l o b a l . c o m 3

    Developments since March 2012 4

    Risk, including cyber risk 5

    The business environment 6–7

    Engagement with investors 8–9

    Gender diversity 10–11

    Skills 12

    Tax 13

    Conclusions 14

    Contents

  • FT–ICSA Boardroom Bellwether 3

    w w w . i c s a g l o b a l . c o m4

    The most striking change captured by this recent survey, in comparison to the findings of 2012, is the perceived improvement in global and UK economic conditions – up from a mean score of 3.04 and 2.87 a year ago, to 3.51 and 3.43 now. These are statistically significant rises. Interestingly, when asked for respondents’ perceptions of their own industry, the rising trend is more muted.

    Despite this, and disappointingly for the Government, there is an expectation of reducing UK headcount compared to increased recruitment overseas.

    Capital expenditure looks set to rise slightly, but the mechanisms for capital raising (debt and/or equity) and expansion (acquisition and/or organic growth) remain substantially unchanged.

    The figures confirm that the lowest area for intended growth, and the highest for retrenchment, is Continental Europe, despite increased confidence in the stability (i.e. no break-up) of the Euro zone.

    The Government might take some comfort from the improved access to bank finance – one of their cornerstone policies – but the perception of the business-friendliness of both the Government and the opposition have barely changed since the last survey, and that of the Government remains marginally negative.

    While there has not been a great deal of change in the perceived difficulties encountered by companies in recruiting staff of sufficient calibre, significant problems remain. However, those who consider that the Government should be focusing investment on education and skills have fallen by 50% in a year, and a third since the last survey.

    Calls for investment in transport have substantially increased, where concern has more than doubled. Much of the latter increase is undoubtedly due to the debate on airport capacity in the south east of England, particularly London.

    Immigration controls are seen as significantly less of an issue than at the time of the last survey.

    Developments since March 2012

  • w w w . i c s a g l o b a l . c o m 5

    Risk is reported as being the principal area of training for the whole board in the last 12 months, due to the continuing fall- out from the financial crisis, and fuelled by constant media reports of failings inside companies.

    On another risk-related question, 93% of respondents felt that board positions – both executive and non-executive – now carried a higher level of reputational risk compared to five years ago.

    Against this background, it is noteworthy that almost all boards think their company’s specific exposure to cyber risk is increasing – yet only 21% of companies have taken action and significantly mitigated the risk. Boards do not appear to be giving this high-profile and increasingly-visible risk the attention it requires, with only 13% of boards having discussed and acted on the Government’s published Cyber Security Guidance, and with around 75% reporting that boards had either not discussed/nor even seen this Guidance.1

    2 0%

    10%

    20%

    30%

    40%

    50%

    60%

    70%

    47

    28

    4 8

    13

    Has your board actively discussed the Government’s Cyber Security Guidance (‘The Ten Steps’)?

    No 47%

    Have not seen it 28%

    Not applicable to us 4%

    Yes, but have not acted on the guidance 8%

    Yes, and have acted on the guidance 13%

    0%

    10%

    20%

    30%

    40%

    50%

    60%

    70%

    13

    19 25 23 21

    Has your board actively sought to identify the company’s key information assets and thoroughly assessed their vulnerability to cyber attack?

    No required 13%

    Not yet, but plan to 19%

    Have discussed, but no clear way forward determined 25%

    Yes, but require external assistance to progress 23%

    Yes, and we have been successful in significantly mitigating the risk 21%

    “ Only 21% of companies have significantly mitigated their exposure to cyber risk.”

    1 ICSA published a Guidance Note on cyber risk in June 2013. The Guidance Note was commissioned by the Department of Business, Innovation and Skills and was prepared with the help of industry experts. It is aimed at helping boards understand the risks associated with cybercrime, and particularly focuses on: issues to address, including identifying potential adversaries; conducting comprehensive risk assessments to understand the risks particular to each individual company; why cyber risk is different from other kinds of risk; and actions for the board and audit committee: www.icsaglobal.com/resources/guidance/getting-wise-to-cyber-crime

    Risk, including cyber risk

  • FT–ICSA Boardroom Bellwether 3

    w w w . i c s a g l o b a l . c o m6

    0%

    10%

    20%

    30%

    40%

    50%

    60%

    70%

    2

    25 30

    36

    4 4

    Over the next 12 months, how do you anticipate your company headcount changing in the UK?

    Increase significantly 2%

    Increase slightly 25%

    No change 30%

    Reduce slightly 36%

    Reduce significantly 4%

    Don’t know/not applicable 4%

    0%

    10%

    20%

    30%

    40%

    50%

    60%

    70%

    2

    30 26

    15

    2

    25

    Over the next 12 months, how do you anticipate your company headcount changing overseas?

    Increase significantly 2%

    Increase slightly 30%

    No change 26%

    Reduce slightly 15%

    Reduce significantly 2%

    Don’t know/not applicable 25%

    The business environment

    There is greater optimism in respect of global economic conditions, compared to the UK, with headcount projected to grow accordingly, particularly overseas.

    Companies continue to seek out the higher levels of growth being experienced in Asia Pacific (42%), Brazil (30%) and China (28%), with the Middle East, North America, South America and India following closely. The largest increase year-on-year would appear to be in the Middle East at 26%, compared to 19% in December 2012, with Russia slipping slightly to 13% from 16% in December 2012. Continental Europe continues to stall.

    Companies plan continued reduction in their presence in Continental Europe (13%) and the UK (8%).

    “ Greater optimism in global economic conditions compared to the UK.”

  • w w w . i c s a g l o b a l . c o m 7

    “ Companies seek higher levels of growth in Asia Pacific, Brazil and China.”

    UK Continental Europe

    North America

    Middle East

    Asia Paci�c

    Africa South America

    Brazil Russia India China 0%

    20%

    40%

    60%

    80%

    100%

    8 8 13

    8

    13

    7

    14

    5

    16

    2

    16

    0

    15

    2

    19

    0

    19

    0

    18

    2

    14

    0

    18

    85

    74

    80 79 82

    85

    79 81 82 84 82

    Do you plan to reduce your presence in the following geographical areas over the next 12 months?

    Yes

    No

    Don’t know

    0%

    10%

    20%

    30%

    40%

    50%

    60%

    70%

    43

    53

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