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  • The top 5 trends that businesses should be prepared for in 2020
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The top 5 trends that businesses should be prepared for in 2020

19 junij 2020

Original content provided by BDO Australia

As the new year takes off, we’ve highlighted some of the biggest trends businesses need to be aware of in 2020 and spoken to key experts about what businesses can do to prepare for new changes and capitalise on growing trends.

1. Digital transformation will be key for growth

The rise of Big Data and its potential to transform the business environment will continue to be a significant area of business interest and investment in 2020, with businesses having more information at their fingertips than ever before. Technological advancements and approaches to effectively manage large amounts of internal and external data, and advanced data and predictive analytics will be a gamechanger in 2020. Predictive analytics and modelling will open a door to a world of new opportunities – greater customer and brand engagement, new growth opportunities, improved efficiency and productivity and better risk management – giving businesses who have invested in these capabilities a competitive edge. However, for businesses to put these technologies into practice, digital transformation will be vital to ensure interconnectivity across the value chain.

Technology Advisory Partner in Sydney, Kamal Prasad says,

“Successful digital innovation and transformation are going to be crucial for businesses in 2020 as emerging technologies like Robotic Process Automation, AI and Machine Learning, the Internet of Things and blockchain help businesses to create new business models and value from their data. Data availability is the starting point, and businesses who wish to truly reap the benefits will need an articulated strategy, a clear business case and an organisational mindset to innovate and iterate in an agile/short sprint manner”.

Another consideration in 2020 is how businesses can protect themselves from new digital risks and vulnerabilities. Greater interconnectivity had led to an explosion in cybercrime and data breaches, raising concerns as to how businesses can protect their data. As businesses often hold sensitive consumer data, they will continuously face ethical dilemmas and stricter regulations as to how they use, store and share that information. The Boards and Management teams will also now need to consider digital risks such as privacy, security and emerging cyber threats as part of their risk management approach.

2. Good governance and culture is a must

Transparency and accountability were two key themes last year as more cases of corporate oversight and noncompliance were uncovered shining a spotlight on how directors, boards and management manage and respond to risk. As a result, the government is tightening laws and the regulators have an increased focus on directors, who now face harsher punishments for cases of oversight and corporate crime. The new legislation also provides additional protections for whistleblowers and requires all public companies to have a clear whistleblowing policy in place.

Going forward it will be critical that Boards and Management understand their new governance obligations and work to imbue a culture of accountability and transparency from the top down. Boards and Management should also look to review the measures they have in place for detecting and reporting cases of Anti-Money Launchering (AML) and Counter-Terrorism Financing (CTF) as regulators have made it clear that there will be no excuses for oversight. AUSTRAC also announced that businesses (including digital currency exchanges), with AML/CTF programs, must have independent reviews conducted on a regular basis. Businesses will also be required to show that the reviewer is independent – someone not involved in any part of developing the program.

When asked what businesses should do to better prepare and protect themselves, Forensic Services Partner, Adam Simms, in Sydney says, “this year Boards and Management will have their work cut out for them as they look to introduce new and ongoing risk management activities, including culture risks assessments and independent AML/CTF program reviews. As Directors’ face greater accountability from regulators for the organisations’ actions, good governance practices and expert advice will be critical. Finally, Boards and Management should review their policies in light of the legislation and its interpretation as well as ensure they have policies in place regarding, whistleblowing, cybersecurity and privacy, immigration, executive pay and corporate social responsibility”.

3. ESG will be a top priority

In the last several years we’ve started to see a growth in demand for good Environmental, Social and Governance (ESG) programs as issues such as climate change and environmental sustainability rise to the forefront of consumers’ and investors’ minds. However, following the drastic impacts of the recent bushfires and floods in Australia, we are likely to see a stronger focus on improving environmental practices as topics such as renewable energy and responsible waste management become of public interest.

Global Head of Natural Resources, Sherif Andrawes in Perth says “as the need to decarbonize and reduce emissions grow, businesses in the resources and energy industries will now need to play an active role in supporting the transition to a low carbon world. Australian businesses should look to incorporate environmental and sustainability reporting and audits as part of their general reporting to ensure quality and transparency in their business activities”. He also notes that “for businesses with a focus on innovative and renewable energy solutions, the green wave provides many new opportunities to capitalise on as ESG factors become key to attracting investors and new talent”.

Over the past decade, there has been a considerable growth in responsible/ethical investing which is expected to grow as millennials look to invest in more environmentally and socially aware businesses. In line with this, we’ve also seen businesses introduce new ‘ethical’ product lines, develop more sustainable packaging as well as providing greater transparency into their supply chains to appeal to the values of the next generations of consumers.

Furthermore, for businesses looking to attract this next generation of talent, good ESG programs could become start to play an important role in recruitment as a survey conducted by Macquarie University last year found that “nearly 1 in 5 business school students are willing to sacrifice more than 40% of their salary to work for a responsible employer”.

4. The crackdown on noncompliance isn’t over…

Last year was marked by a crackdown on noncompliance by the Fair Work Ombudsmen (FWO) as a long list of well-known businesses across Australian came under fire for underpayments such as failing to pay overtime, penalty rates, superannuation, annual leave and more. In 2020, it is likely that this crackdown will continue as not only has the FWO announced it will continue its focus on uncovering and punishing businesses for underpayments, but the Australian Taxation Office (ATO) will now be actively targeting employers who aren’t paying employees and certain contractors their full compulsory superannuation guarantee entitlements.

Moreover, with the introduction of new rules for employee superannuation salary sacrifice arrangements for employees forbidding salary sacrificed contributions from being considered super guarantee contributions from 1 January 2020, the end of the Single Touch Payroll 12-month penalty waiver for smaller employers from 1 July 2020 and the decommissioning of Auskey, businesses are going to have more changes to keep on top of throughout the year to ensure they remain compliant.

Speaking to our Employment Taxes specialist Partner in Sydney, James Trainor, he shared his thoughts on what businesses should do to ensure they remain compliant in 2020. “Given the ongoing issue with noncompliance, businesses today – especially those in the hospitality, restaurant and retail industries – must ensure that they have a thorough understanding of their industry awards. Going forward, I recommend that businesses engage in regular payroll audits as well as develop strong policies and procedures regarding attendance record keeping. Finally, seeking the right professional advice from accountants and lawyers with a deep understanding of this area will be vital too”.

People Advisory Partner in Sydney, Jenine Waters, explains that some of the top reasons that businesses make underpayments are a result of inadequate training and poor policies and procedures. She says, “many businesses struggle with obtaining access to the right level of HR support and expertise required to meet their complex compliance needs. One of the big issues we often see with growing businesses is that they outgrow their existing HR function and don’t realise this until they are faced with a serious compliance issue, like underpaying staff, and by that stage, it’s too late as the reputational, financial and culture damage is already done. That’s why it’s really important that businesses have the right advice and are reviewing their HR needs regularly as it can help protect and prevent noncompliance”.

5. Domestic and global tax complexity will be a key challenge

This year businesses are likely to find themselves under greater pressure as they face growing complexity in the global business environment and greater scrutiny from tax authorities in Australia and overseas.

In Australia, the Australian Tax Office has continued to grow its Tax Avoidance Taskforce and late last year introduced its new Top 5000 Program, an expansion of the earlier Top 320/500 programs aimed at ensuring tax compliance. As the expanded program will involve ongoing one-on-one engagements covering all tax and superannuation obligations, it’s vital that businesses review their affairs, supporting documentation, tax governance frameworks and when in doubt seek advice.

Globally, businesses conducting operations overseas can expect further scrutiny from international stakeholders including the OECD, European Commission and other foreign tax authorities as they continue to increase their focus on MNEs. This will bring added challenges and complexities for businesses who are already facing significant pressure as a result of growing global uncertainty.

Discussing the global outlook ahead for businesses, Head of BDO’s Global Transfer Pricing Services based in Melbourne, Zara Ritchie says, “with Brexit, US elections and now the coronavirus, we will continue to see economic turmoil and uncertainty during the remainder of 2020. With lower profits and in many cases financial losses caused by supply chain disruptions as a result of coronavirus, we can expect increased scrutiny by tax authorities in determining which entity in the supply chain should bear (or share) in these economic losses. This could spark an aggressive layer of controversy as governments around the world are severely impacted by the economic effects of the virus”.

Moving forward, the key for businesses will be ensuring you have the right transfer pricing analysis, governance frameworks and resources in place to respond to inevitable business and tax environment developments across the globe. For more current insights into the Australian transfer pricing environment, see our transfer pricing alerts.

For more information regarding these trends and to find out how BDO can help your organisation or business, please don’t hesitate to contact any of the aforementioned Partners or your local BDO office.