Cameron Bagrie has been an economist for 20 years. For over 11 years he was the Chief Economist at ANZ, heading a team that was consistently ranked number one for its analysis of the New Zealand economy.
Economic commentary is dominated by macroeconomic variables – the big picture ones such as inflation, growth, housing – with little attention to the nuts and bolts of what makes an economy or business tick. That is what we call “microeconomics” – the behaviour of firms and individuals.
An evolving microeconomic issue for small businesses is how to handle the opportunities and challenges of data and information security. It’s an important aspect that doesn’t get enough attention under the broad topic of disruption.
Businesses tend to think about the economy and risks from the top down. “Is the economy doing well or not?” But we’ve seen some big businesses lose a lot of money in an economy that is doing well. Plans can go awry! A buoyant economy only means so much.
New Zealand is thought to have good macroeconomic policy settings. We have low inflation and an independent central bank. Fiscal policy and the government accounts are strong. New Zealand promotes free trade. Our labour market is flexible. Our currency floats, acting as a shock-absorber. New Zealand ranks highly across the World Bank Governance indicators. New Zealand ranked top in the World Bank Doing Business report for ease of doing business. Out of 137 countries ranked in the 2017-2018 World Economic Forum Global Competitiveness Report, New Zealand is the 13th most competitive. We tick many of the big-picture boxes. See the Global Competitiveness Report 2017-2018
Newspapers report on trends in interest rates, the housing market and retail sales – and I comment on them regularly. These trends twist and turn with the economy, but most businesses can absorb weaker growth.
You may have read about basis points with regard to interest rates. An increase of 50 basis points is hardly going to bury a business. Yet we are fixated on interest rates. Low inflation is good. High inflation is bad. Inflation is a thief that steals your savings over time.
What about the thief that could steal your data or clients or bank account details? That's immediate disruption.
Technology and IT are at the centre of a modern business. Data and data-driven insights are too. Information allows better execution and means less trial-and-error. Technology is breaking down traditional barriers such as distance from markets.
As the world becomes more and more integrated – and as more commerce takes place via digital channels – small businesses are more at risk. Cyber-thieves aim for sensitive information, such as customer details, bank accounts and credit card information.
These are risks to any business that go way beyond the economy.
As the digital economy gathers speed, so too will cyber security incursions. For small businesses, it’s the extreme end of disruption. We know from Suncorp’s Business Success Index Survey that New Zealand firms are complacent about disruption, with a “she’ll be right” attitude. See the Suncorp NZ Business Success Index
Small businesses shouldn’t assume that they’re too small to be a target. This is precisely what makes small businesses good targets. Small businesses can often be the door to a bigger business. Not to mention, small businesses often begrudge the spend on data security.
There are loads of strategies businesses can adopt, and cleverer people in this space than me. These strategies include training, having the latest security software, backing up data regularly and having formal security policies and strong passwords.
I stick to my knitting, which is economics. And on that front, a huge issue going forward is thinking more about managing microeconomic risks (and opportunities) around business – including data security.
The security of data and information is one aspect of disruption that is not talked about enough. Combating it rests with microeconomics, and are all part of good leadership, governance and strategy. The key business risk is not only the economy. “She’ll be right” regarding disruption is not a strategy, nor good microeconomics.