Everyone Has Risks
Recent events in the Australian government have highlighted the necessity for senior government officials to implement strategic plans, factoring in reasonable allowances for risks. Businesses also need to be very conscious of developing strategies for handling risks.
The key requirement is to identify the risks and the potential risk exposure to the business and then determine a risk mitigation strategy. Some examples of risk management strategies that businesses could look at include:
|
Risk |
Risk Exposure |
Risk Mitigation Strategy |
|
Cashflow |
The liquidity exposure caused by increasing business activities, thus leading to increased debtors and increased operating expenses, particularly wages. |
· Investigate cashflow facilities, including review of benefits from introducing a debtors' financing facility and reviewing the effectiveness of the business' debtors' management system. |
|
Poaching of Skilled Staff |
Offering higher wages and conditions. |
· Development of incentive packages and continuous development of "team" approach, which will make the business an employer of choice, including weekly team meetings. · Real commitment to staff training. · Continuous expansion of the business. |
|
Management Skills |
Lack of skilled management team members to enable the business to grow and expand. |
· Ongoing recruitment of capable team members who can be trained as managers. · Implementation of management team culture. · Weekly overview meetings. · Monthly management team meetings. · 6-monthly retreat planning meetings with the Board of Directors/Board of Advice. · Incentives for management team members to undertake further management training (eg Australian Institute of Management courses, Australian Institute of Company Directors diploma course, public speaking training, project management, lean management training) · Allocation of portfolio responsibility to broaden management team members' appreciation of the "total business environment". |
|
Occupational Health and Care |
The business has a duty of care to a range of stakeholders, including team members, clients, suppliers, contractors, members of the public visiting the business' premises and team members visiting other business' premises. |
· Management will identify particular OH&S issues that could relate to team members engaged by the business, to ensure appropriate strategies have been determined to deal with all OH&S issues affecting the business. |
SuperStream
SuperStream is part of the government's superannuation reform package.
SuperStream will provide a consistent, reliable electronic method of transacting linked data and payments for superannuation. The goal is to improve the efficiency of the superannuation system, to improve the timeliness of processing of rollovers and contributions and reduce the number of lost accounts and unclaimed monies. Businesses with 20 or more employees must be compliant from 31st October 2015 and those with 19 or fewer employees must be compliant by 30th June 2016.
Personal Property Securities Register (PPSR) - Changes
The Australian government has changed the Personal Property Securities Act (PPSA) so that deemed leases of serial numbered goods for 90 days or more no longer need to be deemed a "security interest", therefore, a lease or bailment for a term of 90 days or more doesn't have to be registered on the PPSR. This will mean that, from 1st October 2015, hires and bailments for a term less than 12 months will generally not be considered as a "security interest".
Leases or bailments for less than 12 months will only give rise to a security interest and require registration if they "in substance" secure payment for performance of obligations.
It's important to note that these changes are not retrospective prior to 1st October 2015.
Problems with Personal Property Securities Act
Recently, a media release from Elevating Work Platform Association Australia Inc has highlighted the ongoing problem under the PPSA and the associated PPSR. The article indicates that "the Australian construction hire companies are losing millions of dollars through the PPSA, which allows creditors to seize rented equipment as part of a liquidated business' assets."
"Under the Personal Property Securities Act, hire company assets can be seized by another secured creditor (usually a bank) when in the possession of a liquidated business – ignoring the fact that this equipment is owned by the hire company."
The spokesman said, "Since the Act was introduced three years ago, it is estimated to have cost the industry tens or even hundreds of millions in lost assets and legal fees, saying nothing of the administrative burden."
"There is a misconception that the Personal Property Securities Act protects these businesses. On the contrary, it legislates for ownership to be taken away from these companies and handed on a plate to the banks."
"On top of this, the hire company may still be liable for any monies owed on the assets that have been taken from them."
Preferential Payment Claims Increasing
It's apparent that many businesses are receiving claims from liquidators for preferential payments that are alleged to have been made to a business.
The Corporations Act defines unfair preference payments as: "A transaction is an unfair preference given by a company to a creditor of the company if, and only if:
(a) the company and the creditor are parties to the transaction (even if someone else is also a party); and
(b) the transaction results in the creditor receiving from the company, in respect of an unsecured debt that the company owes to the creditor, more than the creditor would receive from the company in respect of the debt if the transaction were set aside and the creditor were to prove for the debt in a winding up of the company;
even if the transaction is entered into, is given effect to, or is required to be given effect to, because of an order of an Australian court or a direction by an agency."
One way to avoid this type of claim is for a business to have registered the customer on the PPSR. This requires a Terms of Trade Agreement and a Retention of Title Agreements to have been submitted to the customer and signed by the customer and for the necessary registration to have been made on the PPSR, to give effective protection.