Welcome to the first edition of Boardroom Brief for 2024. This is a service specifically targeted at the needs of busy non-executive directors (NEDs). 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.
In this edition, we discuss the Australian Cyber Security Centre’s (ACSC) cybersecurity planning guide for company boards, the Australian Securities and Investment Commission’s (ASIC) key focus areas in relation to 31 December 2023 financial reporting, and the Workplace Gender Equality Agency’s (WGEA) guide on how directors can improve gender equality in the workplace. We also note the Treasury’s consultation on a draft mandatory climate reporting bill, and examine the outcome of a recent Federal Court decision on misleading and deceptive conduct.
In Over the Horizon, we observe a recent trend in critical minerals markets which has seen investors turning away from nickel and lithium.
GOVERNANCE
ACSC publishes cybersecurity planning guide for boards. On 14 December 2023, the ACSC released a guide titled “Planning for Critical Vulnerabilities and Major Cyber Security Incidents - What Boards Need to Know ”, which is aimed at providing boards with information to create awareness for and highlight the importance of planning for critical cyber vulnerabilities (e.g. flaws in software or hardware which can be exploited by malicious third parties to install malware, infiltrate, control or steal sensitive information). The guide emphasises that critical cyber vulnerabilities are a serious business continuity risk that may be a cause for shareholder and/or regulatory action. It also poses a series of questions that boards should be asking themselves to maximise a company’s preparation against cyberattacks, including, among others: “when did we last check our business continuity and crisis management plans?”. Boards should review their responses to the questions posed in this guide and test their readiness to respond to critical cyber vulnerabilities. See ACSC media release .
ASIC highlights focus areas for 31 December 2023 financial reporting. On 19 December 2023, ASIC issued a media release highlighting its key focus areas for 31 December 2023 financial reporting, which are drawn from ASIC’s first integrated financial reporting and audit surveillance report published in October 2023 titled ”Annual financial reporting and audit surveillance report 2022-23 (ASIC Report 774)”. ASIC urges directors to properly assess the impact of uncertain market and economic conditions. Based on the key findings of its October 2023 report, ASIC highlighted the following areas that directors should consider: (1) impairment and asset values; (2) provisions; (3) events occurring after year end and before financial report completion; (4) disclosures in the financial report and operating financial review; and (5) the impact of a new accounting standard for insurers. ASIC Commissioner Ms Kate O’Rourke emphasised that “[ d]irectors should ensure that company financial reports provide investors with useful and meaningful information on the impact of changing and uncertain economic and market conditions and other developments on their company’s financial position and future performance ”. See ASIC media release and ASIC Report 774 .
WGEA publishes director's guide to assist in accelerating workplace gender equality. WGEA has recently released its publication titled “A Director’s guide to accelerating workplace gender equality ”, in the context of the legislative reforms introduced by the Workplace Gender Equality Amendment (Closing the Gender Pay Gap) Act 2023 (Cth). This guide is “informed by evidence-informed direction from WGEA on strategies and policies that work to achieve change and is aligned with the Australian Human Rights Commission’s guidance on complying with the positive duty to prevent and respond to sexual harassment at work”. The guide sets out a series of prompts and actions boards should consider to better achieve gender equality in the workplace. See WGEA Guide .
REGULATION
Treasury consults on draft mandatory climate reporting bill. On 12 January 2024, the Federal government published the draft Treasury Laws Amendment Bill 2024: Climate-related financial disclosure (Exposure Draft) for public consultation. The Exposure Draft “seeks to amend parts of the Australian Securities and Investment Commission Act 2001 (Cth) and the Corporations Act 2001 (Cth) to introduce mandatory requirements for large businesses and financial institutions to disclose their climate-related risks and opportunities”. Among other things, the Exposure Draft proposes that the regime apply, in effect, to large listed companies and large private companies. Submissions close on 9 February 2024. See Treasury webpage .
LEGAL
Federal Court judge declares Worley Limited in breach of its obligations, but shareholders failed to prove loss. On 19 December 2023, the Federal Court of Australia published Jackman J’s reasons for the decision in Crowley v Worley Limited (No 2) [2023] FCA 1613, in which his Honour determined that Worley Limited had breached its obligations by engaging in misleading and deceptive conduct. His Honour found, in effect, that Worley Limited had made representations to shareholders that it would achieve net profit after tax of $322 million during the financial year ending 30 June 2014 when it did not have a reasonable basis to do so. However, Mr Crowley, the representative applicant, was unable to establish causation and loss. Nevertheless, the decision is a timely reminder for boards to review the robustness of their policies and procedures (including procedures used to prepare financial information) to ensure the reliability of all material financial information on which the company and its shareholders rely. See Crowley v Worley Limited (No 2) [2023] FCA 1613 .
OVER THE HORIZON
Critical minerals market upheaval. Despite still-robust demand for electric vehicles, oversupply in critical minerals markets has seen nickel and lithium prices decline about 40% and 80% respectively since late 2022. The downturn in the critical minerals market has seen various major nickel and lithium players make the difficult decision to suspend mining operations - including Wyloo Metals’ Cassini mine, First Quantum Minerals’ Ravensthorpe project, Core Lithium’s Finniss project and BHP’s Kambalda project. Federal Resources Minister the Hon Madeleine King held crisis talks with her Western Australian counterpart the Hon David Michael on 25 January 2024 to discuss industry challenges and canvas potential responses from the government, which may include royalty relief, payment deferrals or even a production tax credit (designed to encourage processing of minerals onshore). See media article . Although posing challenges for producers, the upside of falling critical mineral prices to consumers is that EVs could become more affordable, which could aid the global push to electrify transport and reduce car emissions, which is seen as crucial to meeting zero-emission targets.