Surging costs, a lack of clarity on trigger points for Government action and lessons learned during the Covid pandemic are dominating boardroom discussions about the fuel crisis, according to a poll of Institute of Directors members.
The institute says its pulse survey ran in mid-April, a time when the Strait of Hormuz was opening and closing almost daily and received 508 responses from directors across multiple sectors.
Herman Visagie, general manager of the IoD’s Governance Leadership Centre, says in a statement this is the first insight into discussions that are playing out in New Zealand boardrooms.
“A large majority, 88%, describe themselves as moderately (29%), highly (42%) or extremely (17%) concerned about fuel price volatility. And directors are taking action with 71% having already made ‘minor’ or ‘moderate’ changes to operations.”
He says the key areas directors are focused on are cost management (53%), travel reduction and remote work (40%), and increased risk modelling and scenario analysis (37%) says.
With fuel still available and price impacts yet to be fully apparent, just 3% of survey respondents had made major changes such scaling back activity or restructuring.
Herman Visagie.
“But it’s clear people expect the impacts to be long term, which suggests this might change,” he says.
The survey found widespread interest in the Government’s fuel response plan and the triggers for moving between phases. Directors are also seeking greater clarity on the Government’s thinking around the broader economic impacts as this may need to be factored into business strategy, Visagie says.
This is not just about fuel costs but also supply chain disruption and the flow-on effects throughout the economy…
“This is not just about fuel costs but also supply chain disruption and the flow-on effects throughout the economy. Directors are asking for greater transparency on potential Government intervention and timely notice of the imposition of any restrictions, but also on the broader economic trajectory to help them navigate the challenges.”
The statement quotes ASB Chief Economist Nick Tuffley saying inflation pressures foreshadow the RBNZ could lift the Official Cash Rate hike as early as July, leading to potential interest rate hikes over the remainder of 2026.
“But given how fluid the situation remains, there are many potential outcomes,” Tuffley says, noting “for example, our current forecasts assume no fuel supply shortage”.
Visagie says the level of uncertainty raises the likelihood of businesses and consumers tightening their belts and waiting to see how things play out, which may slow economic growth.
“Directors are not panicking, but they are cautious, encouraging cost control and ensuring conservative decision-making in their organisations.”
The experience of the Covid crisis has given many boards the confidence to monitor and sense-check developments, without making knee-jerk strategic shifts, Visagie says.
“Dynamic cost management is not a new challenge. The difference in this situation is the high level of uncertainty about cost drivers. Directors also shared concerns for the wellbeing of staff, suppliers and stakeholders as cost pressures continue to mount. Many respondents referenced lessons from the pandemic as informing their board discussions.”
