I have recently published an article on the website of the corporate governance consultancy firm Effective Governance, at which I am a specialist adviser, regarding:
The article was inspired by a recent Harvard Business Review article, The Political Issues Board Directors Care Most About, which identified the economy as the number one issue for board directors globally. In the article, I discuss the major economic indicators of GDP, the unemployment rate, employment growth, and the inflation rate. And I encourage board directors to consider leading indicators such as business confidence and building approvals, as well as any indicators relevant to their specific industries.
Practically every company or organisation will be affected by the economy in some way, so it is important for board directors to be familiar with the current state of the economy and the economic outlook. One example I briefly mention in the article was based on a Brisbane private school board that monitored the sharemarket (see chart below) and consumer confidence during the financial crisis, as they considered those indicators would be relevant to the capacity and willingness of parents to pay school fees. With these indicators suggesting there would be an increase in unpaid school fees, strategies were put in place to manage the problem (e.g. early engagement with parents on late payments to work out whether the fees could be paid according to a payment plan in a reasonable time, or whether the student would have to be withdrawn). Forewarned is forearmed.
N.B. The chart above is based on end-of-month values of the S&P/ASX 200 share price index. As at the close of trading yesterday (Friday 4 March) the index was at 5,090, around 4% higher than its value at the end of last month.