PwC QUARTERLY COMMENTARY SUMMER 2015 Game of Threats · to understand your key information assets...
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PwC QUARTERLY COMMENTARY SUMMER 2015 Digital IQ Survey The digital behaviours fuelling growth Game of Threats How will you respond to a cyber attack? PwC Herald Talks Adapting to changing markets Building better cities A closer look at Auckland
Transcript of PwC QUARTERLY COMMENTARY SUMMER 2015 Game of Threats · to understand your key information assets...
PwC QUARTERLY COMMENTARY SUMMER 2015
Digital IQ SurveyThe digital behaviours fuelling growth
Game of Threats
How will you respond to a cyber attack?
PwC Herald TalksAdapting to changing markets
Building better citiesA closer look at Auckland
was thrilled to see New Zealand businesses showing a renewed focus on digital strategy
in the PwC 2015 Global Digital IQ Survey. But a digital strategy is meaningless without an achievable path to success, so the next step is to develop a digital roadmap.
A well thought-out roadmap is critical for businesses operating in this technologically advanced and constantly evolving marketplace. So how is your business placed to quickly change direction?
I’d encourage you to continue to invest more in digital thinking and planning to keep pace with changing customer expectations.
Careful observation of your customers may lead you to identify a problem worth solving. In the New Year, I expect to see more emphasis on finding these problems, rapidly prototyping before testing again with customers – this is one of the keys to creating a great customer experience.
SleepDrops Founder Kirsten Taylor took this very approach. By paying attention to what her customers really wanted, she grew her business to become the leading brand in New Zealand retail stores in under five years. I’m looking forward to hearing more from her in the last PwC Herald Talks event of the year on 9 December.
But it’s not just your external customers whose needs are ever-changing. Your own people and organisations require more digital investment too, and with the burgeoning technology opportunity, comes increased risk. Both the possibility of being subjected to a cyber attack and of the unsanctioned usage of the cloud. This creates a real risk for businesses, but if you deal with it in the right way, it presents a great opportunity too, which is what PwC’s Game of Threats™ and the ‘Shadow Cloud’ are all about. You can read more on this over the following pages.
Speak with your people as they’re the ones driving your digital success - not technology. In our business for example, our people increasingly need to work more flexibly, and we have significantly ramped up our investment in technology to help them do just that.
I hope you enjoy our Summer edition of AddingValue covering changing markets, digital and growth.
Have a great Christmas. Cheers,
IWelcome
Bruce Hassall CEO & Senior Partner
ContentsThe cyber strategy evolution 3 Why the perimeter approach no longer works
PwC’s Game of Threats 5 How will you respond?
Building Better Cities 7 How does Auckland stack up?
Do digital investments translate to real returns? 9 Digital IQ Survey
Observation key to innovation 11 PwC Herald Talks
Strengthening our Tax offering 14 Tax Pooling Solutions
Online GST – what’s changing? 15 Our guide to help you prepare
Helping new clients 17
New publications 18
Summer 2015 2
orldwide, cyber attacks have become the new normal in today’s digitally connected
world. Historic information security methods are proving to be ineffective in this changing environment, which is why many organisations are rethinking their cyber security strategies and practices.
Traditionally in New Zealand, organisations have assumed that cyber security is a technology issue and have focused spending on firewalls, simple access management and anti-virus software. This approach assumes that all you need to do is to spend money deploying technology trying to stop threats at the perimeter of an organisation.
But we now live in a world of mobile payments, cloud services, a mobile workforce and a growing interdependence on other organisations. In fact, in our Annual New Zealand CEO Survey, 84 per cent of chief executives told us that mobile technologies were important for their digital strategies and 50 per cent told us they are looking at entering into a joint venture or strategic alliance this year.
This means that the outdated approach of treating cyber threats as a technical issue and focusing on protecting an organisation’s digital perimeter has limited relevance in today’s interconnected world. Each day, whether or not they realise it, New Zealand organisations are suffering financial losses, operational disruption and reputational damage because of security incidents.
Perhaps an encouraging sign for New Zealand is that 57 per cent of respondents in our recent Global State of Information Security Survey were confident in the effectiveness of the security controls of their third party suppliers down from 82 per cent last year. This drop in confidence better reflects the actual state of information security and organisations taking seriously the need for robust assurance both internally and with suppliers to accurately measure security posture. We conduct this survey annually to understand how executives and industry leaders view current and future challenges related to cyber security.
As mobile devices, cloud services and partnering among organisations continue to rise, so does the number of places that data can be accessed and stored. While this year’s survey shows that 43.3 per cent of New Zealand organisations have indicated that they have a security strategy in place for the cloud, 40 per cent have mobile malware detection and 50.5 per cent use common identity protection – more than 40 per cent do not currently have an overall strategy that takes into account the holistic needs of the organisation.
What we know through our engagements with clients is that in New Zealand, Australia and across the globe, the gap between the business and the traditional IT department is widening. With ever-increasing pressure to perform, business units – frustrated by rigid organisational structures – are circumventing internal blockades to achieve their own IT outcomes. This is known as ‘shadow IT.’ Shadow IT is not a new concept; IT departments have despaired for many years at users and business groups who download and install their own software to get the job done.
Why the perimeter approach no longer works The recent explosion in shadow IT, however, has been dramatic. The culture of consumerisation within the enterprise – having what you want, when you want it, the way you want it and at the price you want it – coupled with outdated technologies and IT models has accelerated the adoption of cloud computing by business units and individual users.
Shadow cloud, the unsanctioned and uncontrolled use of cloud services, has now emerged as today’s equivalent of the shadow IT problem creating both risks and opportunities for business. Through our own analysis in New Zealand and Australia, the average number of cloud services per employee is about 12, and these range from personal emails and storage services to social media and sites for illegal distribution of copyrighted and objectionable content. Policy is not the answer here because we found that virtually no business is complying with its own cloud policies.
This reinforces the need for organisations to identify the business value of data and what is critical for their own operation. While 48.2 per cent of all respondents in the Global State of Information Security Survey say they classify the business value of data, only 35.1 per cent of New Zealand respondents indicated they do so. Additionally, big data is not top of mind for New Zealand organisations where only 26.8 per cent have a relevant security strategy, compared to 44.8 per cent globally. This means not only are New Zealand organisations not focused on protecting the data, but they also aren’t looking to leverage this important asset to its full potential.
As mobile devices, cloud services and partnering among organisations continue to rise, so does the number of places that data can be accessed and stored. And alongside the cloud and mobile workforce (whether or not organisations formally recognise it) the consumer culture driving information technology consumption is a modern enterprise reality that is here to stay.
The organisations that will flourish in tomorrow’s interconnected world are those which recognise that good cyber security is good business. Effectively they understand that by managing their risks, they can use digital technologies and their information assets to realise opportunity with confidence.
The cyber strategy evolution
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Cyber Security CONTACT: ADRIAN VAN HEST
PARTNER, CYBER PRACTICE LEADER
T: +64 4 462 7109
Source: 2016 PwC Global State of Information Security Survey
How did security incidents occur in New Zealand and across the globe?
New Zealand Global
Mobile device
36.2%
33.8%
Third-party partner
or vendor exploited
25.1%
18.8%
Embedded system
exploited
30.4%
17.5%
Consumer technology exploited (webcam,
home automation,
etc)
29.2%
8.8%
Social media/social engineering exploited
16.8%
38.8%
Do not know
9.4%
17.5%
CONTACT: STEVE McCABE
PARTNER, CYBER PRACTICE
T: +64 4 462 7050
AddingValue Summer 20153 4
f your organisation had just been hit with a cyber attack, would you know how to respond?
Knowing your enemy, understanding their motivations and preparing yourself to detect, respond and recover is the thinking behind PwC’s Game of Threats™.
This PwC interactive and immersive game allows participants to gain an understanding of cyber breaches from their perspective and that of an attacker by simulating the real world challenges through the experience.
The game was created by our colleagues in the US to help make cyber security real for organisations by using an engaging and enjoyable game format to experiencing the key decisions that need to be made before, during and after a breach.
The best way to defend yourself is to know what you’re up against
PwC’s Game of Threats
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CONTACT: ADRIAN VAN HEST
PARTNER, CYBER PRACTICE LEADER
T: +64 4 462 7109
How does it work? Our PwC team expertly facilitates the Game of Threats™ immersive experience where participants play multiple games and are challenged to apply the insights they gain into more effective strategies for preparation and response. At the same time, the experience of playing as the threat actor encourages participants to consider and learn the motivations of nation states, organised crime, hacktivists and insiders to better prepare their defences. Participants include boards of directors, C-suite, general counsels, IT management, information security and risk management professionals.
Each team interacts with its own digital controller and see the impact of their decisions in real-time on a shared command display. Both sides must make careful and strategic decisions in order to win. The post-game analysis provides players with a detailed review of all actions and outcomes for both sides that can be applied to their organisation.
CONTACT: STEVE McCABE
PARTNER, CYBER PRACTICE
T: +64 4 462 7050
Cyber Security
Summer 2015
Game of ThreatsTM – Are you ready?Join a leadership discussion about your organisations cyber security readiness…
• By thinking and acting as a potential attacker you are in a better position to understand your key information assets and the risks to which they are exposed.
• You’ll get a sense of your current state of readiness and the areas where you should focus your efforts and resources.
• You’ll understand just what makes an effective Cyber strategy and response plan, and how to turn your plans into action.
• All participants will gain a greater understanding of the tools, terminology and the threat landscape, preparing them for effective decision making.
• This new level of insight will help you tackle the cyber challenge head on and enable you to use your digital assets to their full potential with confidence.
For more information please contact Steve McCabe: [email protected]
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uckland has emerged sixth overall as a top ranking city in APEC in which to live and do
business and as a top ranked city in APEC for political environment alongside Toronto and Vancouver, according to a new study launched today at the APEC 2015 CEO Summit. The PwC study gives city leaders a view of where they are now, and it hopes to inspire cities within APEC to collaborate and seek advice to solve tenacious problems.
The study – Building better cities – focuses on the role urban centres play in the context of APEC’s economic and social growth, and also looks at the cities’ growing influence outside their borders through three lenses: how they fare in basic city development, what differentiates them and the hindrances they face to growth.
PwC Local Government Director David Walker says, “Auckland finishes well at sixth place overall, two places ahead of our Australian neighbour, Melbourne. At a more granular level, Auckland is the top city in six out of 39 variables; and within the top five cities in 13. In addition, it places in the top seven cities in three out of five categories – culture and society, environmental sustainability and health and welfare; and within the top 15 cities in the remaining two – economics and connectivity.
“Auckland is a cultural and sustainable city, with the culture and social health category Auckland’s best category performance, sitting just behind Toronto and Melbourne, and having topped the Corruption Perception Index, ahead of Singapore and Toronto, which has contributed to this.
“Additionally, Auckland performs well in environmental sustainability ranking fourth overall with a first placing in non-hydro renewable electricity generation, and in the health & welfare category ranking seventh coming first for electricity access and consumption within this category. Yet, the study shows clear areas where Auckland can improve and these include connectivity (Auckland ranked 15th overall), as well as airport accessibility and attracting foreign investment.”
Auckland’s planned overhaul of its mass transit network with a strong emphasis on multi-modal transport: roads, rail, trams, buses, bikes, ferries, will help improve connectivity for the city. The $2.5 billion City Rail Link is planned to start in 2018 and to be completed by 2023, likely doubling the number of commuter trains to move up to 25,000 commuters per hour and adding light rail (trams) for congested bus routes could shift 18,000 commuters an hour compared to 2,500 on a bus.
“A surprising finding is the realisation that despite the relative maturity of APEC, when allied with the general understanding that cities are critical to economic wellbeing, there are few formal mechanisms to connect APEC cities. Given these cities are likely to become more influential, forming deeper and more meaningful relationships will be an essential component to APEC’s futures success,” adds Mr Walker.
Cities are now competing to attract an increasingly mobile, global workforce. Talent collects where the right live-work mix is found. And establishing a unique identity is crucial. Even a top ranking city might lose out on expertise and investment capital if it is not known for broader liveability. It is becoming increasingly important for cities to build up their ‘brand’ and for public and private collaboration to keep Auckland competitive.
How does Auckland stack up?
Building better cities
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Government CONTACT: CRAIG RICE
PARTNER, LOCAL GOVERNMENT LEADER
T: +64 9 355 8641
City Overall Culture & Social Health
Connectivity Health & Welfare
Environmental Sustainability
Economics
Toronto 1 1 8 3 2 8
Vancouver 2 4 9 4 1 9
Singapore 3 9 1 5 9 2
Tokyo 4 5 3 1 12 3
Seattle 5 6 12 8 3 6
Auckland 6 3 15 7 4 11
Seoul 7 7 6 10 5 17
Melbourne 8 2 13 6 6 14
Los Angeles 9 7 16 9 7 5
Osaka 10 9 4 2 19 9
CONTACT: DAVID WALKER
DIRECTOR, LOCAL & REGIONAL GOVERNMENT
T: +64 9 355 8033
Source: PwC 2015 APEC Building better cities
Auckland is the top city for housing quality, mobile broadband, electricity access and consumption.
AddingValue7
Do digital investments translate to real returns?
CONTACT: CHRIS BARENDREGT
PARTNER, NATIONAL TECHNOLOGY CONSULTING LEADER
T: +64 9 355 8956
*We asked nearly 2,000 business and technology executives from over 50 countries.
Top 10 digital behaviours driving growth:
Innovation:
Strategy:
Execution:
9We have a single, multi-year digital enterprise roadmap that includes business capabilities and processes as well as digital and IT components.
Global
53%
New Zealand
62%
8We proactively evaluate and plan for security and privacy risks in digital enterprise projects.
Global
76%
New Zealand
62%
5We actively engage with external sources to gather new ideas for applying emerging technologies.
Global
64%
New Zealand
78%
4Business and digital strategy are well communicated enterprise-wide.
Global
69%New Zealand
76%
7We effectively utilise all the data we capture to drive business value.
Global
58%New Zealand
80%
10We consistently measure outcomes from our digital technology investments.
New Zealand
82%
2The executives responsible for digital are involved in setting high-level business strategy.
Global
77%
New Zealand
68%
3Business-aligned digital strategy is agreed upon and shared at the C-level.
Global
80%
New Zealand
92%
1Our CEO is a champion for digital.
Global
73%
New Zealand
74%
6Digital enterprise investments are made primarily for competitive advantage.
Global
76%
New Zealand
88%
Global
72%
s organisations in New Zealand and across the globe continue to invest heavily in digital
technology, leadership teams are under pressure to translate this considerable investment into real returns.
So what’s the good news? This year we’ve reached a tipping point where key behaviours link strong digital investment with profitability for businesses, as highlighted by PwC New Zealand’s 2015 Global Digital IQ Survey.
This survey represents the most comprehensive comparison of New Zealand’s digital landscape, to global best practices, carried out to date. It’s the behaviours identified in the survey that lead to better performance and the findings are consistent with what our own experts are seeing in the market.
Companies that effectively use business data, investments are made for competitive advantage, and that have a multi-year digital roadmap, for example, are the ones who are maximising their investments.
Our analysis shows that companies responding to the Digital IQ survey with the highest scores across these behaviours identified in the report are 50 per cent more likely to achieve rapid revenue growth and twice as likely to achieve rapid profit growth when compared to the remaining Digital IQ respondents.
PwC’s 2015 Global Digital IQ Survey
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Digital CONTACT: KRIS NYGREN
PARTNER, DIGITAL & CUSTOMER LEADER
T: +64 9 355 8955
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he third PwC Herald Talks event tackled this topic on 4 November at SKYCITY in Auckland, with a focus on changing markets.
Keynote speaker Sir Ray Avery, founder and Chief Executive of Medicine Mondiale, who is one of New Zealand’s most respected and talented scientists and philanthropists, spoke about New Zealanders’ natural abilities to deal with change, saying Kiwis love to challenge the status quo and have less regard for rules.
Sir Ray said key to achieving success and innovating is the ability to observe customers’ behaviours and needs and that it’s important to look to what customers want for inspiration, rather than just focusing on improving the product.
“It is incredibly important any business, no matter how small, knows and understands what their customers want, how they behave and how they like to be talked to. Do customer-centric research, it’s that simple.” said Sir Ray.
He later joined an expert panel consisting of Tenby Powell (Chairman, Advaro Finance), Mai Chen (Founder, Chen Palmer), Nigel Morrison (CEO, SKYCITY) and PwC’s own Greg Doone (PwC Digital and Strategy Leader), chaired by Fran O’Sullivan from NZME, who discussed strategies around adapting and changing business to keep up with the market, as well as being customer-focused.
Greg Doone discussed ‘digital natives’ ability to quickly adapt commenting on how businesses need to be able to change along with their customers. Encouragingly he said, “the platforms that exist now allow people to act on customer observations very, very quickly.”
Tenby Powell went on to say that although New Zealanders were fast adopters of new technology personally, they were not as good at uptake when it came to their own businesses – something that needs to change.
Mai Chen said businesses could tap in to the ‘super diverse’ Auckland market to become more adaptable and better suited to an environment that is faster, quicker and changing all the time. Nigel Morrison reiterated this by saying key to success is having a great team and to give your customer what they want.
What’s the best way of staying ahead of change and adapting to transforming business climates?
Observation key to innovation PwC Herald Talks - Changing Markets
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Digital CONTACT: GREG DOONE
DIRECTOR, DIGITAL STRATEGY AND DATA LEADER
T: +64 9 355 8946
Join PwC Herald Talks - Growth on 9 December. All PwC clients will receive a $20 discount on tickets with code ‘pwcgrowth15’ at checkout from the iticket site.
Illustration by Gareth Parry, PwC digital.
CONTACT: GARETH PARRY
DIRECTOR, RESEARCH & DESIGN
T: +64 9 355 8939
AddingValue Summer 201511 12
Discover key strategies for growing your business
When the time is right, what you’ll need, and how you plan for it
SKYCITY THEATRE 7am, December 9
PwC clients receive a $20 discount on tickets
(normally $89) with code ‘pwcgrowth15’ at checkout
from iTicket.co.nz
Keynote speakerKirsten Taylor Founder of SleepDrops
Brought to you by Thanks to our partners
Diane ForemanEntrepreneur
Steve MahareyVice-Chancellor, Massey University
Dan AlpeCOO and Founder, JUCY
e’re thrilled to have had the business join our National Tax practice in Auckland in November. PwC Tax and Private Business Leader Geof Nightingale says, “Tax Pooling Solutions offers a full suite of online quality services to New Zealand tax payers of all sizes. The acquisition fits well with our ambition to grow our technology offerings and to enhance and grow our tax services.”
This easy to use online service is focused on client service and solutions. Taxpayers and businesses are able to pool provisional tax payments and offset under and overpayments. Financing options are available for clients to finance their provisional tax at competitive interest rates. This enables further efficiencies in the tax pooling market and provides tangible cost savings.
Tax Pooling Solutions Founder Mark Dunwoodie, who is now part of the PwC Tax team, sees this move as having benefits for both existing clients and business advisers from all professional firms.
Mr Dunwoodie says, “This new offering will also have significant advantages for other professional services firms who want to leverage this technology. They will be able to offer their clients a quality product while maintaining absolute confidentiality of client bases, separate from the rest of PwC. We see this as a positive development in the tax pooling industry.”
Is it secure? Absolutely. All funds are momentarily held in the Public Trust bank account and each night transferred to Inland Revenue to hold on account of tax pooling customers. What’s more – customers will also have peace of mind as it’s backed by PwC.
Tax Pooling Solutions has only been with PwC for two weeks, and already we’ve received fantastic feedback. A significant spike in traffic to the site is reflective of the number of PwC clients moving to the pool as well as new clients making contact. We’re thrilled to be out meeting with both new and existing clients to share more about the benefits. This pool, run by business advisers for business advisers, has been seen as a real point of difference in the market.
Please do get in touch to discuss how this could be of benefit to you and your business.
PwC’s tax offering is growing, with the recent acquisition of Auckland-based, tax pooling specialist practice Tax Pooling Solutions.
Strengthening our Tax offering
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TaxCONTACT: GEOF NIGHTINGALE
TAX AND PRIVATE BUSINESS LEADER
T: +64 9 355 8853
Summer 2015 14
The November Taxation Bill introduced draft law to impose GST on digital products and other services (such as music, movie and game downloads) purchased online by New Zealand consumers.
Online GST – what’s changing?he new law will also require offshore sellers to register and pay GST from 1 October 2016.
PwC Partner and GST specialist Eugen Trombitas says, “This demonstrates that our Government and policy makers have a desire to keep our GST model current for the digital. The law reform will address matters of sound tax policy, tax leakage (estimated to be at least $40 million per annum and growing) and fairness.
“The new GST rules are a significant change and will affect many businesses and consumers. Businesses impacted by the new rules will need to start their planning now.”
So what should offshore sellers be doing to ensure they are prepared for the new digital and cross-border services GST rules? We have prepared this timeline to help guide the planning.
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Tax CONTACT: EUGEN TROMBITAS
PARTNER, GST
T: +64 9 355 8686
Digital GST law effective
201720162015
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
16 Nov
1Oct
7May
28Jul
9 months
To do To do To do Services
• Check whether you are liable (as a seller or intermediary).
• Set up a project team.• Seek professional advice if
required as some exclusions will apply.
• Set up systems: - contact software providers about changes required to systems - update reports in your ERP/accounting systems - ensure collection of evidence (e.g. customer billing address, country code
of their SIM card, IP address, credit card information).• Review contracts with your business partners, including terms of sale.• Review pricing.• Prepare for GST registration.• Communicate with customers.
• Register for GST.• Reflect GST in prices.• Set up GST compliance
process.
• Movie and music downloads• E-books, -magazines, -newspapers• Webinars and e-learning• Apps• Games• Software• Website design and publishing services • Any other services purchased online (including e.g. legal,
accounting and consultancy services).
Note some exclusions will apply.
Tax Bill on digital and cross-border services introduced
1st GST return due Oct 2016 – Mar 2017 (optional: 2 monthly)
2nd GST return due April 2017 – June 2017 (quarterly)
A guide to preparing for change
AddingValue Summer 201515 16
New client work
Our Private Business team is delighted to have been appointment as tax adviser to Serato – a New Zealand business that creates world leading audio software for professional DJs and musicians.
Serato is rapidly growing and a true exporter, with 95 per cent of revenue derived from outside of New Zealand.
In April this year Serato was announced as the 2015 winners of the Best Business Operating Internationally category at the New Zealand International Business Awards. The awards recognise the country’s fast-growing export champions.
We have recently worked collaboratively with the Serato team and PwC US to prepare a report assessing their supply chain and optimal business structure for their US operations.
Serato
Managing the Shadow Cloud
The shadow cloud, the unsanctioned and uncontrolled use of cloud services, has now emerged as today’s equivalent of the shadow IT problem creating both risks and opportunities for business.
Paying Taxes 2016: Ten years of in-depth analysis
A unique study by PwC and the World Bank Group which compares tax regimes across 189 economies, ranking them according to the ease of paying taxes
The road ahead: Gaining momentum from energy transformation
This report explores five global megatrends shaping the future of the power sector: technological innovation; climate change and resource scarcity; demographic and social change; a shift in global economic power; and rapid urbanisation.
New Zealand’s regions of opportunity
What can the regions in New Zealand learn from our PwC Cities of Opportunity studies? This report looks at the steps that regions can take to grow and capitalise on economic opportunities.
New publications
Summer 2015 1817 AddingValue
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