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New Zealand business owners are ranked among the highest in the world in their desire to have existing staff to buy their businesses.

The new Waste Minimisation (Information Requirement) Regulations 2021 make it mandatory for waste management facilities to keep records about the waste they’re receiving and where it’s going. Signpost of the direction the Government is taking with waste management – something that will have an impact on not only every local council, but every Kiwi household as well.

Innovation is crucial to the success of any organisation, or economy for that matter. So how can you grow innovation?

If you only make one security tweak to your business, it should be this: turn on multifactor or two factor authentication. Multifactor authentication (MFA) is a simple change that can massively improve data protection. Without it enabled, your business or Not for Profit organisation could be in breach of the Privacy Act depending on the type of information you hold. What is multifactor authentication? Multifactor authentication means accessing a particular app or system requires more than one method of identification. Without MFA, you log on via one device, with a single set of credentials. MFA requires more from users based on three factors: Something you have, like a smartphone or a secure USB key Something you are, like a fingerprint or facial recognition. Something you know, like a password or PIN. For example, to log into Xero online, you enter your email and password. With MFA, you then need to confirm your identity another way – such as on your phone via the Xero app. If MFA is enabled for Microsoft Outlook and you log on using a device that isn’t trusted, you will also need to enter a security code that has been sent to a trusted email account or phone number. Whether it’s a text code, a fingerprint or a phone confirmation, MFA ensures more than one ID method is required to get into your important data. Most platforms and applications give you the option to switch it on through your security settings. It seems inconvenient – why would you bother? Single-factor authentication can make it much easier for a cybercriminal to compromise your bank accounts, accounting software, or business systems from anywhere in the world. All they need is your email address and password, which might have been stolen or leaked, or gained through phishing. With two-factor authentication, it becomes exponentially more difficult for malicious users to get access to your systems. According to Microsoft, there are more than 300 million fraudulent sign-in attempts on its cloud services daily: “All it takes is one compromised credential or one legacy application to cause a data breach.” It estimates that MFA can block more than 99.9% of account compromise attacks. If that seems too high, perhaps it is, but MFA is still highly effective; Google says its implementation of MFA halved the number of account compromises. When you have MFA enabled, it’s less concerning if your password is leaked or compromised. That alone won’t be enough to allow a hacker to gain access. Without MFA, you’re probably in breach of the Privacy Act The Office of the Privacy Commissioner recommends all organisations, regardless of their size to introduce MFA. When a breach occurs, one question often asked is whether an organisation has taken reasonable steps to protect the data they hold. If it is deemed the organisation did not take reasonable steps to protect its data, this could result in a breach of the Privacy Act. What’s reasonable depends on the size of the organisation breached and the scale and sensitivity of data it holds. No matter how small your business or charity might be, it almost certainly holds some personal information. It might be as basic as a list of members’ names, phone numbers and email addresses. Or perhaps it’s a more complex customer management system that includes payment details, health information or biometric data. As such, implementing the MFA is no brainer. Under the Privacy Act, every organisation or individual that holds data must collect it appropriately, keep it safe and allow the people it concerns to be able to access it (for more details, read the Privacy Principles). The Office of the Privacy Commissioner describes two-factor authentication as a bare minimum for small businesses or organisations that hold digital information. Without MFA in place, if someone unauthorised accesses your business data, you are likely to be in breach of the Privacy Act. This could lead to a penalty under the Act starting from $10,000; the most ever awarded is just over $168,000. The risks of a data breach go far beyond penalties, though. Your organisation may also experience potentially huge financial losses, reputational damage, and be forced to shut down. We know of one instance where a small online business experienced a data breach, and the cost of remediation and compliance was so high that dissolving the business was the best outcome. Cyber incursions are such a significant risk it’s hard to overstate their potential impact – yet many organisations are unaware of their responsibilities and risks. It’s all part of everyday risk management Cyber security can feel like a particularly thorny specialist topic that sits outside business as usual. But there’s a better way to think about it – cyber security is simply another risk management activity. It’s not separate or unique or different to other risks in your business, so managing it should equally be an everyday task. This means switching on MFA and getting everybody using it automatically, as well as keeping up to date with software patches and managing passwords effectively. Simple steps like these go a long way to protecting your organisation from breaches. In some cases, you might need to switch platforms to be able to access MFA for your organisation. We also occasionally see small regional organisations in areas that are digitally excluded, which can make this tricky. There may be workarounds available, or alternative platforms that can help. Create awareness and provide training We know that it can feel inconvenient to add MFA to apps you use frequently. If those who use your systems don’t understand the importance of using MFA, they may find this extra effort irritating, or try to switch it off. It’s essential to have all users on board. Education is the key – you need to explain to everyone why MFA is vital and why it is well worth the additional effort. You need to create awareness and provide training. According to research by Verizon, 82% of all cyber attacks “involved a human element”, and phishing scams still dominate social engineering attacks. We know that many small and medium enterprises and Not for Profits, don’t have in house IT and cyber expertise, however, being small or local doesn’t exempt you from the Privacy Act, so you still need to make the effort to not only enable MFA, but to understand your obligations under the Act, establish cyber security policies, and incorporate MFA into your overall approach to risk management.

Raj Tiwari

| 11 min read | 11 Dec 2023

Welcome to the Q2 2022 edition of our procurement index, which analyses the buying conditions facing businesses.

Welcome to the first edition of the Grant Thornton Procurement Index which analyses the buying conditions facing businesses.

While we grapple with the threat of sustained environmental challenges, corporates and other reporting entities need to consider how the impact of climate change on their organisations is reflected in their financial statements. The key challenge is assessing this within our current accounting framework even when don’t yet have specific climate accounting standards. David Pacey addresses these challenge and how you can report the impact of climate change in your financial statements.

David Pacey

| 20 Sep 2022

Thank you for contacting Grant Thornton New Zealand. Your enquiry will be directed to the right person, and they will respond shortly.

Transform your operations with smart, streamlined processes that deliver real value to your business.

Here comes the new year, and it would be lovely to think 2024 will be smooth sailing compared to the past three years. Unfortunately, that’s almost certainly not going to be the case. Instead, volatility will continue to reign as the pace of change only speeds up. Reflecting on 2023, most would agree it was a tough year, and those challenges are not going to disappear over the Christmas holidays. Businesses will continue to face cost pressures, high interest rates and staff issues in 2024. The world has fundamentally changed since the pandemic; buying patterns, financing, and technology have all been transformed. As a business decision-maker, not only do you need to get your head around our new economy, you need to do it while also tackling whatever new hurdles are thrown in your path. How can you help your business survive and thrive in 2024? The answer is simple: you must be ruthless. Start by building resilience When the economic landscape is in permacrisis, it’s essential to make your business as resilient as possible. To make sure you can ride the wave in 2024, you need to ensure your cashflow is reliable and predictable, and you must manage your costs. Look ruthlessly at your spending and outgoings to find efficiencies, while tightening your terms, invoicing and debt management processes to improve cashflow. The key is knowing what your cashflow is. Let go of underperforming products and services Cost-benefit analysis is valuable here as you decide what to let go. Crunch the numbers and identify parts of the business that aren’t providing strong and reliable profits, both historically and into the future. Ask yourself tough questions about those underperforming strands: ‘Why am I continuing to sell this product or service? Is it dying and do I just need to cut it out? Am I continuing to serve legacy customers because it’s in my comfort zone or I feel an allegiance to the past? Will I get a better return by investing the same amount of time and energy on something else?’ Cut out your D clients The Pareto principle, aka the 80-20 rule, says that 80% of your profits will come from 20% of your clients. Most businesses find this principle applies. This is an old exercise but an effective one: look at your client list and grade each one from A to D. Your A clients are the most profitable ones who are the best to deal with, and your D clients are the lowest-value, most headache-inducing to work with. It’s time to cut out your D clients and focus your energy on keeping, growing, and finding new A grade clients. Jettison outdated stock After the inventory rollercoaster of 2020 and 2021, some businesses are still sitting on outdated stock. Sell it if you can, provided you don’t cannibalise your own clients. In other words, don’t sell a cheap old item to a client who might otherwise buy a profitable new item. Instead, try to sell it to a market you’re not involved with. One of my clients was able to shift a huge amount of product to a dollar store, preventing the business from undermining itself. Otherwise, look for a way to give the stock away, or even better - recycle it if you can. Take legacy technology off life support Legacy technology is a drag on any business. We see it in government departments and large businesses, where slow, patchwork systems take hours to complete tasks that could happen almost instantly with up-to-date tech. Getting rid of desktops and landlines, and moving to the cloud, makes your business more resilient and cuts ongoing maintenance costs. Get the experts in to help your business transition to the cloud in a way that will work for your organisation – you should be able to find some significant efficiencies. Embrace AI The point of making all these cuts and cost savings is not only to boost your profitability and resilience. It will also free up funds so your business can be ready for the future, because any company not embracing AI will be left behind. As the pace of change increases, firms that embrace change, and have the knowledge and information to handle it, will accelerate their growth. Firms that keep doing what they’ve always done will start to fall behind. Eventually the gap between non-adopters and their AI-savvy competitors will become too wide to bridge, and the non-adopters will drop away. There will be some high-profile receiverships, but in general these failures won’t happen with a big bang. It will be death by a thousand cuts as small operators decide they’re too tired to keep fighting fires, decline to renew their leases, and let their companies wither away. Open that window of opportunity Skills shortages are already on the horizon for many industries, including accounting where the number of graduates is down by 40%. Overall university enrolment in New Zealand fell in 2022, in line with Australia and the USA which have also seen lower post-pandemic enrolment levels. When there are too few people to do the work, technology is filling the gap. We’ve seen this in our own horticulture industry, for example, where automation is being developed to pick fruit so we don’t need to rely on itinerant workers. And automation is much easier to apply to repetitive data-driven tasks – it will take over many of the drudgework elements of traditional roles undertaken by accountants, lawyers, managers or human resources. With the dreariest parts of the job outsourced, your business will be more efficient, and you and your team can concentrate on the kind of problem solving that needs a human brain - unlock that potential! Find accelerator opportunities The opportunities for innovative accelerators will be massive. Right now, as we head into 2024, we have a window of opportunity. This is the time to make change and prepare for a fast-changing future. By being ruthless now, you can set up your business to seize these opportunities when they appear. You can redivert resources to allow you to invest in technology so you’re better prepared for change and more resilient to challenges. The choice is stark when considering the outcomes. If you do nothing, your business will suffer and potentially dwindle away. But by changing the way you operate, you can become one of the accelerators, dominating in your niche and leaving your competitors behind. There is no middle ground.

Greg Thompson

| 11 min read | 11 Dec 2023

While many Not for Profit organisations (NFPs) consider social media to be an important channel to deliver their communications and fundraising goals, few incorporate social media as a core strategy to capitalise on interactive opportunity to engage with new communities.

Some years ago, I remember someone bemoaning New Zealand business owners’ lack of ambition. This person said when owners have grown their businesses big enough to start to look overseas they then sell, as long as the sale price would allow them to join the Triple “B” and buy a bach, a BMW and a boat. Although I hadn’t heard of this club before, the point that stuck with me was the comment about the real value of a company being unlocked globally by its new owners. I think things have moved on significantly since then with New Zealand companies such as Seequent selling for $1.46 billion, Ziwi for around $1 billion and Partners Life also for $1 billion. Certainly, a lot more that a ticket to join the Triple “B” club! Gone are the days when companies sold for 3-4 times EBITDA (earnings before interest, tax, depreciation and amortisation) or maybe 7-8 times EBITDA if the buyer had Australian pension fund money looking for a home. Deals like Seequent are not referable to EBITDA at all, with technology companies increasingly being sold at multiples of sales instead – sometimes up to 45 times sales and beyond. How to get the best bang for your buck when selling your business While you are sitting at the beach or lake over Christmas, thoughts of selling your company may cross your mind. If so, there are lots of things you might need to start thinking about. Firstly, get sale ready. When a company is sold, there will almost certainly be some level of due diligence – typically covering finance, legal and tax. A buyer doesn’t want any nasty surprises. Preparing for this will involve ensuring everything is in order – making sure all agreements, processes and procedures are documented and all information likely to be needed is collated and ready to provide. Some businesses plan for this several years ahead and look to have their annual accounts prepared and audited. These actions, though worthwhile, are generally house-keeping tasks and won’t necessarily increase the value of your business. So what can add value, or at least bump-up the multiple of earnings that a purchaser is willing to pay? When it all boils down, the value of a business is based on the demonstrable track record of sustainable earnings, or the prospect of growth in earnings in the future - or, ideally the combination of both. Therefore, being able to prove the reliability of your revenue and profits, and the strength of your position in the industry is worthwhile. It’s also important to have a well thought out set of financial projections which demonstrate the growth prospects for the business and how these can be achieved. Is growth going to come from the existing product base, new product development or bolt-on acquisitions to increase presence and market share? How much will this cost, and what are the potential returns if actioned? The other key question a purchaser will want answered is around people, and most specifically you! What does the business look like with you – are key customer and supplier relationships shared across a management team, meaning your exit from the business is not detrimental to its performance? Answers to these questions are usually presented in an Information Memorandum (IM), a short sales document used to market the business to prospective purchasers. Detailed sell side due diligence reports can also be provided to prospective buyers. While this won’t generally stop buy side due diligence being undertaken, it can help buyers get to the heads of agreement stage more quickly and ensure all the information and materials are ready for due diligence questions. Once a heads of agreement (high level terms likely to be reflected in any future sale and purchase agreement entered into) has been signed, a buyer will typically be granted a period of time where they have exclusive rights to undertake due diligence, and formalise a contract and purchase price. If they decide to proceed, the buyer will submit the first draft of a sale and purchase agreement. The buyers and seller will negotiate the terms of the sale and purchase agreement with the document going backwards and forwards between the buyer’s lawyers and the seller’s lawyers. The document may go back and forwards several times while clauses are negotiated. Will you sell shares or assets? A business sale can involve shares in the company or its assets. The advantage of a share sale for the seller is they can walk away and often the sale proceeds are a tax-free capital gain. The disadvantage for a buyer is they inherit any “skeletons” buried within the company not identified during due diligence. Often the sale and purchase agreement will seek to put some of these risks back on the seller in the form of vendor warranties and indemnities. Under warranties and indemnities, the seller will have to refund part of the purchase price if specific things are identified or occur. Where the seller still wants to draw a line in the sand and not have to worry about warranties and indemnities, it is possible to obtain warranty and indemnity insurance. This is specialist insurance, and a premium is paid to the insurer to transfer the risk arising from warranties and indemnities post sale to the insurer. Typically, the warranty and indemnity insurer will want to review all due diligence reports and may require further due diligence to be undertaken or exclude certain risks. Where business assets are sold, the company’s past stays with the vendor with the business being transferred into an existing or new company owned by the purchaser. This involves changes of ownership of assets, assignment of business contracts and the transfer of employees. It can also involve the purchaser assuming agreed liabilities, such as leases and employee entitlements like holiday and sick pay. When business assets are sold, the vendor will need to wind up the selling company to access any capital gains tax free. What about tax? Purchase price allocation Purchase price allocation is where the parties agree what portion of the overall purchase price is allocated to the various assets acquired and liabilities assumed. This is a key area for negotiation. A purchaser will want to allocate as much of the purchase price as possible to items which will be tax deductible either upfront or at some point in the future, such as plant, patents and trading stock. The seller will want to allocate as much of the purchase price as possible to non-taxable items such as goodwill and trademarks to increase the amount of non-taxable goodwill that they realise. There is generally a natural tension between the seller’s best outcome and the purchaser’s best outcome, so Inland Revenue will generally accept the purchase price allocation agreed between unrelated parties as being a fair market price. GST The purchase price will be either inclusive of GST or have GST added on top. Generally, a seller will insist on the purchase price being “plus GST if any”. The purchase price can be zero rated for GST in certain circumstances, such as where an interest in land is included in the sale (ie, a lease) or where the sale is made to a purchaser outside New Zealand. GST zero rating can also apply to a going concern, ie, where what is being purchased is able to be operated on its own immediately after the purchase is complete without adding anything to it. As most business require premises, it is generally quite hard to have a situation where there is a going concern which isn’t already zero rated for GST due to an interest in land being transferred. There are many more things to consider, and if you are considering selling your business you should get your house in order sooner rather than later. There may be significantly more at stake that membership in the Triple “B” club!

Richard Hughes

| 12 min read | 11 Dec 2023

The world of cryptocurrency saw more controversy this year with NFT markets collapsing, Sam Bankman-Fried being found guilty of a range of charges that could land him in prison for over 115 years, and Binance - the world’s largest exchange - agreeing to one of the biggest settlements in US history after violating anti-money laws and sanctions violations, by allowing terrorist groups to trade on its platform. And so cryptocurrency’s renaissance begins … Despite all the negativity, most cryptocurrency markets are up year on year in terms of price appreciation. This could be for a variety of reasons - speculation, artificial unregulated markets, or the maturity of the cryptocurrency industry increasing the confidence in the underlying asset. One element fuelling the fire of cryptocurrency markets is institutions looking to create financial products that allow traditional investors to get a piece of the virtual currency pie. Some of these include cryptocurrency spot exchange-traded funds (ETFs) or even the ability to gain crypto exposure in KiwiSaver. A cryptocurrency spot ETF is a type of investment fund designed to directly track the price of digital currencies like Bitcoin for example. It is a regulated and stock exchange-traded product, which means it is subject to oversight by regulatory authorities. In the U.S. this is the Securities and Exchange Commission (SEC), and would be the Financial Markets authority (FMA) if such a product was ever to launch on the NZX. Spot ETFs are typically structured to hold actual cryptocurrency, and investors buy and sell shares of the ETF which should mimic the spot prices of the cryptocurrency. Other opportunities already exist for New Zealand investors with the highest-performing KiwiSaver in terms of short-term (last 12 months) returns through Kouras’s Carbon Neutral Cryptocurrency Fund, with a one-year return of 66.52%. This fund invests in institutional investments that have direct bitcoin exposure. Allowing KiwiSaver investors to put up to 10% of their portfolio into this. It is definitely for those with a more aggressive growth strategy with the fund's Statement of Investment Policy and Objectives (SIPO) outlining the fund “is only appropriate for investors that have a very long investment horizon and who are willing and able to withstand significant volatility. The Fund is expected to deliver a 50% loss every 1-2 years.” While these developments demonstrate how the industry is maturing, this evolution contradicts the founding principle of cryptocurrency: decentralisation. Bitcoin and other digital currencies were never intended to become investment assets sold on a stock exchange, unlike these newer products which rely on centralised institutions controlling and holding large amounts of cryptocurrency. It’s time to start regulating the renaissance All of this points to a growing imperative for regulatory intervention. A hybrid strategy is being explored by The Reserve Bank of New Zealand (RBNZ) to impose regulations on products that inherently have a lack of regulatory oversight. It has proposed a regulatory approach for the opportunities and challenges of new forms of private money like crypto assets. Having experienced the challenges of a deregulated market during our work liquidating failed exchanges like Cryptopia and our views about stablecoins (a type of cryptocurrency), Grant Thornton New Zealand submitted an alternative approach in a submission to RBNZ. Our perspectives recognise the potential significance to private money that stablecoins could have in the current financial landscape. Having seen the wild west of cryptocurrency, we remain advocates of the potential benefits of Distributed Ledger Technology (DLT) to revolutionise the financial industry. To advance products based on this technology, there is a need for robust regulation and risk management to protect New Zealand's monetary sovereignty, and to maintain trust in the global monetary system. Given the global nature of cryptocurrency, we believe that a coordinated, international approach is necessary to effectively address these risks. On 30 June 2023, RBNZ published the outcome of its public consultation. The submissions reinforced RBNZ’s view that there are significant risks and opportunities with treating virtual assets as money. They have now decided against proposing a regulatory response at this point in time. Another reason outlined for taking a cautious approach lies in regulatory developments globally. There is likely to be real advantages to aligning crypto asset regulation throughout the world. As various overseas regimes are implemented, best practice for regulating crypto assets may become clearer. This was reflected in our submission which stated the limited adoption of these new forms of private money including cryptocurrency means it is too early to develop a robust and futureproof approach to capture all potential risks associated with a new form of private money. The UK is signalling they intend to regulate crypto activities in 2024 through formal legislation. Australia is currently running a consultation process for making crypto exchanges and digital asset platforms subject to its existing financial services laws; this will require platform operators to obtain an Australian Financial Services Licence. These developments mean the RBNZ may be forced to change tactics and follow global changes. In the meantime, we will have to see what 2024 brings in the world of cryptocurrency.

Tom Aspin

| 5 min read | 14 Dec 2023

Grant Thornton New Zealand has acquired the management advisory firm Management Toolbox Ltd, reflecting the increasing demand from New Zealand business owners for advice on how to take advantage of the emerging growth trends in their key markets.

Payment Card Industry Data Security Standards (PCI DSS) were established in 2004 by Visa, Mastercard, Discover, JCB International and American Express to consolidate and simplify their individual security programmes. These standards determine how retailers and service providers should store, process, and transmit transactions to protect payment card data.

This report provides practical, achievable advice for investors looking to harness the forces shaping global real estate activity to hone their investment decisions.

Building resilience through technology is something that all businesses should have started thinking about or better yet, actioning, yesterday. As we come into the digital age, businesses have to take the leap in letting go of the status quo.

On Friday 24 May 2019, we filed a petition in the Bankruptcy Court in the Southern District of New York (SDNY) seeking recognition of the New Zealand liquidation in the USA, and we also applied for urgent interim relief. We took these steps to preserve the Cryptopia information that is stored and hosted on servers with an Arizona based business.

On Friday 24 May 2019, we filed a petition in the Bankruptcy Court in the Southern District of New York (SDNY) seeking recognition of the New Zealand liquidation in the USA, and we also applied for urgent interim relief. We took these steps to preserve the Cryptopia information that is stored and hosted on servers with an Arizona based business.