30
t h e n ew no rma l
| 2 01 2
cost
escalation
0% 5% 10% 15% 20% 25% 30% 35%
PRIVATE SECTOR
PUBLIC SECTOR
NOT-FOR-PROFIT SECTOR
1)
Market shifts
[
Most highly ranked item ]
2)
Changes in
economic
climate
0%
10%
20%
30%
40%
50%
PRIVATE SECTOR
PUBLIC SECTOR
NOT-FOR-PROFIT SECTOR
[ 4
th most highly ranked item ]
[
Most highly ranked item ]
[
Most highly ranked item ]
0%
5%
10%
15%
20%
PRIVATE SECTOR
PUBLIC SECTOR
NOT-FOR-PROFIT SECTOR
[
Outside the 10 most highly ranked items ]
[ 8
th most highly ranked item ]
3)
Emerging
technologies
0%
5% 10% 15% 20% 25% 30%
PRIVATE SECTOR
PUBLIC SECTOR
NOT-FOR-PROFIT SECTOR
[ 3
rd most highly ranked item ]
[ 7
th most highly ranked item ]
[ 6
th most highly ranked item ]
4)
Access
to nance
5)
Cost escalation
6
a) Partnership -
desired outputs
from ops.
0%
5%
10%
15%
20%
25%
PRIVATE SECTOR
PUBLIC SECTOR
NOT-FOR-PROFIT SECTOR
[
Outside the 10 most highly
ranked items ]
[ 5
th most highly ranked item ]
[ 3
rd most highly ranked item ]
[
Outside the 10
most highly
ranked items ]
PRIVATE SECTOR
PUBLIC SECTOR
NOT-FOR-PROFIT SECTOR
[ 8
th most highly ranked item ]
[
Outside the 10 most highly
ranked items ]
[ 7
th most highly ranked item ]
8)
Cultural Barrier
9)
war for
talent
10)
govt led change
11)
social
responsibility
12)
dialogue with
shareholders
cost escalat ion
Cost escalation was rated ‘one
of the riskiest issues faced’ by
about a quarter of Not-For-Profit
Chief Executives, and was also a
significant issue for the Private
and Public sectors.
The Christchurch earthquakes have had
a major effect on business costs across
New Zealand, not just those in the
South Island. These range from rebuild
and relocation costs to associated
increases in insurance and the costs
of building compliance. Quite separately,
organisations are also faced with rising
commodity costs, particularly in relation
to the New Zealand dollar. In addition,
the introduction of KiwiSaver and
increasingly burdensome costs
associated with auditing and reporting
to government were noted.
This cost escalation is particularly
challenging given the current economic
climate, where revenue generation
is excruciatingly difficult.
Organisations have to operate with a
challenging combination of reduced
i come and rising costs. One Chief
Executive noted that “escalating costs
mean that we may need to compromise
quality of service delivery”, another
noted that they were “depleting the
financial reserves for operations”, and
yet another noted that “with the increase
in costs … the biggest challenge is to
lift performance against a decreasing
umber of clients”.
For the Not-For-Profit organisations
that offer social services, in particular,
crippling compliance costs, such as health
and safety certification, building and fire
codes and resource consent, go as far
as to pose a threat to survival. For these
organisations the government places
caps on pricing of social services and has
not increased their funding for four or five
years, meaning that, for some Not-For-
Profits, the financial situation is dire.
The need to get the
government books into
surplus will continue to put
pressure on departments
to do more with less for
the medium term.
CEO
| Crown Entity
key findings //
5:
cost escal ation