Annual Report 2015

Strategy and Performance

Our material business risks

Telstra operates in a rapidly changing environment characterised by profound change in the way people connect and communicate.

Our industry is dynamic and growing, with network traffic increasing rapidly and the continued evolution of technologies and markets. These trends contribute to the different risks that pose a challenge to achieving our strategic objectives, including our growth ambitions and future financial performance.

The following describes the material risks that could affect Telstra, including any material exposure to economic, environmental and social sustainability risks, and how we seek to mitigate or manage them. These risks are not listed in order of significance, nor are they all encompassing. Rather, they reflect the most significant risks identified at a whole-of-entity level. We have identified these risks through our risk management process. Further detail about our risk management process is set out in the Governance At Telstra section.


Business model

Material business risk and key drivers

The risk that we are not able to respond to technology and market developments in a productive and cost-effective way.

Our exposure to this risk is increasing due to changing market conditions, including accelerated technology advancements, increasing customer expectations of performance, and competitors with disruptive and simpler business models in both domestic and global markets.

Management plans

Our strategy involves a combination of driving efficiencies in our business, monitoring new and disruptive technologies, and actively investing in innovation and technology-driven business opportunities.

To improve our responsiveness and agility, and rationalise our cost base, we are undertaking a multi-year portfolio of work that focuses on simplifying our systems, processes and technology.

We are also focused on developing our capability to innovate internally, while accessing and acquiring the required people capability, technology innovations and business models through our relationships with key suppliers, joint venture partners and acquisitions. This includes addressing capability and capacity requirements to succeed in critical growth areas, such as the NBN and health.


Business resilience

Material business risk and key drivers

The risk of disruption to the services we provide to our customers due to factors such as rapidly growing demand and reliance on telecommunications services, greater exposure to complex international networks, and external shocks, such as extreme weather events and natural disasters.

Sustained or significant disruption to our services can have significant impacts on our customers and the communities we serve, and could also significantly affect our corporate reputation.

Management plans

We are developing and maintaining our capability to anticipate, prevent, withstand, respond to and recover from events that can disrupt services to our customers.

Key areas of focus include: business continuity management, technology and network service continuity, incident management and emergency management. These activities are centrally governed by our Business Resilience Team who seek to ensure we continue to meet our operational needs while taking advantage of opportunities to grow our business.


Data management

Material business risk and key drivers

The risk of collecting, using or managing customer and corporate data in a way that is inconsistent with our regulatory obligations or doesn’t meet the expectations of our customers.

This is a growing risk as our business changes, data volumes grow, cyber-security threats become more dynamic, and some data sets converge.

Failure to manage our customer and corporate data can result in significant reputational, financial and regulatory implications. It can also damage the trust our customers have in us to keep their information secure.

Management plans

We have implemented a number of company-wide controls to manage this risk, including in relation to data security and privacy compliance.

We have mandatory data security awareness training for our staff and business partners, as well as mandatory vendor compliance with our data security requirements. We continually review and update the security controls on our network, based on known security threats and the latest intelligence.

We also have a group-wide program of work to support compliance with our privacy obligations, which is underpinned by our privacy policy and mandatory privacy training. Additionally, we are working to improve our governance and decision making processes with regard to the use of customer and corporate data.

Further information on how we manage privacy and data protection is provided under a href=””>Customer Experience in the Sustainability section.


Regulatory environment

Material business risk and key drivers

The emergence of unfavourable regulatory requirements resulting in increased complexity and cost of doing business.

Telstra is heavily regulated in Australia and as people are increasingly relying on telecommunications the risk of regulatory intervention on issues such as consumer protection, service and competition remains high.

New regulation and enforcement of existing regulation could significantly affect our revenues and costs, pricing and product strategy, or result in additional compliance burden that hampers our capacity to operate in line with our strategy.

Executing our strategy could also heighten this risk as it creates new exposure from governments and regulators in new jurisdictions and less-familiar regulatory environments, both domestically and internationally.

Management plans

Our risk management strategy is focused on limiting the adverse consequences of existing and new regulations so that we can meet the needs of our customers in a way that is efficient and minimises compliance costs.

We proactively develop relationships with relevant regulatory stakeholders and policy makers, community groups and industry. In particular, we engage with: ACCC and Australian Communications and Media Authority on the scope and outcomes from regulation, with all our stakeholders on regulatory reform opportunities, and with government in a way that seeks to achieve optimal policy and regulatory decisions.

We’re also focused on developing our relationships with government and regulators in jurisdictions outside of Australia where Telstra operates.


National Broadband Network

Material business risk and key drivers

Risks related to successfully transitioning and serving our customers in an NBN world.

Transitioning to the NBN exposes us to increased competition from retail service providers and new and powerful over the top competitors’ in the longer term. Our exposure to this risk has also increased as a result of NBN Co’s adoption of the multi-technology model and its faster planned rollout.

This risk can result in a potential loss in market share, increased costs and delivery of a poor customer experience.

Management plans

To remain competitive and reduce our costs we are focused on simplifying our systems, processes and technology. We have programs in place to enhance our customer engagement and to deliver innovative NBN products and services for our customers so we can differentiate ourselves from our competitors.

We are actively focused on adapting and scaling our business so we can cost-effectively deliver services under the multi-technology model NBN.


People Capability

Material business risk and key drivers

The risk that we do not have the capability to drive value from our core and build new growth businesses.

As we move from a largely Australian telecommunications business to a multi-faceted technology company with a global focus, the capability of our people will need to change.

In our core business, we need to be able to simplify our business and deliver innovative products and services. In growth areas, our people capabilities are a critical enabler to achieving our growth targets and realising the benefits of our mergers, acquisitions and joint venture activities.

Management plans

We are focused on delivering the capabilities required to simplify our business, transition to an NBN operating environment and extract value from our core. Key capabilities include the areas of IT network simplification, product development and data analytics.

In terms of building new growth businesses, we are focused on delivering the capabilities required for our Health business, enterprise managed services, software application integration and development, and international growth.

In international markets, we are setting up mobility and remuneration policies and practices that better attract talented people from around the world. We have established an experienced recruitment team in Asia and identified recruitment partners who are able to help us access international talent.

Further information on how we attract and retain capable employees so we can better serve our customers is provided in Our People in the Sustainability section.


Reputation and Communication

Material business risk and key drivers

The risk that we do not effectively protect and enhance our reputation.

Telstra’s reputation with customers and in the community is one of our most valuable assets, but a significant reputational issue could quickly erode our position with long-term consequences.

If not managed effectively, a reputational issue can result in heightened government or regulatory scrutiny and intervention, act as a disincentive to investors, undermine our performance in achieving customer advocacy, and create employee disruption and engagement issues.

Management plans

We know that the link between our reputation and customer advocacy is strong so we continue to foster relationships with our key stakeholders, operate at best practice in issues management, build our reputation through ongoing promotion of positive activity, and leverage our technology and expertise to make positive contributions to the community.

Our core strategy is to build robust working relationships with key decision and opinion makers and ensure clear, consistent messages are delivered in a way that maximises the potential of positive outcomes and minimises the risk of reputational harm.

We have recently created the position of Chief Social Officer, who is responsible for enhancing the way in which we communicate and engage with our stakeholders through the use of social media.

Further information on how we make positive contributions to the community, including minimising our environmental impacts, is provided in Connecting Communities and Environmental Stewardship in the Sustainability section.