AICD Director Sentiment Report: Key Signals for Australian CEOs

21 November, 2025 Samantha Cordell

Uncertainty isn’t new for Australian organisations, but the pressures facing boards right now are among the most challenging in years. Leaders are balancing persistent global instability, rising regulatory demands, productivity concerns and the complexity of modern workplaces.

Wherever you sit in the boardroom, the tension is clear. The Australian Institute of Company Directors’ (AICD) Director Sentiment Index (DSI) 2nd Half 2025 report, published November 12, shows sentiment has weakened again, slipping to -29.1 after a short-lived improvement earlier in the year. It offers a realistic snapshot of the risks, expectations and shifts shaping Australia’s business environment.

The Shift in Director Sentiment

Over the years, board priorities have shifted dramatically.

In 2023, cost-of-living pressures and recession fears dominated, while compliance was a secondary concern.
By 2024, regulation surged ahead of cyber risk and productivity began to emerge as a structural challenge.
Now in late 2025, compliance and regulatory burden lead boardroom agendas, recession fears have eased and directors are focused on long-term resilience, driving productivity reform, managing cyber risk, and preparing for the impact of AI while maintaining flexible work models.

Key Insights from the Director Sentiment Index H2 2025

Director Sentiment Index fell by 5.2 points in the second half of 2025, reversing earlier gains and sitting at -29.1, its seventh consecutive negative reading.
Confidence in current economic and business conditions remains flat, but 40% of directors expect conditions to weaken over the next 12 months.
Productivity growth (42%), global economic uncertainty (39%), and regulation and red tape (35%) are now the top challenges facing Australian businesses.
75% of directors expect compliance requirements to increase in the next year, reinforcing regulation as the leading factor impacting boards’ risk appetite.
82% believe a major deregulation agenda would boost productivity and economic growth, up from 70% earlier in the year.
Cyber security is back as the #1 issue keeping directors awake at night, and concerns about AI governance have surged, alongside a strong push for innovation and R&D.
63% agree that investment in innovation and R&D will boost productivity, and more than 80% expect a growing focus on digital and AI capabilities within their organisations.

Cyber Security and AI Risks Dominate Boardroom Concerns

Cybercrime has surged back to the top of the boardroom risk list, reclaiming its position as the issue most likely to keep directors awake at night. This shift underscores the growing vulnerability of organisations to digital threats, even as they accelerate technology adoption. For directors, the challenge isn’t just about defending against attacks, it’s about building resilience in an environment where cyber risk is constant and evolving.

Adding to this complexity is the rapid rise of artificial intelligence. Concerns about AI governance have intensified, reflecting both its transformative potential and the risks of misuse or inadequate oversight. Boards are grappling with questions around ethical deployment, regulatory compliance and the operational impact of AI-driven systems. This dual challenge, securing digital environments while ensuring responsible innovation, demands a proactive approach. Organisations that fail to address these risks risk reputational damage, regulatory penalties, and operational disruption.

For directors, the message is clear: Cyber Security and AI governance are no longer optional, they are core pillars of strategic planning and enterprise resilience.

Cybercrime and data security concerns have again become the number one thing keeping directors awake at night
Legal and regulatory compliance and domestic economic conditions are ranked second and third respectively and concerns over the impact of AI have surged.

Source: Roy Morgan AICD Director Sentiment Index Survey 2nd Half 2025

Compliance Remains the Leading Pressure Point

Compliance and regulation have cemented their position as the strongest pressure point for Australian boards, with 75% of directors expecting compliance obligations to rise in 2026. This concern now overshadows traditional economic pressures and even cyber risk, making regulatory complexity the dominant factor shaping risk appetite.

Despite this tightening landscape, optimism persists. A record 82% of directors believe a major deregulation agenda could significantly boost productivity and economic growth. This signals that leaders see compliance not just as a burden but as a potential lever for national performance, if reform is handled strategically.

Boards are no longer treating regulatory risk as a secondary issue. It’s now central to strategy, capital planning and long-term resilience. The focus has shifted from simply meeting compliance requirements to building systems and governance frameworks that can withstand growing complexity and enable sustainable growth.

Compliance and regulation remains the leading factor impacting boards’ risk appetite for nearly 60 percent of directors and is well ahead of other issues. Cost-of-living pressures and inflation continue to ease.
Significantly more directors (75% up from 67%) expect regulatory compliance requirements to increase within their business over the next 12 months

Source: Roy Morgan AICD Director Sentiment Index Survey 2nd Half 2025

Productivity and Innovation Take Centre Stage

Australian boards are sounding the alarm on productivity. 78% of directors now believe poor productivity poses a real risk to the nation’s economic outlook, making it one of the most pressing structural challenges for 2026. This concern is no longer theoretical, it’s shaping investment decisions and influencing how boards think about resilience and competitiveness.

The response is clear: innovation is moving to the top of the agenda. 63% of directors agree that investment in research and development will boost business performance and nearly half of boards plan to increase their focus on innovation and R&D over the next year. At the same time, more than 80% expect a growing emphasis on digital transformation and AI capabilities, signalling a decisive shift toward technology-driven strategies.

This isn’t just about adopting new tools, it’s about embedding innovation into the core of business models. Boards are recognising that productivity gains will come from smarter systems, streamlined processes, and leveraging emerging technologies to unlock efficiency. For organisations, the challenge is balancing ambition with governance, ensuring that innovation is pursued responsibly and securely.

More than three-quarters of directors (78%) believe poor productivity levels pose a risk to Australia’s economic outlook over the next 12 months
Directors believe the quality of leadership and management is key to boosting productivity, followed by workplace culture and technological solutions. The perception that technology drives productivity has been gaining momentum since the second half of 2024.

Source: Roy Morgan AICD Director Sentiment Index Survey 2nd Half 2025

Turning Insight Into Action

1. Prioritise governance and compliance

Streamline compliance frameworks to reduce complexity and cost.
Build forward-looking regulatory risk into strategic planning and capital decisions.
Strengthen reporting and accountability systems to meet rising obligations and avoid penalties.

2. Drive productivity through smarter investment

Audit processes to eliminate inefficiencies and unlock performance gains.
Invest in tools that enable automation, collaboration, and data-driven decision-making.
Encourage innovation while maintaining strong governance and risk controls, especially for AI adoption.

3. Balance flexibility with digital resilience

Set clear policies and workflows for hybrid teams to maintain productivity and culture.
Double down on cyber hygiene with identity management, secure remote access and layered security controls.
Use technology to support creativity and coordination, even in distributed environments.

4. Advocate for smarter regulation

Push collectively for deregulation in planning and industrial relations, areas most constraining productivity.
Engage with policy bodies, trade groups and industry associations to influence reform and reduce red tape.

How Diamond IT Helps Turn Insight into Action

The latest Director Sentiment Index makes it clear: compliance pressures, productivity challenges and cyber risks aren’t going away, they’re accelerating. Boards that act now will be better prepared to navigate complexity, embrace innovation and safeguard their organisations against emerging threats like AI misuse and cybercrime.

At Diamond IT, we help organisations build resilience through smarter technology strategies. From robust cyber security and identity management to compliance-ready frameworks and digital transformation solutions, we partner with you to reduce risk and unlock performance. Whether it’s streamlining processes, securing hybrid work environments, or leveraging automation and AI responsibly, we provide the tools and expertise to keep your organisation competitive and compliant.

Don’t wait for the next wave of disruption, start building a stronger, more secure future today.

Our services include:

Cyber Security Governance
Streamline frameworks, embed governance and prepare for evolving obligations.
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Develop strategies that address regulatory and economic challenges while protecting critical operations.
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Secure hybrid environments with robust identity management, access controls and data protection.
Digital Transformation & Productivity Solutions
Implement tools and processes that drive efficiency, collaboration and innovation.
Cyber Security Awareness Strategy
Build a culture of security through training, policies and practices that keep your team informed and your organisation protected.

We’re more than technology providers, we’re trusted advisors who help you build resilience and prepare for what’s next. Our Business Technology Consultants work alongside your leadership team to turn complex challenges into practical strategies that safeguard your organisation, strengthen your workforce and create sustainable value.