RELO October by Economic Development Regina Inc.

Regina Executive Leadership Outlook October 2015

Table Of Contents Introduction................................................................................................................................................................3 Highlights...................................................................................................................................................................5 Survey Results............................................................................................................................................................8 Section A (Current Events): Oil Prices.....................................................................................................................8 Section B (Policy Related): Instruments for Attracting Business to Saskatchewan.............................................13 Section C (Business Related): Business Challenges or Priorities ........................................................................18 Section D: Economic Outlook...............................................................................................................................22 Executive Confidence Index.....................................................................................................................................27 Demographics..........................................................................................................................................................29 Qualitative Interview Analysis...................................................................................................................................32 Methodology.........................................................................................................................................................32 Section A: Economic Effect of Oil Prices..............................................................................................................33

“When you live by commodities you die by commodities—the province needs to be much more committed to diversification from nonrenewables and moving up the value chain.”

Section B: Tools for Business Attraction and Retention.......................................................................................37 Section C: Business Priorities...............................................................................................................................39

- RELO Interviewee

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Introduction This document reports the frequency of responses to queries in a survey conducted by Praxis Consulting, in partnership with Regina Regional Opportunities Commission in September of 2015. It includes demographic cross-tabulations that tested significant at the 95% confidence level. Fieldwork for this project included 66 surveys completed by CEOs and senior executives in Regina’s business community. Survey responses were received via an online survey, delivered to each participant by email. Responses were collected from September 11 – 26, 2015. A total of 76 survey invitations were sent; the response rate is 87%. Margins of error cannot be applied to this type of non-probability sample. In many cases data is captured on symmetrical, verbally-anchored five-point response scales. • On this scale, responses of 1 or 2 are negative; a response of 3 is neutral, and responses of 4 or 5 are positive. • This report shows frequency of response at every option in the response set, along with a mean, to indicate the overall level of response.

Executive Summary The Oil Challenge and the Diversification Advantage The Regina Executive Leadership Outlook is a partnership project of the Regina Regional Opportunities Commission and Praxis Consulting. The outlook will measure the attitudes and opinions of a representative group of corporate leaders in Regina on a quarterly basis. The first edition of the Regina Executive Leadership Outlook engages thought leadership from our region’s leading executives on the impact of the oil down turn, strategies to withstand it, and their degree of confidence in our economy and investment intentions. Even though the numbers matter, it’s the executives’ ideas that will provide leadership in determining the future of Regina’s economy.

Economic Outlook Despite the oil downturn, 61% of executives have seen their revenues increase or remain the same, and 81% expect their revenue to increase or remain the same over the next year. Roughly 84% of executives expect their profitability to increase or remain the same moving forward, however a significant 29% indicate that their profitability has dropped from a year ago.

Oil Downturn & Diversification Dropping oil prices is considered by 90.6% to have a negative impact on the region’s economy with 40% indicating they’ve made changes to the way their business operates because of dropping oil prices. To adjust to low oil prices executives are diversifying their investment portfolio, focusing on innovation, targeting new customers, focusing on efficiency and diversifying their markets. Despite the oil downturn, the level of negative impact is considered to be low, and overall executives disagree that the region is too dependent on oil with 45.2% disagreeing and 37.1% respond neutrally.

Along with advocating diversification, executives are focused on the strength of the manufacturing sector and the opportunity to leverage the region’s natural assets and develop a stronger agri-value sector.

Investment Attraction Executives believe attracting new enterprise to Regina is important, particularly for the regional economy, but there is a belief that the region can and must do better. With a mean response of 4.75 out of 5, attracting new business is rated to be a very good thing for the economy of Regina & area. Businesses tend to under-rate their contribution to investment attraction contribution, with only 23% saying they have a large or very large contribution, but when asked how they contribute, participants in the survey painted a picture of a highly engaged business community. Local executives listed their support for new investment with such measures as: providing outstanding recreational activities for employees, offering start-up and expansion capital for businesses, showcasing their own success stories, path-finding for new investors, partnering with new investors, and procuring significant product and services from new and existing businesses.

Thought Leadership CEO Executive Confidence Index The Executive Confidence Index is a single statistic calculated to gauge leadership confidence in future economic prospects. It is an average taken from questions asking executives to look ahead 12 months. A value of ‘1’ indicates an expected decrease. A value of ‘2’ indicates an expectation of the status quo, while a value of ‘3’ indicates an expected increase In September 2015, the CEO Confidence Index is 2.23, a positive result well above neutral. Given the oil downturn and slowing economic indicators, this response bodes well for the region, and reinforces the positive hiring, investment and revenue intentions expressed in the outlook.

Conclusion The responses to this edition of the outlook indicate some degree of concern over the oil downturn. Companies have endured reduced revenue, and have adjusted their strategies including staffing levels. It also shows the resiliency and diversification in the local economy. Executives told us that oil remains an asset worth embracing, but the region should continue to diversify by focusing on its assets, moving up the value chain, and doing a better job of investment attraction. Respondents expect to hire more employees and realize increased revenues in the coming months. Executives reaffirmed the Regina Advantage is diversification, and suggested that the Regina region will withstand the oil downturn and the economy will continue to grow.

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Highlights • Executive Confidence Index is 2.23. On a scale from 1 to 3, this number indicates overall optimism from executives in Regina for the economic prospects of their business in the next 12 months. »» The same executives rate current conditions compared to 12 months ago, at 1.97, just under the neutral midpoint of 2.0. Thus, Regina executives rate the economic prospects in the next year higher than they rate their economic growth in the last year.

Current Events: Oil Prices • Dropping oil prices is considered by many to have a negative impact on Regina’s regional economy. 90.6% of executives say dropping oil prices have a negative impact. 7.8% say it has no impact, and 1.6% say it has a positive impact on Regina’s economy. »» The level of negative impact is considered to be middling. The largest group (38.6%) give a neutral rating to the level of impact that dropping oil prices has on Regina’s economy. One third (33.3%) say dropping oil prices has a highly negative impact, while 28.1% say the level of impact is low. Mean response level is 3.05. • A smaller group, though still a strong majority, believes dropping oil prices has a negative impact on their business. Seven in ten executives (70.8%) say dropping oil prices has a negative impact. One in five (20.0%) say it has no impact, while one in ten (9.2%) say it has a positive impact. »» The level of negative impact is considered to be low overall. The largest group (43.5%) give a neutral rating to the level of impact dropping oil prices has on their business. One quarter (26.1%) say dropping oil prices has a highly negative impact, while 30.4% say the level of impact is low. Mean response level is 2.93, meaning overall negative impact on individual businesses is rated to be lower than overall negative impact on the city’s economy. »» The level of positive impact is considered to be neutral. Of those who believe dropping oil prices has a positive impact on their business, two thirds (66.7%) say the level of impact is neutral. Mean response level is 3.05 of 5.

Dropping Oil Prices Negative Impact

Positive Impact

No Impact

Regina Regional Economy

90.6

1.6

7.8

Your Business

70.8

9.2

20.0

• Two in five have made changes because of dropping oil prices. 40% say they have made changes to the way their business operates because of dropping oil prices. • Overall, executives disagree that the economy of the Regina region is too dependent on oil. While the mean response of 2.66 out of 5 indicates overall disagreement, 17.7% do agree that Regina’s economy is too dependent on oil. 45.2% disagree while 37.1% are response neutrally.

“The oil policy in the province stinks—you have a finite revenue source and the resource should be turned into an annuity with sales being banked similar to what we see in Norway.” - RELO Interviewee

Policy Related: Instruments for Attracting Business to Saskatchewan • Overall, executives believe Regina does a poor job as an economic region at attracting new business. »» The largest group, 43.8%, is neutral (rating of 3) in their opinion of the job the region does at attracting new business. »» Over one third (34.9%) believes the region does a poor job, with 1.6% saying they do a very poor job. 23.4% believes the region does a good job, with 0% saying they do a very good job. • Attracting new business is deemed to be very good for the regional economy, with a mean response of 4.75 of 5. »» Attracting new business is also rated to be very good for each sector executives operate in (4.19) and for executives individual businesses (4.11), though to a lesser degree. • Generally, executives feel they have little role to play in attracting new business to the area. A majority (56.3%) feel they have little or very little role to play in attracting new business. 23.5% feel they have a large or very large role and 20.3% are neutral. The mean response level is 2.47. »» Among those who are neutral or feel they have a large role to play in attracting business, eliminating existing barriers to growth is the most common method or instrument identified to be helpful (selected by 71.4%). Other popular methods include property tax abatement programs (57.1%) and market research and analysis (50.0%).

Policy Related: Business Challenges or Priorities • Growth & staffing are among issues most seen as a challenge or priority for executives. When asked about the top three challenges or priorities their business should focus on in the next 12 months, responses from executives produced four major themes, including: Growth/New customers or markets, Staffing/Recruiting/Training, Maintain/improve services or efficiency and Costs/Taxes/Price increases.

Economic Outlook • Nearly two thirds expect Regina’s regional economy to perform at about the same level over the next 12 months. 20.7% expect that Regina’s regional economy will perform better while 13.8% expect it will perform worse. »» Looking back over the last 12 months, 55.4% say Regina’s regional economy is now worse. 41.5% say it is about the same and 3.1% say it’s now better. • The largest group expects their business’ fixed investments will remain the same over the next 12 months. 47.4% expect the same while 40.4% expect investments to increase. 12.3% expect investments to decrease. »» Compared to one year ago, 46.6% say their business’ fixed investments have increased. 37.9% say they have stayed the same and 15.5% say they have decreased. • Equal amounts say the number of employees in their business will remain the same, or increase over the next year. 43.5% expect to employ the same number of people over the next 12 months, and the same number expects that their employee base will increase. 12.9% expect to employ fewer people over the next 12 months. »» 42.2% say they employ the same number of people as 12 months ago. 29.7% say they employ more now, and 28.1% say they employ fewer now than 12 months ago.

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• The majority of executives expect their sales revenue to increase in the next 12 months. 56.7% expect their business sales revenue to increase, while 25.0% expect it to remain the same. 18.3% expect sales revenue to decrease. »» 9 in 20 (45.0%) say the sales revenue of their business has increased over the last 12 months, while one third (33.0%) say it has decreased. 21.7% say it has remained the same. • While the largest group (43.1%) expects their business profitability to remain the same over the next year, a substantial minority (41.4%) expects their profitability to increase. 15.5% expect a decrease. »» 39.3% say their business profitability has increased over the last 12 months. 31.1% say it has remained the same, and 29.5% say it has decreased.

Since last year

In next 12 months

Decrease

Same

Increase

Decrease

Same

Increase

Investments

15.5

37.9

46.6

12.3

47.4

40.4

Employees

28.1

42.2

29.7

12.9

43.5

Sales Revenue

33.3

21.7

45.0

18.3

25.0

56.7

Profitability

29.5

31.1

39.3

15.5

43.1

41.4

Survey Results Section A (Current Events): Oil Prices A1. Over the course of the last few months, we have seen oil prices fall. Would you say dropping oil prices has a negative impact, a positive impact or no impact on the Economy of the Regina Region?

A1a. On a 1 to 5 scale where 1 is Very Low Impact and 5 is Very High Impact, what level of (negative or positive) impact does dropping oil prices have on the Economy of the Regina Region? Asked of the 90.6% saying dropping oil prices have a negative impact on Reginaâ&#x20AC;&#x2122;s economy (A1)

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A2. Still thinking of oil prices, would you say dropping oil prices has a negative impact, a positive impact or no impact on your business?

“Six months ago we would have thought we would be seeing $60 a barrel oil by now. Since we haven’t tells me that this is a longer term play and the markets will flat line over the next 5 years or so.” - RELO Interviewee A2a. On a 1 to 5 scale where 1 is Very Low Impact and 5 is Very High Impact, what level of negative impact does dropping oil prices have on your business? Asked of the 70.8% saying dropping oil prices have a negative impact on their business (A2)

A2b. On a 1 to 5 scale where 1 is Very Low Impact and 5 is Very High Impact, what level of positive impact does dropping oil prices have on your business? Asked of the 9.2% saying dropping oil prices have a positive impact on their business (A2)

A3. Have you made changes to the way your business operates because of the dropping oil prices?

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A3a. What changes have you made? Asked of the 40.0% who have made business changes because of dropping oil prices (A3) • We renegotiated all oil based chemical prices that feed into operations. • We have had to look at diversifying our portfolio, offering discounts to clients for repeat business and or new business and we have had to look for unique ways to maintain relationships during a time when our services are not needed. • Targeting new Customers and providing more innovative solutions. Also improving internal processes. • Stopped hiring. Reduced some staff. • Staff reductions. Re-focus on revenue sources. • Sector focus. • Revised financial forecasts, re double sales efforts, re define target markets, consider different level of resources in key areas. • Reduction in demand for services has resulted in reduction in force. • Reduce the number of employees. • Redefinition of sales strategy resulting from softness in the market. • Our revenues are derived from freight activity and passenger transportation. Freight activity has fallen as business activity has slowed in the region. In addition, low gasoline prices have incented people to drive personal vehicles as opposed to taking the bus as our fares look unfavorable since gas prices have dropped. Our organization has cut all discretionary spending, reduced route frequencies, and eliminated several positions. • More emphasis on non-oil and gas industry development, sharper pricing on oil and gas related business, broadened our search for new business development • More conservative outlook on growth. • Looked at efficiencies as government funding has decreased due to oil prices. • Location of staff and changes to our marketing and sales programs. • Implemented restraint measures to adjust to reduced oil related activity levels and revenue related impacts. • Focus on other markets and industries, • Due to the fact we are a crown corporation, budget restraints have been implemented. • Diversification by adding a new arm of our business to the mix. The new message and visibility has allowed us to stay current while participating in the community • Controllable spending had been reduced by 5% in Qtr 1. In the 3rd qtr, further spending cuts involved reductions in training, travel, conferences, sponsorships, not filling vacant positions and deferral of capital projects. In preparation for the 2016 budget, likely will keep new initiative and capital spending to an absolute minimum. • Changes in the type of development projects we are taking on and restructuring some existing projects in our portfolio. • Adjusted our investment strategies.

A4. Considering recent drops in oil prices, would you agree or disagree that the economy in the Regina region is too dependent on oil? Use a 1 to 5 scale where 1 means you Disagree Strongly, 3 means you are Neutral and 5 means you Agree Strongly.

A4a. If Regina were to make steps towards achieving a more diversified economy, which steps would you like to see? Asked of the 17.7% who agree that the Regina economy is too dependent on oil (A4)

“Generally this is a psychological effect rather than a real effect. There’s a persisting perception that something bad is happening because of what we are seeing in Alberta. This is despite oil and gas not being core to our provincial economy and all other economic indicators are still there like inward migration, manufacturing, etc.” - RELO Interviewee

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• Optimize efforts in areas of natural advantages - e.g. food production. Increase effort on creating skills for next generation through emphasis on education and research. • More support for manufacturing. • Look at leveraging additional integrated services on existing manufacturing and primary development. • Investment in arts industry and incentives for local businesses, downtown and city-centre density, taking focussed steps towards developing the city in line with the City’s official OCP. • Greater efforts to develop value-add businesses on the supply chain. • Ensure all initiatives are not industry specific... General support of manufacturers is the key. • Attract more head offices in other industries. Focus more on technology and innovation. • A more open, less partisan discussion about it. The key to these kinds of discussion is to allow subjects to be considered without automatically aligning them with political ideology. So, if someone proposes to talk about oil, it should not be assumed that they are conservative; or if someone wants to talk about solar it should not be assumed that he leans to the left. We must consider the absolute value of ideas, not their polarity. • 1. Simplify your process 2. Review your tax process and look to incentivize certain business areas 3. Make retail areas easier to access - parking - traffic flow, etc.

Section B (Policy Related): Instruments for Attracting Business to Saskatchewan B1. On a 1 to 5 scale, please rate how well Regina is doing as an economic region at attracting new business. On the scale, 1 means ‘Very Poor’ and 5 means ‘Very Good’.

B2. Now please rate whether you think attracting new business is very good, or very bad for each of the following areas. Is attracting new business very good or very bad for …

B2a. The economy of the Regina region

B2b. The sector you operate in

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B2c. Your business

B3. How large of a role do you feel you and your business have to play in attracting new businesses to the region? On the scale, 1 means “Very little role” and 5 means “Very large role”.

B4. Please describe the role you feel you can play in attracting new business to the region. Asked of the 43.8% who feel they have a medium to large role to play in attracting new business (response of 3,4 or 5 at B3) • We provide outstanding entertainment, theatre school classes for children and families, we are a downtown attraction that brings patrons to restaurants, businesses, hotels etc. • We are a very active participant in funding new business start ups in both Regina and more broadly in SK. • Through providing a high caliber of design for the built environment on par with other major centers in Canada increasing the aesthetic appeal of the city. • STC’s transportation business connects suppliers of goods with their customers. Regina is well-connected to the rest of the Province and Canada by our network. STC’s network, as a mover of people, has also been utilized to bring workforces into the region for major projects when necessary. STC is actively engaging with new businesses looking to commence operations in Regina. These businesses are looking for distribution channels, movement of staff, and in some cases facility space. • Showcase our success story. Use local suppliers. Expand. • Provision of communications, infrastructure. • Providing competitive choices to businesses for telecommunications products and services. • Provide high quality commercial lands for office space. Enhance air connections and flight choices to Canadian, Transborder and International locations. • Promotion of Regina - quality of life, stable economy, stable government attractive business opportunities, etc. • Our mission is to add value through transportation and logistics by getting SK products to the world and vice versa. A big part of that is attracting new business to the region. • Our company is a great example of the opportunity to build an amazing business from the ground up in Regina. • Now that we have been downtown for 9 yrs, we have helped create some awareness of Local and Independent Restaurants amidst the planning execution for the Downtown Area which has been ongoing during that time. More restaurants are moving in which highlights what we do as well as beckons people downtown. • My involvement at Board level in Regina Economic Development (RROC). • Making others aware of the offerings that we have as a manufacturer. • Look for procurement of services/expertise that are competitively priced and consider setting up operations in Regina area to realize move in/out savings. • Key development project and contributor to infrastructure, leading to a perception of quality and advancement in the region. • Investing in real estate for new entrants. • Help establish business plans and support business growth. • Dealing directly with companies considering locating in Regina area. • Bringing in more students increases the need for services. • As an equity finance company we can play a significant role in ensuring new companies know that local financing is available. • As a member of the media, we can try to find more local business stories to cover. However, our role is to remain objective and couldn’t only focus on “positive” business stories.

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• As a manufacturer that produces a unique, high quality product, that focuses on the local market, we are seeing tons of interest in tourism and offshoot businesses. We have already been approached by multiple entrepreneurs looking to either leverage, partner, or finance us to grow other industries. • All potash mines require a number of sub-industries to support them. From machine shops to suppliers to employees - our company has a large footprint. • Add to quality of life in Regina/Saskatchewan. B4a. Which of the following methods or instruments would be beneficial in attracting new business to the region? Asked of the 43.8% who feel they have a medium to large role to play in attracting new business (response of 3,4 or 5 at B3). Respondents could choose more than one.

“The Saskatchewan business sector is incredibly resilient. I have worked in other provinces and Saskatchewan small business and entrepreneurs are more measured in risk they take and take a longer term approach to planning.” - RELO Interviewee

Section C (Business Related): Business Challenges or Priorities C1. What would you say are the top three challenges or priorities that your business should focus on in the next 12 months? Key phrases or themes mentioned include: • Growth/New customers or markets

• Skilled Long-term Staff.

• Staffing/Recruiting/Training

• Shrinking Margins/ cost of input increases.

• Maintain/improve services or efficiency

• Shifts in government regulation.

• Costs/Taxes/Price increases

• Service Transformation.

• All responses:

• Service enhancement.

• Working capital.

• Selling work (given softening in demand).

• Unintended consequences of social media.

• Sell standing inventory.

• Unfair pricing/sale policies from SLGA.

• Security for patrons.

• Training. When skilled staff are not available we have to expand large amounts on training.

• Securing financing.

• Top and bottom line growth.

• Sales results.

• Taxes.

• Revenue Growth.

• Tax negotiations.

• Retention.

• Talent retention.

• Require higher skilled employees.

• Supplier disintermediation.

• Regulatory compliance.

• Succession planning. • Succession planning.

• Refocusing our services to areas of demand among private businesses.

• Succession planning.

• Refining business plan and strategies.

• Successfully concluding current deals.

• Reduction in government funding.

• Strategic acquisitions.

• Reducing costs to stay competitive in high dollar environment.

• Staying relevant in a competitive market where customers are always looking for the cool new thing. • Stay focused on Regina advantages (priority).

• Reduced Government of Saskatchewan spending resulting from oil prices and the pending election. • Reduced capital expenditures by industry and public sector.

• Staffing & Training.

• Recruitment.

• Staffing.

• Recruitment of people.

• Stabilizing our workforce.

• Recruiting and retaining highly skilled professional staff.

• Stabilize location issues with highways ministry.

• Recruiting and maintaining highly qualified staff.

• Stability.

• Pursue earnings related opportunities.

• Social media / internet.

• Professional Training.

• Slow down in Economic Growth. www.reginaroc.com

• Securing capital necessary for growth.

• Professional development training. • Product Innovation & Marketing. • Process Efficiency. • Penetrating non-traditional markets for our product. • Partner retention. • Overcoming “fiscal austerity” mindset. • Organic Growth. • New Technology Advancement. • New products. • New markets. • New market development. • New clients. • New audience members. • National Networking. • Migration of people to Saskatchewan. • Marketing, Business Development and Succession Planning. • Marketing of Regina as the destination of choice for business and tourism. • Market Share. • Manufacturing Process Innovation. • Managing USD/CAD currency volatility. • Managing growth. • Managing costs more effectively. • Managing costs. • Managing a changing media landscape. • Maintenance of customer base. • Maintaining sales momentum in the face of a tightening of the market. • Maintaining revenue levels. • Maintaining current business relationships. • Maintain staff and resources in light of restraints. • Local community engagement. • Live coverage of local events online.

• Learning and better responding to current market (housing and land). • Leadership Development. • Labour Shortage. • Labour. • Keeping current provincial government in power. • Keeping a level of confidence in investment clients. • Inter provincial activity. • Initiate one new project/product offering. • Infrastructure enhancements. • Industry declines that are negatively impacting the breadth of the Canadian Network. • Increasing growth of new business. • Increased extra-provincial and international competition. • Increased efficiency. • Increased competition. • Increase the economic impact of tourism for Regina and Saskatchewan. • Increase product development. • Increase our sales. • Increase experiences for visitors. • Improving our brand. • Improve our service and output to clients. • Improve operational effectiveness. • Identifying growth opportunities. • Hiring/Finding qualified talent. • Hiring. Finding skilled staff to expand our business. • Hiring senior people (leadership). • Hiring and training quality staff / new staff. • Head Office attraction strategy. • Growth of Customer Base. • Growth. • Growing our brand through export sales.

• Government should focus on getting out some business its in (start outsourcing, partnering with private providers).

• Developing more focussed communication plan.

• Government intervention.

• Declining ridership and revenues.

• Global uncertainty.

• Decline in consumer demand.

• Global transportation hub (priority).

• Customer service.

• Generate new sources of revenue.

• Customer change management.

• Food price increases. • Focusing our strengths and efforts. Not getting sidetracked, or bottle necked. • Focus on core strengths. • Finding qualified suppliers. We work in a military manufacturing sector and there is no support for this business in Regina.

- RELO Interviewee

• Cost of Goods. • Cost Management. • Continuing to provide high quality services to existing clients. • Continuing to grow in a profitable manner.

• Finding an increased number of clients.

• Continuing to deliver a high quality of work and level of service to clients.

• Expense management.

• Continued growth.

• Expansion through acquisition.

• Continued focus on efficiency and productivity measures.

• Expanding business procurement relationships.

• Consumer Confidence in the Economy.

• Expand US sales.

• Consistent, sustained growth.

• Establishing processes to effectively manage growth.

• Commodity Prices.

• Escalating labour costs.

• Commodification of the services we provide.

• Ensuring that our internal capacity can keep up with the demand for service/opportunities available to us (including hiring and retention of staff).

• Collaboration with the Crown Sector; accessing internal market opportunities across government.

• Ensuring capital development is completed despite significant competition.

• City of Regina increases in Development Levies / Servicing Agreement Fees and the resulting impact on housing affordability and attractiveness of Regina for inter-provincial migration.

• Employee recruitment/retention. • Economic challenges.

• Client delivery.

• Capital project delivery.

• Downtown parking.

• Business excellence.

• Diversifying our customer base.

• Business development.

• Diversify markets. • Developing strong relationships, more deeply rooted client relationships. • Developing new service offerings.

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• Creation of tertiary industry “attractors” - IT incentives.

• Cost control and management.

• Focus.

“In the long run oil will come back. In the next five years we’ll see very strong oil prices and my instinct tells me we will have better companies and better decisions being made because they will have experienced the pain and know what to do.”

• Declining travel market (challenge).

• Business development - growth of new clients. • Build tourism business opportunities for Regina.

• Better services and other support businesses to enhance local supply chain. • Best in class service. • Being responsive to new business realities resulting from technological innovations. • Becoming more efficient/lean in daily operations. • Become more efficient. • Availability of technical resources. • Attraction of appropriately trained people to work in the Regina practice. • Attracting qualified staff and sub contractors. • Attracting qualified staff. • Attracting new clients/projects. • Attracting new capital. • Attracting more talent. • Attracting more clients. • Attracting more clients. • Attracting and retaining talent. • Attract and retain top management talent. • Attitude. • Adopting new technology. • Aboriginal Employment.

Section D: Economic Outlook D1. Think about Reginaâ&#x20AC;&#x2122;s economy today as compared to one year ago. All things considered, would you say the economy today is worse than a year ago, about the same as a year ago, or better than a year ago?

D2. Thinking about the next year, how do you expect Reginaâ&#x20AC;&#x2122;s economy will perform? Do you think it will perform worse than today, perform about the same as today, or perform better than today?

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D3. Has your businessâ&#x20AC;&#x2122; total fixed investments increased, stayed the same, or decreased from a year ago?

D4. Is your business anticipating to increase, keep the same, or decrease its total fixed investments in the next twelve months?

D5. Does your business employ more, the same, or fewer employees than one year ago?

D6. Is your business expecting to employ more, the same, or fewer employees in the next twelve months?

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D7. Has your business’ sales revenue increased, remained the same, or decreased from a year ago?

D8. Is your business anticipating sales revenue to increase, stay the same, or decrease in the next twelve months?

“We are so diversified in Saskatchewan that we are not affected like Alberta but the prices are creating uncertainty. Saskatchewan people are naturally conservative and suck back into their turtle shells when there is uncertainty— we have a turtle mentality. People aren’t averse to change they are averse to uncertainty and growth doesn’t occur during periods of uncertainty.” - RELO Interviewee

D9. Has your businessâ&#x20AC;&#x2122; profitability increased, remained the same, or decreased from a year ago?

D10. Is your business anticipating its profitability to increase, remain the same, or decrease in the next twelve months?

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Executive Confidence Index The Executive Confidence Index is a single statistic calculated to gauge leadership confidence in future economic prospects. It is an average taken from questions asking executives to look ahead 12 months. These questions ask executives about the future of Regina’s economy (D2), about their business’ future investments (D4), about their business’ future number of employees (D6), about their business’ future sales revenue (D8) and about their business’ future profitability (D10). In each question, a numeric value is assigned to a verbal response. A value of ‘1’ indicates an expected decrease. A value of ‘2’ indicates an expectation of the status quo, while a value of ‘3’ indicates an expected increase. This statistic assumes equal weight across all five economic questions. The result is an average among all responses. In this calculation, the lowest possible result is 1.0 and the highest possible result is 3.0. A result above 2.0 means that executives are optimistic about the economic outlook for their business, while a result under 2.0 means that executives are pessimistic about the economic outlook for their business. In September 2015, the CEO Confidence Index is 2.23, a positive result well above neutral. This number will give us a baseline from which to compare future results.

Current Conditions A calculation similar to the CEO Confidence Index will tell us how executives feel about today’s economic conditions compared to one year ago. In September 2015, executives rate the current economic condition of their business, compared to one year ago, at 1.97, just under the neutral mark.

“Business is attracted to stable policy and long term predictability. We need to commit to the long term instead of making decisions stuck in the short term.” - RELO Interviewee

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Demographics i. What is your professional title?

ii. Which of the following best describes your business?

iii. In what industry does your company operate?

iv. What is the current size of your business?

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v. Where is your head office located?

Qualitative Interview Analysis Methodology The Interviews As part of the Regina Executive Leadership Outlook process, Praxis invites and conducts approximately ten interviews of Reginabased executives quarterly. Participants are chosen randomly and interviewee data is confidential unless otherwise agreed upon by the interviewee for media use. Ten executives were invited for the inaugural interview process and nine chose to participate. The following individuals were the nine interviewees that participated in this quarter’s RELO interviews: • Bryan Richards, Global Transportation Hub

• Jeff Stusek, Information Services Corporation

• Darrin Craig, Dyna Industrial

• Lorne Schnell, Morsky Group

• Dick Graham, Regina Airport Authority

• Mark Macleod, Information Services Corporation

• Eric Dillon, Conexus Credit Union

• Mo Bundon, Harvard

• Frank Hart, Greystone The Method The Regina Executive Leadership Outlook interviews address three areas of inquiry: • Section A: Current event questions • Section B: Policy related questions • Section C: Company priorities question This quarterly study focused Section A on the impact of oil prices. Section B focused on the attraction and retention of businesses. Section C is a general inquiry and repeated every quarter. The Data The data is organized by question. The report provides Key Findings for each question, as well as Comments of Interest and a Summation & Consultant Insights for each section. Key Findings outlines the questions asked during the interviews. Each question is followed with categorized key findings and the frequency of which they were heard throughout all interviews conducted. Accompanying each key finding category are specific supporting comments from interviewees that provide greater key finding detail. Comments of Interest provides notable quotes from the interviewees. Each quote is identified by an ‘interviewee number’ that corresponds to a specific interview participant. This identification process preserves the confidentiality of the interviewees. If the media wishes to identify the author of the quote, permission will be sought from the interviewee prior to publication. Summation & Consultant Insights is a high level overview of the discussion, patterns, and other insights determined from the section analysis.

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Section A: Economic Effect of Oil Prices Key Findings by Question Q: Recently oil prices have dropped to under $50/barrel, is this having an effect on the Regina economic zone? If so, what do you believe is the effect in the short run? Long run? Key Findings and Comments • Yes the economy is being impacted (8) »» It is mostly light oil that has been effected and regionally impacts parts of the province. All the pain is being felt in the WeyburnEstevan, southern Saskatchewan region and not felt up north around Lloydminister and elsewhere. »» It’s the local contractors that service the oil and gas industry that will be most impacted. Retail gas will remain profitable, drilling companies will move to where the business is, and bigger oil companies have gone through these periods of cost cutting and survival mode before. »» This period of depressed oil prices will alter the way businesses operate over the next 5-10 years and see a rebalancing of businesses in southern Saskatchewan. Businesses that survive will be better positioned and make better decisions moving forward. »» Mostly affects the Weyburn and Estevan area but will affect the Regina area coupled with a lack of capital spending. »» In the long term it could cause less manufacturing to be done in the province as companies go into survival mode and weaker firms fold.

“The Regina economy has to shift from becoming too reliant on the public sector and more reliance on the private sector.” - RELO Interviewee

»» The provincial demography will slightly shift with skilled labour leaving the province. • Yes there is impact; however, not as great as what is generally perceived (3) »» Impact not as profound as Alberta. Thousands in Calgary are being laid off while only hundreds throughout Saskatchewan. »» Given the exchange rate the oil price impact is not as great as perceived by the general public. »» More a psychological affect rather than a real affect. Perception of something bad is happening because of great impact witnessed in Alberta. »» The general negative perception and consumer activity does not reflect what other economic indicators are suggesting. Net migration and business activity indicators suggest that Saskatchewan’s economy is growing despite low oil prices. »» There won’t be any drilling until prices rebound but this is not core to our economy like in Alberta. »» This is not a new cycle and the message is more negative than the actual impact. There are positives that come with lowered oil prices that need to be fed into the message.

Q: Is the recent drop in oil prices having an effect on your industry? If so, can you describe? Key Findings and Comments • Our business’ revenues are affected (6) »» The first reaction is for companies to cut their budgets, which means less IT spending and revenue for us. »» Less oil and gas business travel and activity means considerable less revenue for our firm. »» Our oil and gas sales have declined by 75% from a year ago. • Our competitive landscape is being impacted (3) »» There is now an oversupply of contracting companies. You couldn’t find a subcontractor that would answer your phone call before because they were so busy but now they’re calling us. »» Competitors are going into survival mode in an attempt to weather the storm and some have closed down shop locally to focus their resources elsewhere. • Our business’ costs are affected (2) »» Our inputs are lower because we burn a lot of fuel, which actually serves to increase our profits.

Q: Does this decline in oil prices change the way your organization operates? Key Findings and Comments • Yes, we are looking to diversify our revenue sources (4) »» We are looking at other funnels and different markets that are positively affected or not affected at all by oil and gas. »» We have always had an eye to diversification, product diversification and geographic diversification, so we are not vulnerable to one industry. »» We are growing market share by focusing on other markets outside of Saskatchewan. • No, we haven’t changed our operations (3) »» We are dedicated to Saskatchewan for the past 80 years and confident that Saskatchewan business will come out stronger, better, and more competitive. www.reginaroc.com

»» We haven’t suffered that much as a firm, haven’t changed our hiring plans, and we are well diversified internationally. • Yes, we are making cost management changes »» Because our revenues are down we are making short term changes to our cost management structure.

Q: How long do you believe low oil prices will persist? Short, medium, long? Why this projection? Key Findings and Comments • Oil prices will persist below $70 for the next 12-24 months (3) »» It’s hard to crystal ball but I’d say prices will rebound within the next 12-18 months. »» Prices will hover around $70-80/barrel for awhile, which will make provincial oil development viable. • Oil prices will persist below $70 longer than 24 months (3) »» Six months ago predicted that prices would have bounced back from now but the market has taken longer than expected and prices remain deflated. • I cannot make an accurate estimation (2) »» There is no way to predict this but other sectors will lift the economy like mining, government spending, and capital projects. »» I don’t know but we should get used to a competitive landscape for oil and market dictated oil prices that are not artificially inflated.

Q: If it were up to you, what single intervention would you suggest to address any negative effects of declining oil prices? Key Findings and Comments • Invest into non-commodity sectors (2) »» Create clusters, develop value added manufacturing, and/or invest in health sciences. • Distribute Canadian oil to other markets (2) »» Develop channels to push oil west and to emerging markets such as India, Singapore, and China. »» Develop pipelines in Western Canada—they’re 30-40 year long projects that will spur drilling and other ancillary business. • Invest in nuclear energy »» We have all the components to create a nuclear value chain that can drive our economy. • Invest in infrastructure »» We can take advantage of lowered trade prices and build when prices are low. • Develop a provincial communications plan »» Provide a balanced message that reduction in the price of a barrel of oil creates equally issues and opportunities. »» We need to focus on building consumer confidence instead of giving into negativity. »» We need to promote that Saskatchewan is diversified and not impacted in the same way as Alberta.

Comments of Interest • “When you live by commodities you die by commodities—the province needs to be much more committed to diversification from non-renewables and moving up the value chain.” • “The oil policy in the province stinks—you have a finite revenue source and the resource should be turned into an annuity with sales being banked similar to what we see in Norway.” • “Six months ago we would have thought we would be seeing $60 a barrel oil by now. Since we haven’t tells me that this is a longer term play and the markets will flat line over the next 5 years or so. • “Generally this is a psychological effect rather than a real effect. There’s a persisting perception that something bad is happening because of what we are seeing in Alberta. This is despite oil and gas not being core to our provincial economy and all other economic indicators are still there like inward migration, manufacturing, etc.” • “The Saskatchewan business sector is incredibly resilient. I have worked in other provinces and Saskatchewan small business and entrepreneurs are more measured in risk they take and take a longer term approach to planning.” • “In the long run oil will come back. In the next five years we’ll see very strong oil prices and my instinct tells me we will have better companies and better decisions being made because they will have experienced the pain and know what to do.” • “We are so diversified in Saskatchewan that we are not affected like Alberta but the prices are creating uncertainty. Saskatchewan people are naturally conservative and suck back into their turtle shells when there is uncertainty— we have a turtle mentality. People aren’t averse to change they are averse to uncertainty and growth doesn’t occur during periods of uncertainty.”

Summation and Consultant Insights “It’s sexy to try to attract the large publicly traded companies but the greater economic success comes from small business. Instead we should find a way to really drive business support and incubation at the micro business level.” - RELO Interviewee

All interview participants agreed that the downturn in oil prices was having a negative effect on the provincial and Regina economies. There was, however, a sizable subset of respondents that believed the economic impact was minimal and being perceived by the general public as a larger negative impact than what the economy was actually experiencing. Many believed that the exposure to the tremendously negative impact being felt in Alberta was partially to blame for this phenomenon while others noted that the persisting boom-bust Saskatchewan economic cycle of the past has influenced residents to hold more pessimistic outlooks. Many respondents also noted the regional nature of the oil price, the substantial impact on the Estevan-Weyburn area, and a lesser impact on the rest of the province. Despite the effects most interviewees were confident in the provincial economy in the long term and had positive anticipations for continued future growth for the economy and their individual organizations. As to predicting oil prices in the future, all respondents believed that oil prices would rebound to higher than $70 a barrel, however, the length of time for this recovery to occur produced mixed answers. Half saw prices returning to $70 a barrel in the next 1-2 years while the other half of respondents predicted a slower recovery that would take more than 2 years. All respondents indicated that it was nearly impossible to predict the future price of oil as there were many layers of geopolitical and global economic factors at play. Most respondents believed the oil price decline was impacting both their organizations and the industries in which they operated. Most saw a decline in firm revenues, which in turn was mitigated with an increased focus on diversifying revenue sources both geographically and with new product lines. A small subset of respondents saw declining oil prices as a small positive because of cheaper inputs while others experienced no real impact because of the nature of their industries. When respondents were prompted on possible ways to mitigate the effects of oil price volatility responses varied. Many responses followed a strategy of continuing to diversify the provincial economy further, which was similar to responses in previous questions addressing changes to their organization’s operations. Diversification strategies included: value adding to existing value chains in the province such as bio technology, agriculture, or manufacturing; investing in nuclear power and developing a complete nuclear value chain sourced within the province; investing in infrastructure; or diversifying into other oil markets such as Asia.

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Section B: Tools for Business Attraction and Retention Key Findings by Question Q: There are limited resources to direct toward attracting and retaining new and/or expanding business into our economy. Assuming business attraction and retention is a worthy cause, where do you believe these resources should be allocated? Key Findings and Comments • Attracting talent and skilled labour (3) »» We need to be better at competing with other major centres like Calgary for the same skilled labour. • Provide value add to existing value chains (2) »» If we are going to play the commodity game than we need to exhaust the value chain opportunities that exist in the province. »» Pursue an import replacement strategy that identifies what could be manufactured locally that is currently being imported from elsewhere. • Invest in world class infrastructure (2) »» Limited infrastructure is holding us back from business development and investment. »» You have to have the basic infrastructure blocks in place to attract industry or business won’t develop. • Business office relocation strategy »» Larger and mid-sized businesses facilitate the creation of local, ancillary businesses that cluster around larger firms. • Small business development strategy »» Invest in education and professional training, support systems, and reduce red tape that hinders small business development.

Q: As a business leader, I am sure you have observed many business attraction and retention strategies. Is there anything that you have observed in the past the you think is effective? Alternatively, is there anything that you have observed that is ineffective and simply should not be repeated? Key Findings and Comments • Effective: Provincial R&D incentives (3) »» Need greater investment in programs like the SRED (tax credit for research and development) program. »» R&D investments at the University of Saskatchewan have helped the bio-tech sector and been long lasting. »» We need to be more targeted in our research approach and shift from curiosity based research to applied research. • Ineffective: Anti-immigration policy »» Changes in the temporary foreign worker program focused on reducing people who misused the program and in the process antagonized immigrants.

• Effective: Local procurement initiatives »» There should be the ability for the provincial government, crowns, and municipal governments to make decisions on what is best for the economy they are in and remove the requirement to look outside the province for lower cost bids. • Effective: Red tape removal »» There have been some effort and small steps taken to address red tape, however, there has never been a province-wide approach. Business schools, economic development organizations, chambers of commerce, and other organizations have to work collectively together. • Effective: Family focused initiatives »» Government needs to make it easy for people and businesses to come to Regina and integrate into the community.

Comments of Interest • “Business is attracted to stable policy and long term predictability. We need to commit to the long term instead of making decisions stuck in the short term.” • “The Regina economy has to shift from becoming too reliant on the public sector and more reliance on the private sector.” • “It’s sexy to try to attract the large publicly traded companies but the greater economic success comes from small business. Instead we should find a way to really drive business support and incubation at the micro business level.” • “The best economic strategy is to make Regina and area a great place to live. We need to invest in the vibrancy of this community.”

Summation and Consultant Insights The availability of skilled labour and talent in Saskatchewan was seen as the largest barrier to retaining and attracting business in the province and Regina region. Many firms still had difficulty locating skilled workers to fill positions and Regina based firms had challenges competing with companies based in other urban centres in attracting talent to Regina. If given the ability, many of the respondents would allocate resources to making Saskatchewan and Regina a more appealing place to live and become more competitive in attracting talent. • Other notable business retention and attraction tools consisted of: • Investing in infrastructure that would facilitate private business growth and investment; • Identifying opportunities in existing value chains for local firms to capitalize on; • Attracting large to mid-sized businesses to create clusters of locally owned ancillary businesses in Regina; and • Encouraging the development of small business by reducing red tape and investing in professional development. Prompting respondents on strategies that they had witnessed to be effective or ineffective produced a diversity of opinion. However, a majority of participants responded that government initiatives that invested in or incentivized private business to invest in research and development were very effective. Most respondents saw investment in R&D as long lasting and created new opportunities in the Saskatchewan business environment. The development and growth of the Saskatchewan bio tech sector was seen as a direct result of R&D investments and initiatives created by the provincial government. Some other respondents also agreed with the need for investment in provincial R&D but emphasized the need for focused investments and initiatives that would drive applied research and not curiosity based research activities. Applied research and development, some respondents argued, was targeted in areas that had a direct market

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application and provided the greatest return on investment while curiosity based research may not provide the same business stimulus.

Section C: Business Priorities Key Findings by Question Q: What would you say are the top three challenges or priorities that your business should focus on in the next 12 months? Why? Top Company Priorities • Diversifying revenue sources/taking advantage of sales opportunities (4) • Position the organization for anticipated future growth (4) • Internal process improvement/business transformation (3) Other Company Priorities • Attracting external skilled talent (2) • Professional development and training internal human resources (2) • Implementing strategy • Customer service management • Invest to improve commercial assets • Invest in technology/IT initiatives • Cost management

About RROC Regina Regional Opportunities Commission (RROC) is the lead economic development agency for the City of Regina and region. RROC provides leadership to the community with specific accountability for the following core functions: • Support industry growth and diversification through retention, development and attraction of industry and tourism. • Find innovative ways to promote sustainable growth while effectively addressing the challenges of associated with it. • Market and promote the Regina region for business and tourism. • Ensure the Regina region offers a vibrant and diversified economy for investors, is a positive destination experience for visitors and offers a high quality of life for residents. John D. Lee, President and CEO E:jdlee@reginaroc.com P: 306-789-5099 ext.222

About Praxis Praxis consulting is Saskatchewan’s largest locally-based management consulting firm. Praxis works collaboratively with clients in the facilitation of growth and excellence, leveraging an unmatched wealth of experience across multiple sectors. Praxis strives to: •

Inform clients with market research and economic impact studies, providing relevant insights into various sectors and communities.

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Strategize, developing custom solutions tailored to clients’ most unique and complex needs.

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Execute strategic plans, portfolios and projects by facilitating internal project management, change management and communication capacity.

Val Sluth, Managing Principal E: info@praxis-research-strategy.ca P: 306-545-3755