FOCUS

PAIB CONFERENCE 2018

TRACK 1: PAIB (PRIVATE SECTOR)

PRESENTATION

LEADERS IN TECHNOLOGY: HOW CAN YOU STAY AHEAD?


GLADYS CHIU
Solution Consultant, SAP Concur

Kicking off Track 1 was Gladys Chiu, Solution Consultant, SAP Concur, who discussed how finance professionals can make an impact in the technology space. “Technology has always been an enabler in helping organisations move forward in their business objectives,” she said. Just as the development of mainframe computers and PCs brought forth industrial automation in the second half of the 20th century, and the proliferation of broadband Internet and ERP systems enabled business process automation in the early 2000s, we are now entering a digital tech-fuelled era of the “intelligent enterprise”.

Cloud computing, mobile technology, social networking, AI, the Internet of Things and other technologies allow companies to achieve, or even accelerate, their business objectives. Ms Chiu enumerated the advantages of machine learning for the finance function, including 24/7, real-time processing of transactions, avoidance of unbiased forecasts or human errors, and time savings from chatbot analytics as well as automated invoice clearance and approvals. These benefits enhance strategic value across the enterprise, or as Ms Chiu put it, “transform challenges today into efficiencies tomorrow”.

As a case in point, she introduced SAP Concur’s robust spend management solutions. The machine learning-powered software helps businesses to simplify their travel and expense management, thus yielding greater visibility and control over costs, faster invoice processing and improved employee productivity.


PRESENTATION

CLIMATE CHANGE AND FINANCIAL DISCLOSURES: HOW DOES IT AFFECT YOU?


FANG EU-LIN
Partner, Sustainability and Climate Change Leader, PwC Singapore

Staggering growth in the global population has led to over-consumption of natural resources and rising greenhouse gas (GHG) emissions, making climate change one of the most serious challenges of our time. Fang Eu-Lin, Partner, Sustainability and Climate Change Leader, PwC Singapore, argued that it is imperative for businesses to consider the financial implications of climate-related risks and opportunities, and incorporate these into mainstream annual reports.

The impact of climate change on organisations is two-fold. There are the physical risks of climate-related extreme weather events like flash floods and heat waves, which respectively cause damage to property and lead to higher energy costs from the use of cooling systems. There are also the transition risks as businesses implement new policies and technologies aimed at mitigating climate change, or expose themselves to climate-induced shifts in supply and demand or potential reputational losses.

Under the Paris Agreement, signatory countries including Singapore have pledged to cut GHG emissions, with many governments levying a carbon tax on large emitters. The Financial Stability Board also established the Task Force on Climate-related Financial Disclosures (TCFD), an industry-led and geographically-diverse group, in 2015. TCFD has issued a set of recommendations for voluntary climate-related financial disclosures that cover four areas: Governance, Strategy, Risk Management, and Metrics and Targets.

“TCFD is helping organisations find out their climate-related risks (physical and transitional), so as to manage the risks better,” said Ms Fang, who encouraged companies to adopt the TCFD guidelines.


PRESENTATION

CORRUPTION IN THE BUSINESS WORLD: WHY DIDN’T YOU REPORT?


LOH YOON MIN
Senior Assistant Director (Internal Audit), Corrupt Practices Investigation Bureau

Singapore’s reputation as one of the least corrupt nations globally for business was not arrived at accidentally. Strong political will was one of the decisive factors. Singapore’s Prevention of Corruption Act criminalise both public-sector and private-sector corruption including bribery. The Corrupt Practices Investigation Bureau (CPIB) is also empowered to continue investigations into other offences detected during the initial corruption investigations. Corrupt proceeds and gains derived thereof are dealt with under the Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act. In addition, CPIB is also actively engaged with the business communities and professional bodies to join in the fight against corruption.

Loh Yoon Min, Senior Assistant Director (Internal Audit), CPIB, gave a sobering talk about the consequences of corruption. Besides the monetary loss incurred through the higher costs of doing business or when settling bribery cases, he highlighted the “irreparable damage” to a company’s reputation, loss of investor confidence and drop in employee morale.

“CPIB needs everyone to do their part to ensure we keep a level playing field and create a corruption-free nation,” said Mr Loh. “Finance professionals are very well-placed to identify cases of corruption. They must not stay silent – they must blow the whistle.” He also suggested several tips for companies to combat corruption:

  • Get board and senior management to set the right ethical tone from the top;
  • Identify risk areas (example, procurement, hospitality expenses) and potential conflicts of interest;
  • Institute proper working procedures (example, internal audit regime and reporting channels, a code of conduct outlining acceptable staff behaviour);
  • Train and educate employees to enhance awareness of corrupt practices.

PRESENTATION

FRS UPDATES: WHAT YOU SHOULD KNOW IN 45 MINUTES

CHAN YEN SAN
Department of Professional Practice, KPMG Singapore

With 2018 soon drawing to a close, preparing year-end financial statements was at the forefront of PAIBs’ minds. Chan Yen San, Partner, Department of Professional Practice, KPMG Singapore, reminded participants that full convergence with SFRS(I)s, Singapore’s equivalent of IFRSs, is now mandatory for Singapore Exchange-listed entities and listing aspirants. She then presented an update on new and upcoming changes to three key accounting standards.

Under FRS 115 Revenue from Contracts with Customers, revenue recognition is based on the concept of performance obligation. This affects the timing of revenue recognition, which may be accelerated for some contracts and deferred for others. It impacts the firm’s gross/net profit, bonus scheme, KPIs, IT systems and internal control processes, among other considerations.

On FRS 109 Financial Instruments, equity investments are most affected. More financial investments are expected to require fair valuation, increasing P&L volatility. Application of the new expected credit loss impairment model is likely to cause an increase in impairment allowances.

Lastly, Ms Chan summarised the accounting changes brought about by FRS 116 Leases, due to take effect on 1 January 2019. Lessees will see their assets and liabilities on the balance sheet, while depreciation and interest expenses will be recognised on the income statement. Companies with operating leases will appear to be more asset-rich, but also more heavily indebted. Total lease expenses will be front-loaded. Financial metrics affected include an increase in lessees’ EBITDA and gearing ratio, and an adverse impact on EPS (in the early years of lease), net assets and interest coverage.

 


PANEL DISCUSSION

BE A CFO WHO THINKS LIKE A CEO 

(From left) Chan Yen San, Partner, Department of Professional Practice, KPMG Singapore; Sanjay Rughani, CEO, Standard Chartered Bank – Tanzania and Deputy Chair, IFAC PAIB Committee; moderator Ei Leen Giam, Partner, Audit & Assurance, Deloitte Singapore; Zann Kwan, Co-founder and CEO, Bitcoin Exchange Pte Ltd; Sanjay Sivanandan, Regional Managing Director, LucaNet AG; Caroline Stockmann, Chief Executive, The Association of Corporate Treasurers; Lee Fook Chiew, CEO, ISCA

Being a CFO does not mean what it used to mean. While CFOs still hold responsibility for optimising a company’s financial performance, they are increasingly expected to fulfil additional roles such as monitoring cybersecurity risks, and act as strategic business advisors or catalysts of business transformation. “CFOs need to have more than financial capabilities… This creates an opportunity to do different things, but (is) also a threat. If you don’t stay up-to-date, the role may become redundant,” said Ei Leen Giam, Partner, Audit and Assurance, Deloitte Singapore, who moderated the panel discussion.

An accountant by training, Zann Kwan, Co-founder and CEO, Bitcoin Exchange Pte Ltd, opined that being open-minded and agile is especially crucial in start-ups like hers. “I require CFOs to not be afraid to make mistakes. Our profession could be obsessed with perfection, or getting things right. But we also need interdisciplinary skills. Think from different vantage points, not just financial.”

Two of the panellists – Sanjay Rughani, CEO, Standard Chartered Bank – Tanzania and Deputy Chair of IFAC PAIB Committee, and Caroline Stockmann, Chief Executive, The Association of Corporate Treasurers – are former CFOs themselves. Both observed that CFOs must be able to effectively communicate the company’s financials to internal and external stakeholders by using jargon-free language and visual aids. Beyond that, CFOs should, like CEOs, look at the “bigger picture” and gain a well-rounded understanding of the business, including the various departments, and its overall risk appetite.

Given today’s increasingly complex business environment, Sanjay Sivanandan, Regional Managing Director, LucaNet AG, challenged CFOs to break out of the traditional accounting mindset of looking retrospectively. “The pace of the economy will only get faster from now, hence, it is vital to have insightful information as quickly and in as real-time as possible. But that is only possible if we adopt the correct technology and tools that eliminate mundane manual task and empower the higher value-added strategic work… Move from being reactive to proactive. Be a core part of forecasting where the future can lead.”

The discussion then veered towards how CFOs can build future-ready finance teams. Mr Rughani’s advice was to “stay agile” in your roles, avoid getting bogged down in the internal world and adopt an “outside-in” perspective so you are more aware of the changing dynamics and can respond. “Spend no less than 30% of the time on non-technical activities so you can help and impact more of your clients with certainty and real business value. Have a network of people who are subject matter experts, inside and outside the organisation – you do not need to know it all; this way you will be able to anticipate and respond to disruptions,” he said.

Another critical capability for CFOs is to be a people person, or to pay attention to what Ms Kwan called the “wetware” of organisations. This involves looking closely at each team member, empathising with their needs and leveraging on their individual skill sets. “Create an environment where individuals in your team get to utilise and leverage on their strengths, rather than focus on filling gaps in their competencies. If you do that, you are more likely to have a diverse and high-achieving team,” added Ms Stockmann.

Above all, CFOs should lead by example and embrace change. “Often, the biggest barrier to change is fear of the unknown. Finance professionals have to be architects of change,” said Mr Sivanandan. “Technology is not a driver of change, it is just an enabler; change comes from within.”