Letter from... Singapore

What keeps Singapore's CFOs awake at night? asks Sonia Kolesnikov-Jessop

What keeps Singaporean chief financial officers (CFOs) awake at night? Like many of their international counterparts, compliance with increasingly complicated accounting standards is a major headache, but CFOs here also currently face two additional challenges: managing offshore expansion and a war on talent.

‘As my company continues to expand overseas and incorporates several new subsidiaries in various parts of the region, one of the things that keeps me awake at night is worrying about the compliance standards in the various countries, especially in countries where transparency is not so clear,’ said Karen Chong, CFO of the clothing retailer FJ Benjamin Holdings. She added: ‘Procedures can be in place, but it is the staff that must ensure compliance. Error in financial statements, fraud, stock loss... we at Head Office have to constantly work with Internal Audit [department] to ensure compliance.’

Chong also complains about the tight local labour market. ‘It is not easy to find financial controllers who are hands on, technically competent, and able to lead and motivate staff. And once you find them, you really don’t want to lose them. Half the battle is won when operating companies have competent financial controllers. However, retaining them becomes a real challenge as they often move on to “greener pastures”,’ she said.

Keith Stephenson, PricewaterhouseCoopers’ advisory partner and Asia Pacific leader of performance improvement, says these concerns are echoed by many other Singaporean CFOs, especially those in local companies expanding abroad. ‘The further away, the higher the risk,’ he said.

‘The five points that regularly come up with CFOs are: first, complying with reporting requirements; second, making sure they get no surprises; and third, getting a clean tick from their audit committee on their general standard of governance,’ he said. ‘The fourth one is moving from being the guardian of numbers to being in the frontline of decision support and the fifth one is managing movement offshore.’

Stephenson says control self-assessment techniques are increasingly used in Singapore to make sure overseas locations ‘stay honest’.

Lim Yen Suan, executive director of KPMG’s Risk Advisory Service, says that many local CFOs express concerns about ‘moving up the finance value chain, staying relevant and keeping pace with the business’, while still fulfilling traditional finance, accounting, control and compliance roles.

The role of the CFO around the world is fast changing, especially in terms of the breadth of his purview, points out Cedric Read, author of a recent book entitled Creating Value in a Regulated World.

‘CFOs have moved past accounting and are thinking about shareholder value. But there is still a wide gap between the world of accounting and that of shareholder value, and international accounting standards [IFRS] are making it worse, not better.’

Most CFOs, no matter what industry they are in, are fatigued with the sheer volume of regulation they have to cope with from IFRS to Basel II and Sarbanes–Oxley requirements.

‘I have to constantly update myself with the new changes in accounting standards and anticipate the impact on the company’s results. Especially in this time of buoyant mergers, acquisitions, expansion, it is even more imperative to understand the financial impact of these changes,’ noted Chong.

Read compares the current challenge CFOs face to riding a ‘twin headed monster’, ‘coping with increasing regulation and compliance, while pursuing growth and innovation’.

A recent KPMG report, Being the Best, provides insights into what characterises top performing finance functions. It suggests that 80% of CFOs in average performing companies were spending too much time on cost control, and 62% felt they were spending too much time on compliance.

‘It’s a catch-22 situation, and their key challenge is to find ways to bridge this chasm. One way may be to depend more on a strong second-in-command, like a financial controller, to assume many of the traditional finance and accounting responsibilities. This will free CFOs to work more closely with their CEOs in decision-making efforts across a broad spectrum of issues and business areas,’ argued Lim.

Sonia Kolesnikov-Jessop is a freelance journalist regularly contributing to Newsweek and the International Herald Tribune.