Changes in tech, stakeholder expectations pressure local CFOs: EY

Singapore

THE grass is perhaps not that green on the side of the chief financial officers (CFOs) in Singapore, as they now face added pressures from rapid technological changes and fluid stakeholder expectations.

This was a key finding based on a 2016 poll by EY Financial Accounting Advisory Services (FAAS) titled "How can reporting catch up with an accelerating world?".

The survey sought the views of 1,000 CFOs or heads of reporting of large organisations across 25 countries, including 40 from Singapore.

It said that 32 per cent of Singapore CFOs cited changing stakeholder expectations of information as the top external challenge compared to 18 per cent of global participants.

Some 30 per cent of Singapore CFOs cited the frequency of reporting requirements as another top external problem, compared to 17 per cent of global respondents.

Joon-Arn Chiang, EY Asia-Pacific FAAS managing partner, Ernst & Young LLP said: "Many Singapore companies have overseas business interests or are subsidiaries of multinational corporations (MNCs), and so are subjected to the various reporting requirements of GAAP (Generally Accepted Accounting Principles) and rules in Singapore, their home country, and their country-of-listing. This 'onion-layering' of regulatory risks compels Singapore CFOs to be adept in grappling with the different rules and reporting expectations across jurisdictions."

The poll found that coping with technological changes such as cloud-based systems, data analytics, and artificial intelligence (AI) is the top issue for 35 per cent of emerging markets respondents and the number two issue for those in Europe.

This, as many are encumbered by legacy systems that do not allow reporting teams to extract forward-looking insight from large, fast-changing data sets, said Mr Chiang.

About a third and 40 per cent of global and Singapore respondents, respectively, rank their reporting operating model as "average".

A sizable number also said transforming their reporting model is a major focus.

Over the next two years, 54 per cent of those polled expect to see a very significant or great increase in the use of outsourcing, followed by managed services and onshore or near-shore captive shared services centres.

Among Singapore CFOs, more than half expect to see an increased use in outsourcing (55 per cent), followed by offshore captive shared services (45 per cent), onshore or near-shore captive shared services (43 per cent), managed services (35 per cent) and centralised centres of excellence (25 per cent).

The survey said the top three drivers of what Singapore CFOs hope to achieve by these new reporting arrangements are: the use of data analytics, a more flexible and agile reporting function and future-proofing the reporting function against disruptions and changes.

"High operating costs over more routine transactions are driving the outsourcing of high-volume work to lower-cost countries. The concentration of data prepared in a consistent manner in a centralised location, combined with the use of analytics, presents companies with the opportunity to derive insights and anticipate opportunities that were not viable previously," Mr Chiang said.

Currently, the dominant organising principle for corporate reporting is one that is led by the head office, but decentralisation is expected, with local markets taking on more responsibilities, said the survey.

The poll covered 14 main industry sectors. More than 40 per cent of the organisations the CFOs were with had revenues in excess of US$5 billion a year, with 21 per cent in excess of US$20 billion.