ROUNDTABLE PANELLISTS
- Cedric Foo, group CFO, ST Engineering
- Chew Kum Ee, CFO, SBS Transit
- Tan Yong Hwa, CFO, Tai Sin Electric
Moderator: Megan Cheah, journalist, The Business Times
CHIEF financial officers (CFOs) are often called upon to play a key role in the company, advising strategic direction, supporting management objectives and even spearheading change.
The Business Times speaks to three individuals who have showcased effective financial gumption and leadership. They were named Best CFO, under different market capitalisation categories, at the Singapore Corporate Awards 2024.
As CFO, what are your top concerns and strategic priorities?
Cedric Foo: As CFO, my top priority is to support the group growth strategy, ensuring ST Engineering achieves sustainable and profitable growth. In this regard, sharpening our competitive advantages and achieving scale are key focus areas.
For ST Engineering, portfolio management and making good investments in technology, human capital and processes are key enablers. Enhancing innovation and agility is another top priority, allowing us to navigate changes in technology, geopolitics, macroeconomics, and sustainability issues.
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Thirdly, returns and risks are two sides of the same coin. Even as we seek growth, the CFO’s role in risk management – encompassing market relevance, strategic risks, financial stability, liquidity, currency exchange rates, operational safety, supply chain management, compliance and cybersecurity – is equally important and critical to the company’s long-term success.
Chew Kum Ee: As CFO, one of my key focuses is ensuring that we are constantly improving in our performance both in productivity and efficiency, which can be largely measured through our financial numbers. Notably, together with senior management, I strategically align my organisation’s environmental, social and governance (ESG) targets with financial goals, which I view as essential in sustaining our business, and concurrently, enabling us to achieve a reasonable return on our investments.
Besides the organisational level, I am also committed to my finance team by leading and inspiring my people to transform and improve our work processes and systems to be progressive and productive.
Tan Yong Hwa: My top concern has always revolved around maintaining financial stability and being sustainable. I believe that having growth without the ability to sustain it is not true growth – that would be a mere stroke of luck.
Taking into consideration geopolitical tensions, such as the war between Russia and Ukraine; the impending US presidential election, which may lead to significant policy shifts; and the impact of ESG (environmental, social and governance) on business through increased regulation and growing consumer awareness, my priorities would be risk management and talent development.
Risk management refers to mitigating financial risks to protect the company’s assets, which are primarily located in South-east Asia, and diversifying our supply chain. As for talent development, I aim to instil a culture of continuous upskilling in the finance team to adapt to evolving market needs, particularly ESG regulations and policy changes in South-east Asia.
What key challenge have you faced in the past year and what steps have you taken to address the challenge?
Chew: Elevated electricity prices, coupled with inflationary pressures, remain our key challenges. I am very specific in how we manage this to achieve tangible outcomes. For instance, with senior management, we are always on the look-out for ways to reduce our electricity consumption. Besides optimising energy contracts, we also explore innovative technological solutions that can cut back on energy use.
Last year, I was also heavily involved in six competitive government tenders – four for bus and two for rail. Winning them means we can continue to be in business. I had the responsibility to ensure that our bids were financially sound and competitive. By aligning our financial strategies with initiatives that benefit our commuters, we demonstrate our commitment to deliver value beyond monetary terms while maintaining financial discipline. And I am glad that we have had some successes so far.
Foo: A key challenge we faced in the recent past has been navigating a high interest rate environment, due to the US Federal Reserve’s rate hikes since mid-2022. To address this, we used treasury locks to good effect to hedge against a rising interest rate environment in advance of a bond issue to fund a major acquisition. Maintaining a balanced fixed-to-floating interest rate debt ratio is important for reducing the impact of interest rate volatility on profits.
We also started a US Commercial Paper (USCP) Program to issue short-term unsecured promissory notes directly to US investors. The USCP market, worth US$1.25 trillion according to Fitch Ratings, is highly liquid and enables us to achieve very competitive borrowing rates at flexible tenors of up to one year.
Tan: One of the significant challenges we faced in the past year was the lingering effects of the Covid-19 pandemic, which left many companies financially shaken in terms of their finances. Across South-east Asia, liquidity was tight, with many companies still recovering and some unfortunately went under.
Fortunately, our historical focus on robust cash flow management enabled us to closely monitor credit and balance between sales and collections, thus avoiding significant impact from customers that closed.
CFOs are often tasked with transforming and shaping the financial performance of companies to create lasting value. In what ways have you been able to contribute to this process?
Tan: I always believe in maintaining financial stability and prudence, adhering to the concept of “cash is king”. This belief has driven our focus on cash flow management and any financial policy adopted or undertaken is with prudence in mind. This resulted in our financial stability and the ability to declare dividends to our shareholders every single year without fail, even during the global pandemic. This is how we create lasting value and as the CFO, I will do my utmost best to continue this trend.
Chew: As CFO, my role also involves balancing financial returns for various stakeholders. We are committed to delivering a reasonable financial return to our shareholders and at the same time, delivering value to our commuters too. To achieve this, I strategically drive our financial strategies to support our investments in technology and innovation to deliver safe and reliable journeys for our commuters.
Additionally, I employ data analytics to provide insights for better decision-making and resource allocation. These are some of my efforts which have been instrumental in shaping SBS Transit’s financial performance to create lasting value.
Foo: My approach is multi-faceted. By managing capital intensity, we ensure effective use of capital over time. Additionally, managing the capital structure (debt to equity) of our balance sheet ensures an optimal weighted average cost of capital. These factors combine to ensure sustainable long-term returns and shareholder value.
We also minimise the working capital required to support our operations by improving the cash conversion cycle, including customer collections, and maintaining high inventory turnover.
We implement strategies to ensure a robust supply chain, maintaining business and operational continuity.
In addition, our risk management objective for foreign exchange (FX) and interest rate hedging is to reduce the volatility of profit because of FX rate and interest rate fluctuations. We have in place a hedging strategy that takes into account the volatility of the underlying FX and interest rate movements versus forecasting accuracy.
As companies look to expand their geographical footprint, what role are you playing in your company’s push into new markets?
Chew: Today, we are contracted and paid by the government to operate public bus services through a competitive tender process. This means that our finance team plays a very critical role in ensuring our bids are competitive and value-for-money. To achieve this, I actively partner with various teams from across the departments to understand their operating requirements, conduct scenario planning, and assess risks and opportunities. This collaboration is essential to developing competitive bids where we can retain our market share as the incumbent operator.
In our rail business, securing the contracts to operate the new Jurong Region and Cross Island Lines through competitive tenders will allow us to expand our rail network locally and achieve better cost efficiencies with economies of scale.
Tan: In the company’s push into new markets, I play several roles. I conduct country analysis by researching rules and regulations of the prospective countries, and I develop funding strategies to support the company’s expansion plans. I am also involved in advising and selecting candidates for the prospective country expansion. As CFO, I also have to ensure Tai Sin Electric is compliant with local financial regulations and laws, as well as facilitating the integration of financial systems and processes in the prospective countries to mitigate risks and maintain consistency and control. In addition, I build strategic partnerships and alliances with local financiers to support the company’s market entry and growth potential.
Foo: In our push to expand into new markets, we have strategically pursued significant mergers and acquisitions (M&A), including TransCore in 2021 and Middle River Aerostructures Systems in 2018. As CFO, my role is to support the executive committee in ensuring that these acquisitions are financially sound and aligned with our strategy. I am directly involved in major M&A negotiations and oversee due diligence, risk management, financing, hedging and compliance.
Additionally, I ensure effective communication with stakeholders. providing clear, accurate information on the rationale, benefits and risks for each acquisition. Such transparency is crucial for maintaining trust and illustrating the financial impact and risks of our expansion efforts.
Growth, whether organic or inorganic, can only be successful if we have good managers who can steward and manage the integration and operations. Such managers must not only be domain specialists but also inspiring leaders and culturally attuned, especially for cross-border M&As.
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