CPDget verifi able cpd units by reading technical articles

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DIRECTOR INDEPENDENCE GETS OVERHAUL

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THE MAGAZINE FOR BUSINESS AND FINANCE PROFESSIONALS ACCOUNTING AND BUSINESS SINGAPORE 01/2012

GET CONNECTED DOING BUSINESS THROUGH NETWORKS

INTERVIEW NG BOON YEW OF RAFFLES CAMPUSINFLATION TIPS FOR STRATEGIC PLANNING

HOW MUCH?HIGHLIGHTS FROM ACCAS SALARY SURVEY

TAKE THE LEAD EMBRACING INTEGRATED REPORTING

OPINION ACCA PRESIDENT ON INNOVATIONTALENT CRUNCH TRAINING AND RETAINING STAFF

SG_cover.indd 1 02/12/2011 12:54

A&B JanFeb 2012 (BS payroll) ol_output.pdf 2011/12/1 2:09:30 PM

In this issues interview, Ng Boon Yew, founding chairman and CEO of education provider Raffl es Campus and a Public Star Award holder, explains why it is important for him to do his bit in preparing todays youth for a bright future. Page 12

RAISING THE BARSingapore has one of the best corporate governance practices globally. Yet the city-state is making a renewed effort to revamp standards to bolster its status as Asias most trusted financial centre.

A panel set up by the Monetary Authority of Singapore (MAS) has made final recommendations to revise the Corporate Governance Code, last reviewed in 2005. The Corporate Governance Council proposed greater disclosure on remuneration of CEOs and directors a contentious issue. It is also seeking rigorous reviews for directors who have served more than nine years.

A report on corporate governance in Asia last year ranked Singapore the highest in the region, but added that even the best Asian markets demonstrated far from global best practice. Regulators in the region make it too easy for companies to get away with box-ticking. Markets still lack effective rules on fundamentals such as independent directors and audit committees, the report from CLSA and the Asian Corporate Governance Association said. Our cover feature (page 16) takes a closer look at the current revisions and examines whether they go deep enough in meeting global benchmarks.

The council also recommended that independent directors make up at least half of a companys board where the chairman is either also chief executive or a close relative of the latter. That proposed rule would also apply if the two are part of the same management team or if the chairman isnt independent. Alan Chan, chairman of the council, said: Adoption of the revised code will encourage listed companies to adopt higher corporate governance standards, thereby increasing transparency of their operations and accountability of their key executives.

While MAS responds to the changes in due course the recommendations are not mandatory. The effectiveness is largely dependent on Singapore-listed companies voluntarily complying with the code revisions and implementing them. This means that the proof of the pudding is in the eating.

Sumathi Bala, abeditor@accaglobal.com

THINK AHEADInflation has yet to reach worrying levels, but companies should start thinking about their strategies in dealing with the risks. Page 20

REACHING OUTAs international accounting networks become increasingly popular, what can you do to ensure that joining one translates into success? Page 40

NEW YEAR NEW JOBCheck out thousands of jobs and expert careers advice at www.accacareers.com

TECHNICAL WEBINARS

Automating internal reporting processes www2.accaglobal.com/automate

Integrated reporting www2.accaglobal.com/integrated

3Editors choice

SG_B_Edletter.indd 3 02/12/2011 16:15

Audit period July 2009 to June 2010138,255

Features12 Strong foundationsFor Ng Boon Yew FCCA, executive chairman of Raffl es Campus, education is everything

16 Unlocking the codeProposals to improve the Code of Corporate Governance have implications for board members

20 On guardWith the threat of infl ation looming large, preparation is everything

24 All together now Workplace diversity is key to business success

28 Front of houseInternal audit is coming out from behind the scenes

30 Click onAs a training tool, e-learning is set to expand even further

32 World viewThe benefi ts of adopting IFRS are increasingly being felt around the globe

VOLUME 15 ISSUE 1

Editor-in-chief Chris Quickchris.quick@accaglobal.com +44 (0)20 7059 5966

Asia editor Colette Steckelcolette.steckel@accaglobal.com +44 (0)20 7059 5965

International editor Lesley Boltonlesley.bolton@accaglobal.com +44 (0)20 7059 5896

Singapore editor Sumathi Balaabeditor@accaglobal.com

Chief sub-editor Eva Peaty

Sub-editors Peter Kernan, Vivienne Riddoch

Design manager Jackie Dollar

Designers Robert Mills, Jane C Reid

Production manager Anthony Kay

Advertising James Fraserjfraser@educate-direct.com +44 (0)20 7902 1210

Head of publishing Adam Williams

Printing Times Printers

Pictures Corbis

ACCAPresident Dean Westcott FCCADeputy president Barry Cooper FCCAVice president Martin Turner FCCAChief executive Helen Brand

ACCA Connectmembers@accaglobal.com +44 (0)141 582 2000

ACCA Singapore435 Orchard Road#15-04/05 Wisma AtriaSingapore 238877+65 6734 8110 info@sg.accaglobal.com

Accounting and Business is published 10 times per year. All views expressed within the title are those of the contributors.

The Council of ACCA and the publishers do not guarantee the accuracy of statements by contributors or advertisers, or accept responsibility for any statement that they may express in this publication.

Copyright ACCA 2012 Accounting and Business. No part of this publication may be reproduced, stored or distributed without the express written permission of ACCA.

Accounting and Business is published by Certifi ed Accountant (Publications) Ltd, a subsidiary of the Association of Chartered Certifi ed Accountants.

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www.accaglobal.com

AB SINGAPORE EDITIONCONTENTSJANUARY 2012

SG_Contents.indd 4 05/12/2011 17:19

BRIEFING06 News in pictures A different view of recent headlines

08 News in graphicsWe show a story as well as tell it using innovative graphs

10 News round-upA digest of all the latest news and developments

VIEWPOINT23 Errol Oh Financial standards must be fl exible

27 Cesar Bacani Ernst & Youngs regional restructuring means greater governance

35 CORPORATE35 The view from Paul Law FCCA of Luk Fook Group, plus news in brief

36 Delivering the goods How to keep large-scale projects on time and on budget

39 PRACTICE39 The view from Manohar Benjamin Johnson of PwC Malaysia, plus news in brief

40 Network know-how Local fi rms should make the most of international accountancy networks

Regulars

CPDAccounting and Business is a rich source of CPD. If you read it to keep yourself up to date, it will contribute to your non-verifi able CPD. If you read an article, learn something new and apply that learning in some way, it will contribute to your verifi able CPD. Each month, we also publish an article or two with related questions to answer. If they are relevant to your development needs, they can also contribute to your verifi able CPD. One hour of learning equates to one unit of CPD. For more, go to www.accaglobal.com/members/cpd

Your sector

TECHNICAL44 Update The latest from the standard-setters

46 Change for the better A wide range of reforms are helping Asia weather the storms of the fi nancial crisis

48 CPD: IAS 36 Understanding the implications of an amendment on the size of cash-generating units

CAREERS52 Time to change Surefi re ways to beat procrastination

54 World view ACCAs fi rst global salary and career survey shows high levels of career satisfaction among members

56 Talent spotting Securing skills for the future was the key message of the Singapore Accountancy Convention

WorldwideThere are six different versions of Accounting and Business: China, Ireland, International, Malaysia, Singapore and UK. See them all at www.accaglobal.com/ab

ACCA NEWS58 Take fi ve Hints to help you plan your CPD for 2012

59 Dean Westcott Embrace technology to control our destiny, urges the ACCA president

60 International Assembly Senior members gathered in London to discuss the challenges that lie ahead

62 Kaka Singh ACCA can provide for all your development needs, says ACCA Singapores president

63 News Keppel Land comes top at Singapore Awards for Sustainability Reporting; night at the museum for ACCA Singapore members

64 News An ACCA and CSR Asia roundtable focused on ways of introducing integrated reporting

SG_Contents.indd 5 02/12/2011 17:59

01 Dissident artist Ai Weiwei handed over a US$1.3m bond to the Chinese government in order to start an appeal against a US$2.4m tax bill

02 Hong Kong Disneyland opened Toy Story Land, part of a US$500m expansion project

03 Olympus went into meltdown after admitting losses going back more than 20 years

04 Shoppers queued overnight to buy Versace-branded clothes from H&M in Shanghai

News in pictures6

AP_B_newsinpix.indd 6 02/12/2011 14:30

05 Thai government flood relief workers wore distinctive orange waterproof leggings at a public ceremony highlighting the countrys worst flooding in more than 50 years. The government announced a 100 billion baht recovery plan

06 Singapores former minister mentor, Lee Kuan Yew, proposed a S$100m bilingualism fund to promote the teaching of English and mother-tongue languages to pre-schoolers

07 A Christmas tree made of pure gold, worth 1.5 billion yen, went on display at Tokyo jeweller Ginza Tanaka. The gold used in the 2.4 metre-high tree weighed 12kg

08 Palestinian students from Jericho recreated Pablo Picassos Dove of Peace at the foot of the Mount of Temptation. The UN initiative to promote world peace was directed by aerial artist John Quigley

7

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STAYING POWERThe top three countries in the 2011 AT Kearney Global Services Location Index India, China and Malaysia have held their positions since the inception of the index, thanks to their deep talent pools and cost advantages. Asia ranks highly throughout the top 10.

M&A MARKET BUOYANTFinancial services mergers and acquisitions (M&A) in Asia are expected to accelerate in late 2011 and 2012, according to a new report from PwC, Emerging Opportunities: Financial Services M&A in Asia 2011. A large majority of 375 Asia-based senior executives are extremely bullish about the prospects for M&A in their market, with respondents from Malaysia among the most confident.

KEY:CHINA: US$16,733M IN 78 DEALSAUSTRALIA: US$10,442M IN 104 DEALSJAPAN: US$8,207M IN 104 DEALSSOUTH KOREA: US$6,514M IN 29 DEALSHONG KONG: US$5,453M IN 39 DEALSINDIA: US$2,054M IN 88 DEALSTHAILAND: US$1,326M IN 17 DEALSMALAYSIA: US$912M IN 18 DEALSINDONESIA: US$799M IN 51 DEALSTAIWAN: US$716M IN 15 DEALSSINGAPORE: US$547M IN 16 DEALSPAKISTAN: US$279M IN 8 DEALS

RANK: 32SINGAPORE

RANK: 3MALAYSIA

RANK: 2CHINA

40%Percentage of Chinese millionaires considering emigrating to the US, according to Knight Frank.

US$3.5BNAmount planned to be raised by Chow Tai Fook, the worlds biggest jeweller, in a Hong Kong IPO.

30%The leap in Chinas gold imports from Hong Kong in September.

4.5 LITRESAnnual per capita wine consumption in Hong Kong, the highest in Asia.

Mon

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RANK: 1INDIA

EASY BUSINESSSingapore has topped the Doing Business survey for the second year in a row. Through indicators benchmarking 183 economies, the report from the World Bank and the International Finance Corporation tracks changes in the regulations applying to domestic companies in 11 areas in their life cycle.

ASIAN FS M&A BY DEAL VALUE IN 2010

News in graphics8

AP_B_graphics.indd 8 02/12/2011 14:29

8.5%The percentage fall globally for the total tax rate for small and medium-sized enterprises since 2006, according to PwCs Paying Taxes 2012.

1.84%The percentage of UK gross domestic product reliant on accounts receivable finance, according to GE Capital.

50%The level of luxury purchases by Chinese consumers taking place overseas, of which half take place in duty-free shops.

Mon

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Corporate tax 2011

Indirect tax 2011

Corporate tax 2010

Indirect tax 2010

HEAVY-HANDED TAXATION MAKES WAY FOR THE LIGHTER TOUCHAccording to KPMG Internationals annual Corporate and Indirect Tax Survey, corporate tax rates have been steadily falling for a decade, while goods and services tax (GST) and value added tax (VAT) systems have been introduced, rising to higher rates and applying to more items as indirect tax systems mature.

1 ASIA: DOWN FROM 24% 2 LATIN AMERICA: DOWN FROM 25.3%3 EUROPE: UP FROM 20%4 OCEANIA: DOWN FROM 24.2%5 NORTH AMERICA: DOWN FROM 23.7%6 AFRICA: SAME AS 2010

7 ASIA: UP FROM 11.6%8 LATIN AMERICA: DOWN FROM 13.9%9 EUROPE: SAME AS 201010 OCEANIA: UP FROM 12%11 NORTH AMERICA: SAME AS 201012 AFRICA: UP FROM 13.9%

KEY

GLOBAL FRAUDDespite a significant drop in fraud cases, global executives are reporting increased vulnerability to nearly all types of fraud, according to Krolls Global Fraud Report, conducted in conjunction with the Economist Intelligence Unit and surveying the sentiments of more than 1,200 senior executives worldwide.

1 Corruption and bribery 2 Money laundering 3 Internal financial fraud or theft4 Vendor, supplier or procurement fraud5 Regulatory or compliance breach

6 Theft of physical assets or stock 7 IP theft, piracy or counterfeiting8 Management conflict of interest9 Financial mismanagement10 Information theft, loss or attack

22.8%ASIA

1

2

25.1%LATIN

AMERICA

3

20.1%EUROPE

4

23.8%OCEANIA

5

22.8%NORTH AMERICA

6

28.3%AFRICA

7

11.7%ASIA

8

12.8%LATIN

AMERICA

10

12.5%OCEANIA

12

14.2%AFRICA

44%

41%40%

39%38%

25%

50%47%

46%

1 2 3 4 5 6 7 8 9 10

KEYXX% Incidences of fraudXX% Percentage who see themselves as highly or moderately vulnerable

42%20%

4%

10%11% 16%

19%19%21% 23%25%

11

5%NORTH AMERICA

9

19.7%EUROPE

9

INT_B_graphics.indd 9 02/12/2011 15:13

Helen Brand

ECONOMYS PROSPECTS GLOOMYSingapores economy is expected to grow at a sluggish 1% to 3% next year, according to the Ministry of Trade and Industry (MTI). The figure could be even weaker should Europes debt woes worsen or a full-blown financial crisis erupt in the worlds advanced economies, said MTI in its recent forecast. The last time Singapore suffered such weak growth was in 2008, the year the global financial crisis hit, when the economy expanded by just 1.5%.

BE PREPARED, WARNS OECDChinas economic growth is likely to slow to 8.5% in 2012 from 9.3% this year, but the global headwinds it faces could be partly offset by supportive policy steps, the Organization for Economic Co-operation and Development (OECD) said. In its biannual outlook, the Paris-based body added that the worlds second-largest economy also faces risks from a property sector downturn that could lead to resurgence in bad bank loans. It projected that Chinas current-account

surplus relative to gross domestic product (GDP) would fall to 2.6% in 2012 and to 2.1% in 2013, as Beijing tries to rebalance the economy.

HEAT IS ON FOR MASThe Monetary Authority of Singapore (MAS) faces the challenge of maintaining price stability amid a more volatile global environment, prime minister Lee Hsien Loong said. Because of the economic and political uncertainties in the EU and US, and the worries over global deleveraging and rebalancing, financial markets and capital flows will continue to be volatile, and asset price inflation will remain a risk, Lee said in a speech. Energy and commodities prices continue to fluctuate around elevated levels. MAS must address these issues to keep prices stable and maintain preconditions for economic growth.

AUSTRALIA FOLLOWS THROUGH The Australian government stuck to its goal of restoring its budget to surplus in the year beginning 1 July 2012,

slashing spending even as warnings of an imminent European crisis continued to grow. Treasurer Wayne Swan announced spending cuts of A$11.5bn (US$11.39bn) over the next four fiscal years, partly offsetting a A$20bn funding gap that has opened up in the governments accounts since May. He also cut the governments forecast for economic growth in the current fiscal year that ends 30 June to 3.25% from a forecast in May of 4%.

R&D IS THE KEYResearch and development (R&D) has boosted Singapores competitiveness amid rising competition, said prime minister Lee Hsien Loong. Speaking at an event he said: China and India arent just doing low-cost manufactures. Increasingly [they are] hosting many Asia Pacific or global headquarters of multinationals like Microsoft and GE Healthcare. Highlighting the benefits of R&D, Lee said it has created good-quality jobs and diversified Singapores economy to make it resilient amid volatile global conditions. The national R&D expenditure is targeted to increase to 3.5% of gross domestic product (GDP) by 2015.

INDIA FEELS THE PINCHIndias economy grew at the slowest rate for more than two years in the second quarter, confirming the countrys shift to lower growth rates of around 7%. Official data showed economic growth for the quarter to the end of September slowed to an annualised 6.9%, weighed on by almost two years of progressive monetary tightening, low domestic business confidence and a retreat of foreign capital. Additionally, Indias policymakers have been unable to tame inflation raging at near double-digit levels.

UK PARTNERSHIP POSSIBLEChina Investment Corporation (CIC), Chinas main sovereign wealth fund, is keen to invest in infrastructure development in the UK and other developed countries. Lou Jiwei, head of CIC, wrote in the UKs Financial Times

ACCA TO DESIGN QUALIFICATION A new post-university professional accountancy qualification, the Singapore QP, will be developed jointly by ACCA and the Pro-Tem Singapore Accountancy Council. ACCA was awarded the tender to act as consultant, and the two bodies will work together on the development and design of the qualification. The design must take into account: a robust admission criteria; mandatory structured practical experience; tests of professional competence; a pathway to facilitate entry of degree holders from non-accountancy disciplines; and a pathway to enable the re-entry of former professional accountants. ACCA chief executive Helen Brand said: I am sure that the team established to work on this important project will ensure that the right competences and skills are embedded in the Singapore QP.

10 News round-up

SG_B_newsroundup.indd 10 02/12/2011 12:51

P20

that the fund was looking to participate in public-private partnerships in the UK. The British government has been seeking to upgrade infrastructure in a bid to boost growth. CIC believes that such an investment, guided by commercial principles, offers the chance of a win-win solution for all, Lou said.

NO REVERSAL FROM INDIAN PMIndian prime minister Manmohan Singh rejected calls to reverse major retail market reforms, saying that the entry of foreign supermarket giants would help modernise the US$450bn sector and fight stubbornly high inflation. The reforms have drawn howls of protest from opposition parties and from allies within Singhs Congress Party-led coalition. It was his first public statement on the controversy and appeared to show that his government would hold firm on one of its boldest economic reforms in years. The decision on allowing FDI [foreign direct investment] in retail was not taken in any hurry, but well considered, Singh said, adding that investment rules would protect small businesses.

UNEMPLOYMENT WILL WORSENSingapore Labour chief Lim Swee Say has identified structural unemployment as an issue of concern and a problem he expects to get worse given the economic outlook. He added that, for real wages to keep growing, the economy must expand by 3% to 5% over the next decade. Lim said: Inclusive growth is to minimise structural mismatch. In other words, if a growing number of Singaporeans are not able to take on these jobs that are being created in the economy, then theyll be excluded.

QUANTAS PROFITS TO NOSEDIVEQantas Airways forecast a steep decline in the companys fiscal first-half profit, largely driven by costly strikes and the grounding of the airlines entire fleet to force a resolution with trade unions. Australias flag carrier said it expects to post an underlying pretax profit of

between A$140m and A$190m for the six months ending 30 December. That would be down from A$417m a year earlier, or a drop of as much as 66%.

UNITED FRONT FOR EXCHANGESJapans two main bourses plan to merge in January 2013 as they look to boost competitiveness and create one of the worlds biggest exchanges. The Tokyo Stock Exchange Group

and is still looking for investment opportunities. The fact that Olympus happens here or Enron happens in the US doesnt affect our attitudes at all, he said, referring to an accounting scandal at Olympus that has raised questions about Japanese corporate governance standards. Visiting Japan for the first time, Buffett, chairman of Berkshire Hathaway, said that the company is looking for companies

ASIA CAN FIGHT EURO CRISISMost Asian nations have room to use fiscal stimulus to protect their economies from an escalation in the European debt crisis that may have substantial spillovers in the region, the World Bank said. Developing East Asia excluding Japan, Hong Kong, Taiwan, South Korea, Singapore and India will expand 7.8% in 2012 after growing 8.2% in 2011, the World Bank said in its East Asia and Pacific Economic Update report. Asian policy makers have shifted their focus to shielding growth, rather than stemming inflation, as Europes debt woes and a struggling US economy increase the risk of another global recession. While new capital rules being introduced in Europe will constrain the ability of the regions banks to lend in Asia, high reserves and current account surpluses in most East Asian countries will protect them from the impact of possible renewed financial stress, the World Bank said.

(TSEG) and Osaka Securities Exchange (OSE) issued a joint statement saying that they have agreed to conduct a business combination. The Tokyo and Osaka bourses hope that combining the TSE, where most cash stocks including Toyota and Sony are traded in Japan, and the OSE, which is strong in derivatives trading, will enhance the global competitiveness of the nations securities market.

BUFFETT STILL CONFIDENTBillionaire investor Warren Buffett is unfazed by the recent scandal at Japanese camera maker Olympus

that have some kind of sustainable competitive advantage in Japan.

LUXURY LISTING A FIRSTCoach is out to make a splash in Asia and other brands may soon follow. The luxury firm became the first US company to list on the Hong Kong Stock Exchange in December. Coach, which already trades on the New York Stock Exchange, will not be raising any new capital with the listing. Instead, the goal is to raise its profile in a market that is the brands fastest growing and where its products are in hot demand.

11AnalysisFIVE TIPS TO PLANNING FOR INFLATIONInflation is heating up enough for some finance experts to warn that companies should start taking it into account in their strategic planning, which is causing economists and consultants to dust off old books for guidance.

SG_B_newsroundup.indd 11 02/12/2011 12:51

12 Interview

SG_F_NgBoonYew.indd 12 02/12/2011 13:05

Atoy typewriter, given to him by his mother, was all it took to set Ng Boon Yew, a retired KPMG partner, on a path

towards accounting. It led him to a fulfilling 25-year career with one of the Big Four firms and helped foster a deep interest in education.

Even as a boy, Ng clearly had a mind of his own. He enjoyed playing with the typewriter so much that against his fathers wishes, he chose to enrol at Outram Secondary School because it offered commercial studies, with typewriting among the subjects.

That changed the whole course of my life. Lo and behold in a commercial school, we did not just study typewriting but also the principles of accounting, says the founding chairman and CEO of education provider Raffles Campus.

Ng is also chairman of Strategic Foundation, a not-for-profit charitable organisation that he set up to help needy students.

Accountancy fascinated him, and backed by a fondness for mathematics, he came top in his O-level and A-level examinations at Outram.

Because of my passion for commercial studies and business and accounting, I started sitting for the ACCA exams in December of 1972, the year that I sat my A-level exams, says Ng, 57.

In 1975, having completed two-and-a-half years of National Service and with the ACCA Qualification under his belt, he decided to go straight into the accounting profession at the age of 20, instead of going to university.

He joined Peat Marwick Mitchell in 1976, now KPMG, where he stayed for 25 years.

It was there that he was able to use his teaching skills, first noticed by his tutors at Outram. They asked him to coach his schoolmates in accounting and suggested he take up teaching as a profession.

Accounting educatorAs his family were not wealthy, he made a practical decision to enter the accountancy profession. However, teaching remained close to his heart.

Because of my great interest in training and education, over time I headed the professional practice committee of KPMG in Singapore, which was involved in staff training programmes, Ng says.

He also counts himself fortunate to have had the opportunity to create new business segments in KPMG. For example I started the corporate finance division of KPMG. At that time corporate finance was the preserve of investment bankers, Ng says.

He was made a partner at KPMG in 1984 when he was 30 years old. In 2000, he retired from the firm, just after he turned 45.

His decision to retire was also prompted by his appointment as chairman of the Disclosure and Accounting Standards Committee (DASC), a private sector-led committee set up by the Finance Ministry.

Being a partner in KPMG and the chairman of the DASC could have led to a conflict of interest, he explains.

LEADING LIGHTFormer KPMG partner Ng Boon Yew FCCA, recipient of the prestigious Public Service Star award, is now focused on setting up schools in developing nations across Asia

The basicsACCA: AFANg Boon Yew was recently named the chairman of ACCAs Accountancy Futures Academy (AFA). He says: The challenges for the profession lie primarily in human resources. The key focus is to look at the training of future accountants.

Explaining the role of the AFA, he adds: Based on current trends, discussions and controversies, we ask ourselves what reforms are required to tackle the challenges that the profession is facing.

The accountants of todays world are different from the accountants in the world I was in because of globalisation, technology and inter-connectivity, and the complexities of the business world, quite apart from the challenges of the regulatory environment.

More regulations are being introduced but they are not the solution, he adds.

13

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The CV2004PRESENT

Executive chairman, Raffles Campus.

200204CFO, Singapore Technologies.

2000Retired from KPMG.

1984Made partner of KPMG.

1976Joined Peat Marwick Mitchell (now KPMG).

1974Qualified as a certified accountant.

Ng was awarded the Public Service Star by the president of Singapore in 2004.

He is a member of the Institute of Certified Public Accountants of Singapore and a fellow member of ACCA. He is an associate member of several accounting bodies, including the Institute of Chartered Accountants in England and Wales (ICAEW), CPA Australia and the Institute of Chartered Secretaries and Administrators (ICSA).

Ng says the ACCA Qualification provided him with a strong platform on which to further develop his education as a professional accountant. Between 1975 and 1978, he obtained his CIMA, ICSA, followed by ICAEW qualifications.

He praises the ACCA system, which enables students to study on their own, with its open access policy.

Thats the beauty of ACCA, and why Im still very much involved.

Retiring from KPMG also allowed Ng to focus on education and charity work. In 2004, Ng founded Raffles Campus, in line with his strong interest in human resource development.

Arabian schoolsThe company caught the eye of United Arab Emirates-based property developer Emaar Properties, which took over Raffles Campus in 2006. Emaar wanted Ng and Raffles Campus to help manage the schools that it planned to build in the townships and communities it was developing in Dubai and the Middle East and North Africa region.

Ng and his team designed, built and managed two international schools and eight pre-schools for Emaar. The pre-schools accepted children as young as 24 months, as Ng believes that children should begin their education in their early life.

But the scenario changed when Emaar, affected by the global economic crisis, disposed of the Dubai schools in 2010. At the same time, through Strategic Foundation, Ng successfully launched a management buyout for the Singapore operations, comprising Excelsior International School (EIS).

The foundation then decided in June 2011 to sell EIS to exit the Singapore market, as part of a move to reposition Raffles Campus. We believe that in the light of our objectives and vision for the foundation, there are greater needs in developing countries than developed countries, Ng explains.

China, Malaysia and VietnamRaffles Campus is developing two joint venture projects in China and Malaysia. In China, it has teamed up with a listed property developer to build and operate an international school in the south for 5,000 students.

And in April 2011, it entered into a joint venture with Malaysian-listed United Malayan Land, to build what

will be its first international school in Iskandar Malaysia in Johor, near Singapore, to be managed and operated by Raffles Campus. The RM60m project, a flagship school, will have a built-up area of at least 200,000 sq ft.

In addition, Ng reveals that Raffles Campus is in talks with a party in Vietnam to set up an international school there.

The vision and objective of Raffles Campus has not changed. We intend to set up a network of schools. We want to have campuses in key locations where our students will be able to move seamlessly from one campus to another, Ng says.

This will be possible as the schools will share a common curriculum. His vision also encompasses enabling teachers to move easily from one campus to another.

He believes Raffles Campus could build a network of 10 to 15 schools in key developing nations in South-East Asia and North Asia, of which two to three will be flagship schools.

14

SG_F_NgBoonYew.indd 14 02/12/2011 13:05

THE UPBRINGING OF CHILDREN IS IMPORTANT.THATS WHY I AM INVOLVED IN EDUCATION. I HOPEI CAN DO MY BIT TOWARDS PREPARING THEM

The tipsNg Boon Yew says that young accountants must have passion in their chosen area in order to succeed, and not just be motivated by money. They need to stay focused and persevere, while treating each project as a learning experience.

The ability to handle crises can only be achieved through experience. No school or university can teach that, he says.

Many people say, I want to go into this area because the money is good. I think this is the greatest mistake. My view is that significant changes are required in the way we train and educate accountants.

Strategic Foundation owns 70% of Raffles Campus, with the remaining 30% set aside for staff as an incentive, Ng says. Although finances are an important consideration for many people, Im glad to say that my core team is not driven purely by economics. In the case of education, you do not look at only the bottom line. You must have passion, he stresses.

The foundations plans include providing scholarships for needy students, but the criteria will not be based solely on academic excellence.

Ng favours an all-round education for children. He rues the fact that when younger, he focused a great deal on his academic studies and lacked the opportunity to pursue other interests.

The upbringing of children is very important. And that brings me back to

why I am involved in education. I hope my team and I can do our bit towards preparing children for the future, Ng says.

Raffles Campus seeks to develop children in three areas academically, sports, and visual and performing arts.

Personal philosophyHis philosophy regarding the upbringing of his own children was to let them pursue their own interests. His 27-year-old daughter studied marine biology as an undergraduate before obtaining a Masters degree in environmental management. His son, 22, is studying theatre management in Australia.

Whatever little spare time Ng has is spent reading. People call me a workaholic. I do a lot of travelling for business and have not played golf for

a long time. Ive got my charity work as well, Ng says.

He sits on the boards of several public interest entities and listed companies. He is a director of the National Kidney Foundation, and a member of the board of trustees of two cancer centre funds. He is also a member of the Securities Industry Council.

In addition, he puts his accounting expertise to good use by being a director of listed companies, so that he can help them with their financial and corporate reporting matters.

He also serves as chairman of the advisory committee of Outram out of gratitude to the school. I believe that one must not forget where one comes from, he says.

In todays world, everything is interlinked, even in the charity world. For example, I also get schools involved in charity work so that children understand from a young age the importance of charity, he says.

Suki Lor, journalist

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SG_F_NgBoonYew.indd 15 02/12/2011 13:05

From the Asian financial crisis of 1998 to the US-triggered financial meltdown in 2008, and the ongoing European

debt crisis, governance models in both the East and the West continue to be found wanting. While modern Western governance structures have been keenly focused on rules and transparency, markets and regulators in the East have relied more on trust and reputational accountability.

Together with the varying stages of development in different markets, there is clearly no one-size-fits-all solution to a governance model, says Hsieh Fu Hua, chairman of the new Temasek Holdings-backed Stewardship and Corporate Governance Centre in Singapore. Thus we should strive to develop core principles to underpin governance rules and practices appropriate to each market.

In recent months, Singapore has been hard at work trying to improve corporate governance structures. In a latest attempt, the Corporate Governance Council a panel set up by the Monetary Authority of Singapore (MAS), put forward final proposals to make important changes to the existing Code of Corporate Governance for companies listed in the country.

Among the key proposals is a tighter definition of independence for independent directors, along with greater disclosure of board and executive remuneration. Similar plans were proposed and rejected by the ministry of finance at the last review of the code in 2005, but members of the council are confident this time.

Irving Low, head of risk consulting at KPMG in Singapore, believes the reintroduction of the proposed changes are appropriate for the times, given the financial crisis of 2008 and the way the global corporate governance landscape has changed significantly over the last 10 years. The MAS will evaluate the recommendations and release its response in due course.

Under the proposals, independent directors will have to make up at least

half of the board if the chairman and CEO positions are held by the same person, by immediate family members or both are part of the management team. Directors who are substantial shareholders or immediate family members to the CEO will no longer be considered independent, while a director who has served on one board for more than nine years will be subject to rigorous review.

Dose of objectivityChiew Chun Wee, head of policy for Asia Pacific at ACCA, says improving independence within boards is especially crucial in the context of Singapores market, where many listed companies are family owned. Family

owned businesses can definitely benefit from a healthy dose of objectivity in the boardroom someone who can provide an external perspective, and be bold enough to challenge managements actions, he says.

But Low notes that independence is subjective and it remains to be seen how the industry will implement this in both spirit and substance. The reality is that independence is really looking into the state of mind of the individual affecting human behaviour and judgment. There are multiple facets to this and it cannot be completely captured by introducing new or tightening existing definitions, he says.

One issue that remains untouched is multiplicity of directorships. Mak

MARK OFThe ink is barely dry on proposals to improve Singapores

ensure that directors stay independent, rather than

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SG_F_code.indd 16 02/12/2011 12:54

responsibility on to the nominating committee which must satisfy itself that each director is able to carry out his duties, taking into consideration the directors other board representations and principal commitments. This should, says Chiew, raise awareness and put pressure on those who take on unreasonably large numbers of directorships. But it would be helpful for the code to include guidance on what is deemed reasonable by benchmarking international studies and experience.

Factors to highlight include whether the individual is full-time; size and nature of the listed group; and whether the other directorships reside within the group entities. Such guidance

Yuen Teen, an associate professor specialising in corporate governance at the National University of Singapore Business School, believes the proposal could have gone further.

There should be guidelines on the maximum number of directorship directors can hold then companies can use that as a benchmark, adjust it as they see fit and explain why they have gone over, says Mak, noting that Malaysia is reducing the limit from 10 to five listed companies. I do not believe that this is an issue that can be left completely to directors themselves or to the market.

Chiew notes that the proposal partially addresses the issue of multiple directorship, passing the

will help form the baseline from which the nominating committee can build their case, and will help flag out any blatant abuses of the system, Chiew says.

Top prioritiesNeo Sing Hwee, advisory partner, Ernst & Young Advisory, believes that while measures to minimise multiple directorships are in line with good governance, there is no magic number. The more important issue is the calibre, experience, knowledge and integrity of the directors, he says, adding that a renewal framework of continuous identification and training is vital.

Alan Chan, chairman of the Corporate Governance Council, says that the council believes that, over time, a pattern will emerge as companies will now be required to indicate the maximum number of directorships its directors can hold. We feel its a much better way than having five wise men decide the number should be X, he says.

The introduction of the new directorship recommendations will have a definite impact on the local corporate landscape, despite the watering down of an earlier recommendation, following industry feedback, that directors who had served for nine years could no longer be viewed as independent. A recent survey by the Singapore Institute of Directors of 700 listed companies found that 25% of independent directors had served that length of time.

Still, OCBC chief executive David Conner, who chairs the Corporate Governance Councils

FREEDOMCode of Corporate Governance. Can the amendmentssimply mirroring the views of the chairman and CEO?

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SG_F_code.indd 17 02/12/2011 12:54

subcommittee on board matters, does not expect any companies to take the code lightly. Under the proposal, companies will also need to fully disclose the remuneration of each director, instead of within bands of S$250,000 as in the current code. Furthermore, the revised code states that directors remuneration should be aligned with the long-term interests and risk policies of the company.

There will also be new requirements for companies to arrange and fund director training. Neo welcomes this as it will help progressively enhance the overall quality of directors. The important thing is to identify the areas of importance and relevance for the training, he notes.

While the code is not legally binding, the proposals will apply to Singapore-listed companies on a comply-or-explain basis. This means that companies choosing not to implement the changes will have to explain their decision. This approach can, says Chiew, work well as long as regulators and other users especially investors and analysts scrutinise annual reports and identify shabby practices.

Low believes that regulators should put more teeth into such guidelines. I have seen many examples where companies cut and paste word for word each principle in the code to disclose them in their own financial statement, he says, although he concedes that recent changes in the SGXs Listing Manual, coupled with proposed changes to the Companies Act, will support the codes adoption.

However, Mak believes that the proposals do not address a fundamental issue linked to the comply-or-explain requirement itself: the lack of monitoring and enforcement by the SGX. He suggests that just as a code of corporate governance spells out what is expected of investors, directors and other players, it should spell out what is expected of the exchange.

Sonia Kolesnikov-Jessop, journalist

KENNY YAP, EXECUTIVE CHAIRMAN AND MD, QIAN HU

Singapore has become an important financial centre and needs to be in line with what the best practices are among other major financial centres. Thus it is important for Singapore to review the code and enhance it. I have recently replaced one independent director, who

had exceeded the nine years, to prepare for the new code. But different companies

have different constraints. Entrepreneurial companies usually dont have a separation

between the role of CEO and chairman; if you separate them its rather form over substance. In small companies, it also saves cost.

R DHINAKARAN, MANAGING DIRECTOR, JAY GEE MELWANI GROUPGiven the current economic situation, the new

direction of the code is very timely, but it has to be viewed more as a guideline. Having said

that, I would like to see certain aspects as mandatory for example, to make the independent directors truly independent I am supporting the maximum directorship of nine years rule. I also think that multiple directorships should be restricted; that has to slowly happen.

On the other hand, I think there should be flexibility on the separation of CEO and chairman positions,

depending on the size and nature of the company. If the chairman and CEO are the same person, there should be a mitigating clause to

say that more than 50% of directors should be independent.

DOUGLAS FOO, CEO, SAKAE HOLDINGSI dont think there should be a mandatory separation between chairman and CEO for all companies.

Sometimes putting in a separate chairman is more form than substance and it adds to cost.

But I would agree that if you cant separate that role, you need to have much more independence at board level. There is talent out there, but very often because of a small network, people tend to go to each other. When I listed and I had to find independent directors, I didnt invite anybody I knew. Having directors you dont know brings

challenges; Ive never looked for yes men but for professionals who deliver their views. As for the change to remuneration, I would

be uncomfortable giving details, mainly because its a competitive advantage. Of course, if its made mandatory we would comply, but if

not then were unlikely to adopt that rule.

between the role of CEO and chairman; if you separate them its rather between the role of CEO and chairman; if you separate them its rather between the role of CEO and chairman; if you separate them its rather between the role of CEO and chairman; if you separate them its rather between the role of CEO and chairman; if you separate them its rather between the role of CEO and chairman; if you separate them its rather between the role of CEO and chairman; if you separate them its rather between the role of CEO and chairman; if you separate them its rather between the role of CEO and chairman; if you separate them its rather between the role of CEO and chairman; if you separate them its rather between the role of CEO and chairman; if you separate them its rather between the role of CEO and chairman; if you separate them its rather between the role of CEO and chairman; if you separate them its rather between the role of CEO and chairman; if you separate them its rather

18

SG_F_code.indd 18 02/12/2011 12:55

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Asia Ads.indd 2 30/11/2011 11:40

No one imagines that Asians will be pushing wheelbarrows full of banknotes to the grocery store any time soon,

but inflation is heating up enough for some finance experts to warn that companies should start taking it into account in their strategic planning.

Although the biggest emerging Asian economies may be somewhat protected by various kinds of capital restrictions (such as strict loan-to-value limits on mortgages in China), and generally strong sovereign cash positions, experts say that many Asian companies may still face some serious inflation risks in the near future.

So how do you prepare? While most Asian executives have dealt with rocky macroeconomic reversals at one time or another, most people familiar with the sustained inflation of the 1970s are now long retired. To try to figure out the best response, some economists and consultants are now dusting off 30-year-old playbooks to look for guidance. Here are their top recommendations:

1 Dont wait until it hurtsAs with most preventative measures, the time to prepare for inflation is before you think youll need it.

Its a sweet poison, explains Ulrich Pidun, a principal in the Frankfurt office of The Boston Consulting Group (BCG) and co-author of two papers on inflation. You dont feel the threat because it feels so nice at the beginning.

In an inflationary environment, the first symptom tends to be a strong growth in sales. If some of your costs, such as labour, arent climbing as quickly, this can seem like a real gain, says Pidun. Only later will your costs begin to creep up and if they start to outstrip your ability to raise prices, your margins will suffer and you could find yourself in a serious bind.

Squeezed margins are already taking their toll in China, where thousands of factories shut in 2011. A consolidation is taking place in the market, with better run and better capitalised players grabbing market share and becoming volume players, says Shaun Rein, managing director of the China Market Research Group and author of The End of Cheap China.

2 Keep costs downTheoretically, it makes sense to take on more debt just before an inflationary period, on the expectation that those debts will be cheaper to pay off down the line. However, BCG research has found that companies that carried high leverage in the 1970s actually tended to suffer in the stock market.

Lack of cash can reduce flexibility at a time when you need it most, Pidun argues. Your debt becomes cheaper in real terms, but the more important effect comes from whether or not you can afford to do your investments that are required. In this sense, having debt is negative because you may forego certain attractive investments just because you

cannot pay for it, because asset prices inflate as well during inflation.

BCG argues instead that the better policy is to try to cut costs as much as possible, giving the company more flexibility to handle inflationary pressures later on.

Certainly, companies look for possibilities in writing long-term contracts that reign in costs, finding instruments to hedge rising materials costs, and in looking for ways to hold down labour expenditures.

In China, rising wages are seen as a key component of inflation, rising so quickly that many companies are nearing a crisis point. Wage inflation is a huge issue at the moment and actually its getting to the stage where unless its curtailed you could start to see companies struggle and even fall over, says Russell Brown, managing partner of LehmanBrown, an accounting and business advisory firm specialising in Chinese companies.

This is not only an issue in China. A recent survey by Vietnamese employment agency Navigos Search found that in 2011, more than 70% of managers and executives, and 68% of general staff, saw raises of at least 11%.

As a result, some Chinese companies are doing what developed countries did 10 years ago and outsourcing their work to China Western China, that is, where wages are lower and the government is offering tax incentives until 2020 to employers who open new factories and facilities.

In general, although the recent trend has been towards making more costs variable, in an inflationary environment, it is better to try to create more fixed costs, Pidun says.

INFLATION WATCHWith the threat of infl ation looming large in Asia, companies would do well to act now to prepare for the challenges and opportunities that they could be presented with

WAGE INFLATION IS A HUGE ISSUE AT THE MOMENT. UNLESS ITS CURTAILED YOU COULD SEE COMPANIES STRUGGLE AND EVEN FALL OVER

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AP_F_inflation.indd 20 02/12/2011 12:14

Just how serious might those rises be? One key component to watch is where the dollar is trading. A study by Steve Hanke, a professor of applied microeconomics at Johns Hopkins University, found that 50% to 60% of the volatility in most commodities ties back to movements in the dollar. As most major commodities trade in dollar terms, any decline in the dollar will serve to drive up the price of the commodity.

But dont expect Asia to try to diversify out of the dollar anytime soon. Hanke says that reserve currencies typically last a very long time. The average life of these things has been over 300 years each. Its very hard to challenge a dominant world currency, he says.

3 Squeeze your working capitalIf raw material prices rise consistently, companies may start to hoard to protect themselves from further increases. But more inventory in the warehouse translates into more money tied up in working capital and that can make the company much less efficient. Shipping is also

becoming an issue, says Hanke not just because of fuel costs but because long sea voyages can expose cargo owners to shifts in cost and more expensive trade financing.

Growth in receivables may be even more dangerous. For example, if a company with US$1bn in sales grows by 5% a year, it will need US$50m more in working capital. However, if inflation is climbing at 10%, even if the economy is still moving, working capital is suddenly US$150m.

This can really pose a problem if you dont have the cash to finance it. You may forego certain contracts or you may forego certain investments that you just cannot afford anymore, Pidun says.

4 Forget your instinctsInflation creates an economic situation that is so different from the ordinary that it can be difficult even for professionals to come to terms with its full implications.

The most common mistake is to think in nominal values. For example, some researchers have theorised that although

stocks are supposed to be a good hedge against inflation,

they actually did not perform well because analysts made a mistake in

how they evaluated cashflows, according to Hersh Shefrin, professor of finance at Santa Clara Universitys Leavey School of Business.

They didnt adjust future cashflows appropriately for inflation but they did adjust the discount rates for inflation, Shefrin says. In a highly inflationary environment, what that does is it penalises future cashflows very heavily.

Management experience may also introduce biases into your understanding. People ignore historical evidence from either before they were born or before they were paying attention, Shefrin says. People who were around during the 1970s will tend to forecast higher rates of inflation than people who came of age in the 1990s.

This kind of systematic bias even holds true for professionals. All through the 1980s and 1990s, when inflation began to decline, economists kept missing the fact that inflation was slowing down. Throughout the 80s and early 90s you could almost predict the size of the error in the announcement of the [Consumer Price Index] based on the inflationary forecasts done by professionals because they were

21

AP_F_inflation.indd 21 02/12/2011 12:14

consistently off by about the same bias, Shefrin says.

Its not that people dont learn, its just that they dont learn quickly, says Shefrin. They learn slowly and sometimes painfully.

5 Set your pricing strategyMost of all, you will need to reconsider your pricing strategy. The most defensive strategy of course and the one most often recommended is to try to keep pace with inflation, but this is not the only option. In Europe and the US, some packaged food companies have maintained prices but reduced the amount of food in the package.

Other, more inventive solutions may also be possible. There may be an opportunity for a new business model that can give the buyer a greater perception of control, such as the Bristol-Siddeley aircraft engine power-by-the-hour model, a 1965 innovation by the British engine company that leased running time rather than equipment itself, making it easier for the leasing company to forecast prices.

Inflation can even be an opportunity for a producer with a lower-cost structure, who may want to hold on tight and force the higher-priced competitors out of the market. But even if your company is not in a position to do this, it is something to be wary of, given the propensity of Chinese companies to wage high-stakes price wars when they see an opening.

Conclusion stay alertIn the East, there is little room for error. Restructuring tends to be difficult to arrange outside the major cities, Brown says, and little financing is available to do this. Theres a reasonable amount of capital sloshing around, in terms of venture capital and private equity firms, but theres a limited amount of capital around for restructuring or transformations, he says.

Of course, economic forecasts are far from exact; as one old joke puts it, economists have predicted nine out of the last five recessions. Yet the difficulties with sovereign debt and government revenue shortfalls all over the world suggest that the odds are good that theres inflation in your future.

However, if inflation does stop suddenly, it always ends in a recession, according to Pidun. At that

point, the tactics need to change again. While free cash is still going to be welcome, companies typically need to hit the brakes.

Just as the beginning of an inflation is very favourable for consumption, the end of an inflation is very dangerous for it, Pidun says. Instead, think about reducing capacity, preserving cash and identifying distressed competitors you may be able to take over.

Bennett Voyles, journalist

Private equity firms are now spotting opportunities in the tighter credit conditions, says Henry Ong, a mergers and acquisitions (M&A) lawyer for Weil Gotshal & Manges in Hong Kong. With the slowdown in the initial public offerings (IPO) market, many young companies are feeling the pinch as impatient investors look to cash out creating an opening for private equity.

Accountancy firms may be even luckier, with any change in the business climate a potential opportunity. Russell Brown, managing partner of LehmanBrown, plans to open three new offices in western China over the next three years, as more coastal firms move inland in search of lower wages. He is also looking to expand the firms expertise in turnaround management.

As for wage inflation, bad news for the profit and loss account is good news for the personal balance sheet, particularly for executives. A survey by global executive search firm Russell Reynolds Associates found that compensation for executives in India and China continues to rise more than 12% a year. The study also suggested that this may be a good time to move to developed world multinational corporations (MNCs); with the differential between expat and local packages eroding, MNCs may be more likely to up their bid.

*WHEN THE MUSIC STOPS

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AP_F_inflation.indd 22 05/12/2011 15:09

Comment

It has finally happened. Malaysias new accounting framework, the Malaysian Financial Reporting Standards (MFRS), comes into effect this month, marking the convergence with the International Financial Reporting Standards (IFRS).

The MFRS framework comprises standards issued by the International Accounting Standards Board (IASB) that became effective on 1 January. The Malaysian Accounting Standards Board (MASB) has described the framework as a significant milestone for the capital market as entities will be able to assert that their financial statements are in full compliance with IFRS.

This is a landmark achievement after a long haul and countless endeavours, said Datuk Ali Abdul Kadir, chairman of the Financial Reporting Foundation, the MASBs oversight body. Now comes the time when we must equip ourselves with adequate IFRS knowledge so as to position ourselves in the global market environment.

But wait. The MFRS framework does not apply to everybody. The exceptions are entities that are within the scope of MFRS 141, Agriculture (MFRS 141) and IC Interpretation 15, Agreements for Construction of Real Estate (IC 15). They have another year to adopt the new framework.

This was how MASB chairman Mohammad Faiz Azmi explained it: While the board is seeking full

One size does not fi t all[The Malaysian Financial Reporting Standards are now in operation mostly. But the fact that some sectors are not yet required to follow them illustrates the importance of listening and adapting, says Errol Oh

convergence, we need to be mindful of potential changes on the horizon that may change current accounting treatments. These include, he said, the IASBs plans to issue a new standard on revenue recognition that will subsume IC 15 and the likely amendment of IAS 41, Agriculture (the equivalent of MFRS 141) requirements for bearer biological assets (BBA). The board had decided to allow the status quo until the IASB direction is clearer.

Property developers and oil palm growers in Malaysia should

be glad that it is not yet mandatory for them to comply with the new

framework. After all, the two industries have been the most vocal about the impact of the new standards.

For example, developers have expressed concern over the implementation of IC 15, arguing that the primary business model of the Asia real estate industry is different from the build-then-sell one widely practised in the West. On the other hand, the plantation industry takes the view that the IAS 41 treatment for BBA should be distinguished from that of consumable biological assets.

The fact that the IASB is expected to make adjustments is a good sign. One of the chief worries about the

move towards global standards is that a one-size-fits-all framework will disadvantage small, emerging economies whose business arrangements and environments can differ vastly from those of the developed world.

There has to be some degree of consistency and

uniformity if the world is to accept a single

set of financial reporting standards. Yet it would be foolish to pretend that global convergence will have the same effect across the world.

The strength of global accounting standards does not

just rest on their completeness and soundness; it is also dependent on the

stakeholders conviction that they have a say in the crafting of the standards.

Errol Oh is executive editor of The Star

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AP_COM_Errol.indd 23 02/12/2011 12:12

The fact that diversity is now a boardroom agenda item highlights how far the issue has come. Diversity of gender

and race has often been driven by legislation, but many business leaders have come to realise that, as the pace of globalisation speeds up, there is a strong business argument for a varied workforce.

The composition of the workforce has evolved to reflect changes in society. Consumer and client buying habits have developed in parallel, so it stands to reason that employers should recruit staff who mirror society.

Nowadays, diversity in the workplace goes well beyond gender and ethnicity. Diversity today must ensure no bias towards gender identity, sexual orientation and race, to physical or mental disability, religious beliefs, age and cultural experience and behaviour. Employers are now taking diversity a step further by focusing on inclusion.

Many large corporates are keen to embrace this, and to be seen to be doing so. HSBC, for example, has a long-standing worldwide advertising campaign, which shows a variety of images such as a tattooed face, the Leaning Tower of Pisa and a briefcase full of money, among other images, posing questions like, Right or wrong?, Good or bad? with the strapline, The worlds local bank.

When the campaign was launched in 2002, HSBC said: Underpinning the advertising is HSBCs philosophy that the world is a rich and diverse place in which cultures and people should be treated with respect. The point of the campaign is to recognise that different cultures and peoples see things in completely different ways. Its poignant, clever and forward thinking.

For the accountancy profession there is a further incentive to embrace diversity and inclusion. What employers need from todays accountants and finance professionals is sufficiently different enough to require a new kind of accountant. The skills and experience required of todays accountants have moved on and whereas a decade ago the profession, business and the boardroom were dominated by middle-aged men, todays business world is different.

Differing discussionEwan Willars, director of policy at ACCA, says: The discussion has moved on in the last five to 10 years. Previously it was about gender and ethnicity, but now its in terms of widening the role

of accountants in business. The role of the finance function in business has changed and employers are noticing that they need a wider set of skills to respond to the marketplace and address an underlying need about the way the business works.

While in the past differences in the workplace were seen as a source of friction, says Willars, now employers want to capture the heat of that friction and channel it to elicit fresh and different ways of thinking.

The 2007 credit crunch and ensuing global recession highlighted the need for people with different experiences, views and behaviours to sit in boardrooms and on non-executive

committees, to avoid groupthink and challenge decisions.

The internal audit function has also laboured in the past under groupthink, says Willars. They all went to the same university, trained in the same way and there was little friendly confrontation or questions over the way they did things. That has since changed and now they identify people with a range of backgrounds and experience, he says.

Since the crisis, companies have recognised the need to inject diversity into their businesses on every level, and a growing body of evidence shows that a more diverse workplace leads to better business performance.

We need people who can spot market changes so we need a mix of people. The challenge is that as

humans we like to work with people who are like us and think like us, so the shift has moved towards diversity of thinking, explains Sarah Churchman, head of diversity at PwC.

The Big Four firms recognised years ago that, as global organisations competing to sell their products and services, they must have workforces that reflect their clients views, experiences and needs.

One of the key drivers for the Big Four firms initially was attracting and retaining staff, but their philosophy on diversity has clearly moved on to encompass thinking and behaviours, not just a physically diverse workforce, but one with myriad experiences.

THE NEW DIVERSITYEmployers have long been forced to provide equal opportunities, but many now see diversity as an increasingly important component of business success

ITS ABOUT MOVING PEOPLE AWAY FROM THINKING THIS IS A MINORITY ISSUE. ITS NOT FOR MINORITIES. IT IS ABOUT THE SUCCESS OF BUSINESS IN THE 21ST CENTURY

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AP_F_diversity.indd 24 02/12/2011 12:13

Diversity today no longer means just differences in race or gender. It encompasses the whole human experience. Multiple dimensions such as generation, culture, personality, skills, training, educational background and life experiences need to be considered.

To thrive and innovate in todays global economy with its various challenges, companies require flexibility, creativity and imagination qualities that can be nurtured only by a diversity of viewpoints, experience, skills, cultures and education.

If an organisation does not leverage the potent weapon of diversity, it risks limiting its creative potential, and ultimately, losing its competitive edge.

Furthermore, as companies become more global and expand into new markets, they demand a more global mindset and greater diversity from their partners, clients and customers too.

Differing voices and viewpoints are powerful factors in steering innovation. They generate lively debate, healthy conflict, fresh ideas and potentially, new products and services that result in visible benefits to the bottom line.

Open to changeBy receiving and implementing innovative ideas from a variety of individuals with different backgrounds, skills and experiences, leaders can drive steady growth and profitability for their organisations.

An organisations performance can improve as a result of diversity. Diverse viewpoints lead to broader perspectives on business issues, better ideas, better teams and better decisions.

Inclusiveness is all about making the diverse mix work. Diverse teams stimulate innovation and new ways of problem-solving. But they need an inclusive culture to help them function at their best.

In todays globalised world, the people we work with and for come from a diverse range of backgrounds and cultures.

At Ernst & Young, we actively recruit and develop a workforce that mirrors the world we live in and has the skills and mindset to work effectively across

any borders. We encourage our people to move around the organisation, both geographically and functionally, to help foster the global mindset needed to work in crossborder and crosscultural teams. We send them on international assignments, allow them to experience a wide variety of roles and to develop new skills and competencies through exposure to different cultures, industries, individuals and ways of thinking. We also have formal training and learning programmes in place to support them.

Soo Fern Lee, partner and ASEAN people leader at Ernst & Young Advisory Services, Malaysia, kicks off our round-up of how fi nancial professionals from around the world view the various aspects of diversity

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AP_F_diversity.indd 25 02/12/2011 12:13

Last spring PwC rolled out its Open Mind e-learning training to all staff and partners. Until you are aware, you cant change. Its cultural change, Churchman adds.

Sarah Bond, head of diversity and inclusion at KPMG, agrees. Its a broader understanding that its about value and differences. Theres an understanding that creating an inclusive environment isnt about limiting it to just gender and race. People think diversity is only about minorities but we are keen to see it as about our culture.

Practical issuesBut challenges remain. Its all very well having a diverse workforce, but if it isnt managed well then the outcome can be a workforce that is split into silos of different types of people, because management hasnt overseen a simultaneous policy of inclusion.

Keeping it on the boardroom agenda is also tough, especially in economically challenging times. Diversity and inclusion, in difficult economic circumstances, slip off the priority list. Its a continual challenge. Its not about single interventions; its about changing the culture. Its easy to think of diversity and inclusion as setting up networks or running events which arent to be underestimated but if you are really talking about change then you need to do something big, says Bond.

KPMG is also running a programme of training about raising awareness of unconscious bias. Its about moving people away from thinking this is a minority issue. Its not for minorities. It is about the success of business in the 21st century, Bond adds.

Embracing diversity delivers better results and ensures companies are fit for the marketplace, now and in the future. But management shouldnt just hire a varied workforce for the sake of it. Companies, if they havent already begun to think about it, must now start to assess their workforce and their business needs for the benefit of business and the workforce alike.

Michelle Perry, journalist

Jim Yang ACCAGeneral manager, financial department, China LifeThe evolution of China Lifes finance function has resulted from the swift development and increasing competition in the insurance market in China. As we work on the transformation of our business operation system to maintain our competitive edge, our finance function has to provide the relevant information for decision-making and we need the right people in the right place. Different functions have different requirements for financial talents. A diverse workforce in the finance function helps you pick the right person for the right job.

Wairimu NjagePeople and change manager, PwC KenyaWhen we consider diversity, we look at the full range of human and organisational differences and similarities. The real payoff comes through creating an environment of inclusion, and the process of leveraging each unique individual to strive toward a common goal. Diversity management is an important part of talent management and there is a demonstrated clear link between investing in diversity and inclusion and corporate performance. Investments in diversity tend to result in greater agility, better market insight, stronger customer and community loyalty, innovation, and improved employee recruitment and retention.

Imran Husain CFO, Unilever PakistanThe finance function has proved to be a great example where diversity has really benefited the organisation as a whole; from gender balance to hiring talent from various backgrounds and industries. The finance function ensures, working with human resources, that it makes itself attractive for people of diverse backgrounds and qualifications outside and within the organisation and provides the training that is required. We recognise that diverse teams play an important role in enhancing our companys brand perception and competitive edge.

Hung To ViFinance and control manager, BP Exploration VietnamBP has systematically developed strong local talent pools, including in the finance function. These local talents will best serve BPs interests in emerging countries, where there are complex local issues, different practices and cultural variances. However, local talents need to be developed to understand BPs culture and requirements. This has been carried out by the movement of staff, not only from head office to the regions to set up new operations, but also back from the regions to head office.

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Comment

I asked to interview Lou Pagnutti, Ernst & Youngs Asia Pacific area managing partner, because I thought enough time had passed for an assessment to be made of the Big Four firms regional network restructuring. National practices in 20 Asian economies were grouped together under Pagnuttis purview in July 2010, replacing the traditional model of member firms operating essentially as autonomous fiefdoms.

We have had a tremendous start, said Pagnutti, formerly managing partner of EY Canada. For the fiscal year that ended in June, we are up approximately 18% across Asia Pacific in US dollar terms. Equally important, he said, the area structure is ensuring that we get the right resources to the client at the right time.

However, to my mind, the most interesting aspect of the experiment EY has also integrated national practices in the Americas and EMEIA (Europe, Middle East, India and Africa), but kept Japan as its own region is the potential to strengthen governance.

I have written about controversies that dogged accountancy firms, including EYs Hong Kong member firms work on electronics maker Akai and its US practices audit of Lehman Brothers. More recently, its Japanese member firm has defended its role as auditors to troubled Olympus, the camera and medical equipment company, noting that it did not feel the need to resign as the groups auditor. EY only took over as auditor from KPMG in 2009.

One common thread in these

Greater governance reduces risk[By integrating national practices in 20 Asian economies, Ernst & Young has created a second layer of oversight that may reduce the chances of auditors behaving improperly, says Cesar Bacani

scandals is: how did the auditors fail to spot the blindingly obvious?

My theory is that having an area or regional superstructure provides a second layer of oversight to counterbalance the pressures or blandishments that auditors may be subjected to. EY has agreed to pay an undisclosed amount in the Akai case after a local partner was accused of faking

documents, allegedly at the behest of Akai executives.

It certainly gives us the opportunity to have broader consultations in terms of what we should or should not be doing and how we can effectively mitigate risk and make the right decisions, Pagnutti said.

At the end of the day, you have to make decisions locally, but there are certain things that were doing, such as making sure that all the countries in Asia Pacific operate in accordance with the area policies and methodologies.

You can have better flows of information, he added. And

absolutely we have quality and risk management processes that happen at the area level.

That means we are developing stronger practices

across member firms.What about billing, cost-sharing

and individual prerogatives? We know how to share fees, said Pagnutti. Sometimes there are challenges we have to overcome, but by working together more, you build both policies and procedures as well as trust.

EY managed to avoid the exodus of talent that hit Grant Thornton last year when it adopted a similar one-firm approach in China and Hong Kong. That initial challenge surmounted, the firm is on the way to rendering seamless, consistent, quality service on a global basis, said Pagnutti.

If, in so doing, EY also averts audit missteps such as the Akai case, the

area integration approach would be that much more invaluable to the profession.

Cesar Bacani is editor-in-chief of CFO Innovation Asia

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INTERNAL AUDITORS OF THE FUTURE HAVE THEIRWORK CUT OUT FOR THEM. THEY WILL BE EXPECTEDTO SHOW INTEGRITY AND INDEPENDENCE

Accountancy isnt just a profession; its a vocation. Done right, nobody knows it exists. Done wrong, nobody

lets you forget. And unfortunately, the profession has been in the spotlight for the wrong reasons rather a lot in the past decade, beginning with Enron in 2001. There are, however, some valuable lessons to be learned. Considering how fraud was perpetrated in these cases, one segment of accountancy, internal auditing, looks set for an infinitely more expanded, if not completely new, role within the corporate set-up.

For a very long time, the accountants position was inviolate. No one thought to question, much less challenge, the decisions that were made by finance at the highest level. But then came a slew of financial scandals that rocked the corporate world and pointed to fraud with the collusion of top management and suddenly anyone who ever crunched numbers came to be viewed with the same kind of distrust traditionally reserved for politicians.

Realising the long-term implications of this one of the major ones being loss of confidence in the profession efforts were put in motion by the accountancy profession itself to remedy the situation. The implementation of the Sarbanes-Oxley Act in 2002 tightened many controls, primarily internal ones, and emphasised detailed documentation. Unarguably, the tedium of auditing was increased by the acts requirements, but stripping every

transaction down to bare bones was deemed necessary if transparency was to be put back into corporate dealings. With the acts implementation, internal audit started to move from being a back-room function to a boardroom one. Internal auditors found themselves more frequently called on to explain the vagaries of operations at board level, so that risks could be more efficiently identified and managed, while decisions could benefit from better-defined

information. The overhaul of the internal auditors role had begun.

The question is whether this relatively new role can be sustained, and much hinges on the quality of current and future internal auditors. Most large companies have auditing departments, which is where fresh accounting graduates start. Auditing is an integral part of their training, but most of them move on after their required three-year stint.

However, the career path for those who choose internal audit is beginning to look very different from the traditional, number-crunching and compliance role.

Internal auditors of the future will need the right skillsets. It wont be enough to know what goes where; it will be necessary to know what the implications of each and every

transaction are, how they will impact on the business in the short and long terms, and how difficulties can be mitigated before they have a chance to turn into major problems.

Looming challengesWhile an external auditor provides assurance to the board and by extension, stakeholders, of the integrity of financial statements, the internal auditor provides independent

assurance to the board. Viewed from this perspective, even external auditing has to depend on the integrity of internal auditing, especially on financial control reviews. Auditors are now an inalienable part of the good governance process, and will need to provide comfort to the board regarding the integrity of financial statements of the corporation. Compliance requirements are already stringent, and they will not get easier anytime soon.

Because compliance is such a big part of auditing, it is not unreasonable to expect internal auditors to understand how every department is run, and to be able to plan (or at least suggest) improvements in efficiency in the long term. This level of understanding, and the ability to advise accordingly, will not develop overnight but those who have already gone

BACK ROOM TO BOARDROOMThe Sarbanes-Oxley Act helped move internal auditing into the spotlight; but how can auditors ensure they have the right skills to keep on top? asks Wee Hock Kee FCCA

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through the auditing mill will find themselves at an advantage.

The role of compliance in the organisational governance agenda is gaining importance, particularly where the laws of different countries are concerned. Companies have to respect the regulations of the respective countries where they operate; the onus will therefore be on internal auditors to ensure that these are adhered to, as compliance is mainly a board governance agenda.

Every aspect of operations will have to be scrutinised in order for internal auditors to form an opinion on their effectiveness, and this has to be done in a consolidated manner which can be integrated, without duplication, into the assurance matrix for risk and control management.

Career developmentJuxtaposed with the requirements of traditional auditing, this seems a tall and rather daunting order but the more complex the operation, the more opportunity it holds. Because

of the nature of this expanding role, several other skillsets will be required versatility, flexibility and rapid analysis, among others. This also opens the internal audit field to those accountants who have acquired expertise outside auditing.

Simultaneously, corporations will need to start mapping out their own internal auditing strategies, which must include ensuring adequately skilled personnel who will be able to maintain continuity. One approach may be to allow them to move to other line functions with the intention of returning to internal audit as more senior auditors in the near future.

Internal audit may be seen by some as a low-profile function, but it has wide-ranging implications. At present, there is a general lack of interest in the area because it may not be deemed sexy enough. However, trends indicate that all countries and economies are concertedly moving towards more stringent compliance, better corporate governance and higher ethical standards. Stakeholders are growing

more vociferous, and the general public has already signalled its distaste and intolerance for fraud and what it perceives as bad corporate behaviour.

Strong-minded and fearlessInternal auditors have their work cut out for them. They will be expected to show high levels of integrity and independence, in addition to being multitasking, strong-minded and fearless enough to blow the whistle when white-collar crime rears its head. Soft controls, such as tone at the top, morale, ethical climate, trust, integrity, corporate cultures, are unlike clearly defined, hard controls. Internal auditors are expected to perform this under board governance review. Obtaining reliable information about soft controls is one of the most daunting challenges internal auditors must confront.

The staid world of internal audit has some exciting things in store.

Wee Hock Kee is the former Malaysia president of the Institute of Internal Auditors

Wee Hock Kee is CEO of BackToHealth and MD of CG Board Asia Pacific in Malaysia. Despite his current entrepreneurial roles, he retains a passion for auditing. Wee was fast-tracked, via an accounting technicians course, to ACCA, and carried out his studies partly in Singapore, and partly in the UK. Auditing positions at Fraser and Neave, ICI, Cycle & Carriage Group, Guinness and AstraZeneca followed. He was also president of the Institute of Internal Auditors (IIA) Malaysia from 200406, president of the IIA Asian Confederation (200607), a board member of IIA Global (200507) and was the organising chairman of the 2011 IIA International Conference.

*ONE-MINUTE CV

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While e-learning is no longer a novelty, the unrelenting pace of IT progress means that

modern online training is expected to become ever more exciting, challenging and rewarding.

Technology is now an integral part of our work and personal lives. Only 20 years ago, schoolchildren would be hunched over library books researching the secrets of the pyramids or how the atom came to be split. Now, the stock answer to any request for information from an overworked parent is surely: Lets Google it when we get home.

And its not just children who can benefit from the educational properties of the digital world. Professionals both digital natives and those old enough to remember life before email have also come to take it for granted.

ACCA recently commissioned a report exploring the world of the e-professional and how online learning affects development, the impact of technology on finance professionals and their clients, and what the future of online learning may look like.