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Spotlight
onBusiness Perspectives that matter | Issue 1, 2019
Dealing it right
Will M&A or alternative capital
strategies help unlock growth?
Corporate excellence
Fostering a board-activist partnership
Innovating with data and purpose
Building trust with reporting
Sustainability matters
Closing the sustainability reporting gap
Building sustainable supply chains
Turning digital risks into opportunities
Rebalancing gender disparity in STEM
Finding security in the cloud
Southeast Asia’s digital journey
Shifting trade and industry
Ready for the future Singapore consumer?
Trade disruption – what’s next?
Rise of the industry-agnostic workforce
Welcome
Content
Leaving nothing to chance
Short-term uncertainties are growing with economic and business norms being
disrupted: trade negotiations are underway, customer and citizen expectations
are evolving, and shareholder activism is on the rise.
At the core of many of these uncertainties is the issue of trust — or the
lack thereof. Trust forms the bedrock of relationships, transactions and the
functioning of economies, and building it requires taking a binocular view of
the risks and gains behind every decision made, even when kneejerk reactions
may be to rely on the familiarity and visibility afforded by past solutions and
short-term gains.
Where investors demand greater transparency and engagement, how
can businesses see it as an opportunity to deliver responsible and responsive
corporate reporting, and drive greater rigor with data analytics and
In today’s rapidly changing world, having an informed emerging technologies?
view of tomorrow is vital. That’s where we come in. Where trade flows are disrupted, how can businesses re-engineer their supply
Spotlight on Business offers you global perspectives and chains for cost effectiveness and security while embedding sustainability?
insights into business issues that matter to you. Where portfolios or markets are slackening, how will businesses buy, sell or
Knowledge that can help you take your business build, and question the tried-and-tested assumptions about their customers
forward with confidence. today who may not exist tomorrow?
Where digital risks are growing, how can business look to the cloud for
advantages in cybersecurity services that they don’t already have?
Where innovation is the solution to challenges in every part of the organization,
how can businesses stay focused on its purpose and trust its data to make the
most insightful investment choices?
As businesses grapple with these challenges, so will governments as they
seek to build resilient and agile ecosystems that support economic and citizen
growth, including tackling a potentially widening gender gap in STEM fields and
driving shifts in workforce development with the rise of industry convergence.
Arguably, building trust must be what matters most. And that doesn’t happen
by chance.
Max Loh
Managing Partner, EY Asean and Singapore
Ernst & Young LLP
Issue 1 2019
Content
Building trust with corporate reports Opportunities in the rise of an
Trust can take a lifetime to build and seconds industry-agnostic workforce
to lose. While rebuilding that trust depends on Industry convergence may be disruptive
many factors, reporting can play a vital role. but opens up cross-industry employment
opportunities for individuals who reskill and
22 40 offers organizations a more diverse talent pool.
Available on-the-go Closing the sustainability reporting gap Rebalancing gender disparity
While there is greater interest in long-term in STEM
reporting, the quality of nonfinancial disclosures With the rapid rise in demand for STEM
ey.com/sg/sob SB remains questionable, and could be holding back skills and the impact of digital, gaps in
both companies and investors from advancing gender parity must be addressed ugently.
betterworkingworld.ey.com
25 42
the sustainability agenda.
@EY_Singapore
The case for sustainable supply chains Trade disruption: what’s next?
beyond compliance The ongoing US-China trade dispute is
Companies must move away from approaching increasing trade risks for businesses.
sustainability as a purely regulatory reporting However, astute navigation of the complex
requirement and start integrating sustainability international trade and business environment
10
28 45
within its business practices and operations. can still lead to favorable outcomes.
4 Dealing it right
Contributors Geopolitics and global trade challenges are creating complexities for
companies seeking growth. Is M&A the answer or are there merits in Retail reset: are you ready for the future Forging ahead on Southeast Asia’s
alternative capital strategies? Vikram Chakravarty and Mah Kah Loon
Singapore consumer? digital journey
discuss the shifts in dealmaking and the risks of value erosion.
6 Retailers will be challenged to transform as the ASEAN countries must collaborate to be digitally
World in numbers foundation of the retail industry shifts, driven by
technology-empowered future consumers.
ready in terms of connectivity infrastructure
and technology adoption across governments,
32 48 businesses and citizenry, so as to realize its full
economic potential.
Finding security in the cloud
Managing Editor: With the right service providers, enterprises
Max Loh can benefit from the cost savings, seamless
and quick deployment, committed availability
Editor: and on-demand scalability that cloud-based
36
Donna Liew cybersecurity services can bring.
Editorial:
Ho Ying Shan
Sophia Mah 16 20 EY | Assurance | Tax | Transactions | Advisory © 2019 Ernst & Young Solutions LLP. All Rights Reserved.
Why successful Fostering a
APAC no. 12001780. ED None.
Design:
Soo Soon Tat About EY Ernst & Young Solutions LLP (UEN T08LL0784H) is a limited liability partnership
innovation needs board-activist EY is a global leader in assurance, tax, transaction and advisory services.
registered in Singapore under the Limited Liability Partnerships Act (Chapter 163A).
data and purpose partnership The insights and quality services we deliver help build trust and confidence in the In line with EY’s commitment to minimize its impact on the
MCI (P) 127/11/2018 capital markets and in economies the world over. We develop outstanding leaders environment, this document has been printed on paper with
Printed by Hock Cheong Printing Pte Ltd How can organizations “fail fast” The discipline in being prepared for an who team to deliver on our promises to all of our stakeholders. In so doing, we a high recycled content.
and “scale fast” with innovation? activist campaign means that the board play a critical role in building a better working world for our people, for our clients
Editor’s note: If you would like to receive This material has been prepared for general informational purposes only and is
copies of our publication or wish to Data and purpose hold the key. is aware of its state of governance
and for our communities. not intended to be relied upon as accounting, tax or other professional advice.
suggest topics of interest to be covered and demonstrates that shareholder Please refer to your advisors for specific advice.
in future issues, please write to: concerns in all forms are valued and EY refers to the global organization, and may refer to one or more, of the member The views of third parties set out in this publication are not necessarily the views
The editor, Spotlight on Business, taken seriously. firms of Ernst & Young Global Limited, each of which is a separate legal entity. of the global EY organization or its member firms. Moreover, they should be seen
Ernst & Young Solutions LLP at in the context of the time they were made.
contact.eys@sg.ey.com.
Ernst & Young Global Limited, a UK company limited by guarantee, does not provide
services to clients. For more information about our organization, please visit ey.com.
4 5
Krishna Balakrishnan Adrian Ball Samir Bedi
Content
Contributors EY Asia-Pacific Cybersecurity-as-a-Service Leader
Ernst & Young Advisory Pte. Ltd.
+65 6309 6616
krishna.balakrishnan@sg.ey.com
linkedin.com/in/krishnaprabhu
@krishnaprabhu1
EY Asia-Pacific Indirect Tax Leader
Ernst & Young Solutions LLP
+65 6309 8787
adrian.r.ball@sg.ey.com
Partner
People Advisory Services
Ernst & Young Advisory Pte. Ltd.
+65 6309 6648
samir.bedi@sg.ey.com
linkedin.com/in/samirbedi13
Dilys Boey
EY Asean People Advisory
Services Leader
Ernst & Young Advisory Pte. Ltd.
+65 6309 6246
dilys.boey@sg.ey.com
linkedin.com/in/dilys-boey
Krishna has served as a trusted advisor to clients on complex With vast experience in international trade and indirect Samir has extensive consulting experience in business
Dilys has significant experience in people strategy
cyber challenges in industries including financial services, taxes, Adrian advises companies in addressing market strategies linked to people-organization dynamics across
and organization development work. She leads
energy and utilities, and retail across Asia-Pacific, the UK access for their products and handling of audits and Southeast Asia. His experience includes all areas of
assignments including industry and market feasibility
and the US. He is highly experienced in threat detection and investigations throughout the Asia-Pacific. He has HR, particularly in organization structuring, manpower
studies, organization structuring, people strategies
response, threat exposure and vulnerability management, directly represented clients in the settlement of such planning and optimization, integration of performance,
and corporate governance across sectors including
digital identity, data protection and cyber risk management, matters with trade authorities and also supported reward and talent programs, and HR process review
public, education and retail.
covering insider and third-party threats. clients on legal proceedings. and audit.
Vikram Chakravarty Kuntha Chelvanathan Chiang Joon-Arn Chandan Joshi
EY Asean Transaction Advisory Services Leader Partner, Advisory Services EY Asia-Pacific Financial Accounting EY Asean and Global Emerging Markets
Ernst & Young Solutions LLP Ernst & Young Advisory Pte. Ltd. Advisory Services Leader Consumer Products & Retail Leader
+65 6309 8809 +65 6309 8272 Ernst & Young LLP Ernst & Young Solutions LLP
vikram.chakravarty@sg.ey.com kuntha.chelvanathan@sg.ey.com +65 6309 6997 +65 6309 8097
linkedin.com/in/vikram-chakravarty linkedin.com/in/kunthachelvanathan joon-arn.chiang@sg.ey.com chandan.joshi@sg.ey.com
linkedin.com/in/jachiangfaas linkedin.com/in/chandanjoshisg
@IamChandanJoshi
Vikram leads the team covering strategy and portfolio Kuntha leads the supply chain team in Singapore Joon-Arn has extensive experience in providing Chandan has two decades of global consumer industry and
analysis, corporate finance, infrastructure financing, and the procurement team in Asean. She is highly accounting advisory services to international and local strategy consulting experience, working with world-leading
restructuring and turnaround, and valuation and business experienced in multiyear supply chain transformation entities across Asia-Pacific. He leads assignments consumer goods companies and global consulting firms.
modelling. He also focuses on postmerger integration, and operational strategy, and has worked on projects including International Financial Reporting Standard At EY, he leads the Consumer Products & Retail teams across
corporate due diligence, inorganic and organic growth, across Europe and Asia-Pacific. Kuntha has industry conversions, complex accounting transactions for all service linesin over 100 emerging markets globally.
cost reduction and transformation. experience in developing and executing global strategies diverse sectors, tax restructurings, and arbitrations
for a leading telecommunications company in Europe. between disputing companies.
Michael Ignatiadis Max Loh Mah Kah Loon Mok Sze Xin
Director, Advisory Services Managing Partner Partner Associate Director
Supply Chain & Operations EY Asean and Singapore Transaction Advisory Services Asia-Pacific Tax Center, Indirect Tax
Ernst & Young Advisory Pte. Ltd. Ernst & Young LLP Ernst & Young Solutions LLP Singapore
+65 6309 6281 +65 6309 8828 +65 6718 1338 Ernst & Young Solutions LLP
michael.ignatiadis@sg.ey.com max.loh@sg.ey.com kahloon.mah@sg.ey.com +65 6309 6062
linkedin.com/in/michael-ignatiadis linkedin.com/in/maxlohkw linkedin.com/in/kahloon-mah sze-xin.mok@sg.ey.com
Michael is EY Southeast Asia lead for supply chain Max has overall responsibilities for the operations of the Kah Loon is works with clients and other stakeholders to Sze Xin has worked extensively with companies and
sustainability and supply chain planning. He has helped Singapore member firms‘ practices and Asean Region. develop an EY Asia-wide deal origination mergers and governments in the Asia-Pacific region to facilitate
consumer goods, life science and automotive clients He has extensive experience in providing audit and acquisitions (M&A) capability, deepening relationships global trade-related matters including, but not limited to,
drive business benefits through process re-engineering business advisory services, having been involved as an with private equity and financial sponsors in the process. investment location studies, business model restructuring,
and optimization of the end-to-end value chain. audit partner with various listed companies, responsible Prior to joining EY, his rich and diverse experience in investment protection, regulatory market access, customs,
for their financial statement audits and internal the banking sector ranges from investment banking, export control, intellectual property, anti-dumping,
control reviews. corporate banking to private banking. government procurement and free trade agreements.
Jojico Tanuwidjaja Christopher Wong Sam Wong Simon Yeo
Manager Head of Assurance, Singapore EY Asean Government & Public Sector Leader EY Asean Climate Change &
People Advisory Services Ernst & Young LLP Ernst & Young Advisory Pte. Ltd. Sustainability Services Leader
Ernst & Young Advisory Pte. Ltd. +65 6309 6935 +65 6309 6727 Ernst & Young LLP
+65 6309 8821 christopher.wong@sg.ey.com sam.wong@sg.ey.com +65 6309 6845
jojico.tanuwidjaja@sg.ey.com linkedin.com/in/christopher-wong-munyick linkedin.com/in/samsamwch simon.yeo@sg.ey.com
@SamWongCH
Jojico’s experience cuts across various HR disciplines Christopher is highly experienced in the audit of large Sam has led projects covering business process Simon provides climate change and sustainability advisory
including talent management, job redesign, competency global companies, MNCs and public-listed companies. re-engineering and improvements, performance and assurance services to large, diversified public companies
development, organizational effectiveness and design, He has been involved in IPOs, due diligence, investigations management and change management. He has worked with multinational operations, as well as other multinationals
and change management. She has worked with clients and valuation projects. He has served as the coordinating with clients from sectors including banking, securities, based in Singapore. He also has experience in providing
from both public and private sectors, and from multiple Partner on numerous Asia-Pacific client engagements, oil and gas, hospitality and leisure, supply chain commercial due diligence and valuation services to clients
industries including infocomm technology, retail, particularly those with shared service centers based and government. in the Asean region.
consumer goods, education and trade. in Singapore.
World in numbers
All data on this page are extracted from published materials by EY. 7
Megadeals and unicorn IPOs dominated 2018 Can data use and trust go hand-in-hand?
Content
Where will open banking thrive? While 2018 global IPO volumes declined by 21% from 2017, Finance leaders are focusing on turning data into
Open banking is invisible to most consumers. Regulatory Adoption Consumer Innovation
proceeds are up by 6% due to a number of unicorns and mega reporting insight but are challenged by how they can
Yet it will be one of the most disruptive environment potential sentiment environment
IPOs that went public. Asia-Pacific continued to dominate drive innovation without compromising standards and
forces of change in banking globally. Giving global IPO activity in 2018. undermining trust.
consumers the control of their banking data
may accelerate innovation — but conditions How conducive is What is the potential for How do consumers feel How strong is the All amounts in table are in US$ Q: In your finance function, what are the biggest barriers to implementing
the regulatory consumers to adopt open about open banking, and environment at fostering
must be right. environment for open banking services based on the data sharing involved? innovation, especially 2018 Change on prior year Q4 2018 Change on prior year quarter
innovative new reporting technologies?
banking? existing behaviors? among financial services
1,359 326
firms?
21% 34%
Concern over data security 54%
Overall global ranking IPOs globally IPOs globally Budget constraints 48%
$204.8b $53.7b
Lack of collaboration
1 1 7 3 8 1 1 2 3 3 3 4 4 8 4 6 6% 10% between finance and IT 41%
8 7 Lack of relevant skills within
1 1. UK 2. Mainland China 3. Singapore 4. US proceeds proceeds the finance function 41%
9 2 The UK sets the Mainland China Consumer adoption US outperforms
4 10 Challenges in establishing a
regulatory benchmark holds greatest potential in Singapore on innovation
business case 39%
6 but consumer trust adoption potential is strong IPO activity M&A activity
is a barrier Lack of resource to dedicate
3 2,000 $300 to implementation 38%
40,000 $4,000
4 8 4 6 5 4 6 7 6 5 10 8 10 10 8 5 $250 Lack of buy-in from the
5
1,500 30,000 $3,000 leadership team or board 30%
$200
5. Australia 6. Hong Kong SAR 7. Netherlands 8. Canada 1,000 $150 20,000 $2,000
Positive sentiment helps Hong Kong SAR has high Netherlands ranks Canada’s adoption
Australia reach 5th place adoption potential but lowest on sentiment, but potential is lower, $100
500 10,000 $1,000
lags APAC neighbors uptake of mobile banking but a strong FinTech $50
indicates potential environment may boost
its prospects 0 $0 0
2014 2015 2016 2017 2018
$0 More creative approach to portfolio
2014 2015 2016 2017 2018
Ranking key
1 = highest; 10 = lowest Where markets share a pillar 2 9 9 10 6 7 5 9 Number of IPOs Proceeds Number of M&A Deal value management needed
ranking they have scored equally While creative approaches to deals such as carve-
Overall ranking against the index for that pillar
9. Germany 10. Spain outs and joint ventures can be a good alternative,
1 Pillar ranking German consumers may Spain outpaces its
be hesitant to adopt European peers on corporates in Southeast Asia (SEA) are still not
open banking consumer sentiment
Growing reliance on nonfinancial information allocating enough resources or attention to these.
Institutional investors are turning to nonfinancial or environmental, Q: Which of the following capital allocation and strategy issues is your
social and governance (ESG) information as an essential component company placing the greatest attention and resources today?
in investment decision-making.
Insurance growth by region, Emerging risks for banks: data and disruption Investors see ESG information as valuable in a market downturn
Improving working capital
management
33%
CAGR, 2012-2017 8.0% 26%
Banks and regulators are now focused on attacks that manipulate
1% 1%
or destroy data, as well as data availability. Another potential Investment in existing 25%
issue, given legacy systems, is IT obsolescence. 3% 2% 9% operations 25%
8%
Asia-Pacific 15%
Digital transformation
Rest of the world 18%
Banks Regulators In the last 12 months,
2.8% how frequently has a 34% In the event of a market
0.9% 0.6% Integrity of data and company’s nonfinancial downturn or correction, Acquisitions, 14%
0.4% 0.2% data destruction 79% 64% performance played do you think ESG and JVs and alliances 15%
a pivotal role in your nonfinancial information
Industry disruption
62% investment decision- will become:
Life Non-life Overall 3%
due to technologies 79% 63% making? Divestitures
8%
Mixed performance for insurance sector Geopolitical risk 64% 49%
Improving capital structure 8%
in response to changing
Life insurers grew marginally in recent years while non-life 80% conditions* 6%
insurers in Asia-Pacific saw high single-digit growth. Availability of data 56% 40% Returning capital to 2%
Frequently Occasionally Much more valuable Somewhat more valuable shareholders 2%
Industry disruption to Seldom Never Somewhat less valuable Much less valuable
new entrants 50% 36%
Don’t know Singapore SEA *Interest rates, currency risks, tax regimes and rules
Corporate brief
New EY Global Chairman EY wavespace™ opens EY acquires Adelphi Digital Strategic alliance Accolades
and CEO-elect in Singapore The move sees 170 digital with Symantec EY ranks top in the HFS Top 10 ALM Intelligence recognizes EY EY earns Global Newcomer of EY named as a leader in
Carmine Di Sibio has been The innovation center focuses consultancy professionals EY combines scale and deep Robotic Process Automation as a leader in corporate services the Year at the 2018 SAP® innovation consulting services
elected to succeed current on intelligent automation, joining the EY digital team experience in cybersecurity Service Providers 2018 list, consulting; capital projects Customer Experience Partner in The Forrester Wave™:
EY Global Chairman and CEO including artificial intelligence, in Asia-Pacific, boosting its with Symantec’s Integrated based on HFS Research’s infrastructure consulting; and Awards Summit for commitment Innovation Consulting Services
Mark Weinberger, who steps machine learning, blockchain full-service digital consultancy Cyber Defense Platform to help comprehensive assessment cybersecurity consulting. to co-innovation and helping Providers, Q4 2018.
down on 1 July 2019. and robotic process automation, capabilities. organizations tackle risks in and rating of 29 vendors. mutual customers achieve
to help companies innovate and intellectual property, data their goals.
transform their business. and cyber.
8 9
Content
Will Globalization
4.0 deepen or
deal with the
crisis of trust?
The convergence of global trends,
unprecedented technological change,
geopolitical tensions and environmental
challenges, are ushering in a new
era of Globalization 4.0. As the new
economy transforms industries,
reinvents jobs, and disrupts trade,
the widespread level of disruption is
fueling the public’s distrust in this new
world. Left unchecked, this mistrust
could lead to a rise in protectionism,
technophobia and anti-immigration.
Globalization is fundamentally good
for the world and citizens of the world,
but that globalization — what the world
is used to — needs to adapt to the
changing environment. To thrive in
Globalization 4.0, businesses will need
to be driven by purpose rather profits,
governments will need to look beyond
economic growth to build inclusive
cities, citizens will need to embrace
rather than resist change.
If 2019 were to mark the year of
rebuilding trust, then the choice
for every economy, business and
individual is: will we hold on to false
dichotomies or realize the growth
opportunities together?
10 In Conversation 11
DEALING
Content
IT RIGHT
Geopolitics and global trade challenges are creating
complexities for companies seeking growth. Is M&A the
answer or are there merits in alternative capital strategies?
Vikram Chakravarty and Mah Kah Loon discuss the shifts
in dealmaking and the risks of value erosion.
G
eopolitics and global trade low gearing ratio, and are looking to achieve
challenges have put pressure — scale through M&A as the answer to slower
albeit slightly — on the deal growth,” Chakravarty said.
appetite in Southeast Asia.
The 19th EY Global Capital Not all is gloom and doom though, with private
Confidence Barometer found that 46% of equity offering a spark of optimism.
Southeast Asian corporates were planning to
According to Mah Kah Loon, a Partner in the
acquire in the next 12 months — down from
Asia-Pacific Transaction Advisory Services at
50% six months ago. Regulation and political
Ernst & Young Solutions LLP, private equity is
uncertainty are seen as the biggest risks to
set to be a potential major player in the M&A
dealmaking and the near-term growth of their
market in the coming year.
core businesses.
“There are record levels of dry powder funds
The decline in appetite may not seem
globally and a proportion is being earmarked
significant, judging by statistics alone.
for Asia-Pacific markets. That will need to
However, EY Asean Transaction Advisory
be deployed. Private capital has also been
Services Leader, Vikram Chakravarty,
a good option for unlocking value by many
believes that the challenges in the M&A
listed entrepreneurial businesses that have
landscape should not be underestimated.
not attracted expected valuations,” he said.
“Companies in the region have struggled
Against such complexities, what makes the
with the headwinds from the ongoing
best capital strategy for companies that are
trade dispute, as well as a potential global
seeking growth?
slowdown. Dealmakers have remained resilient,
underpinned by strong balance sheets and
12 13
Content
“
Q How real is the impact of geopolitics Q Besides M&A, what other options do Given the high valuations and fewer
on the M&A landscape? companies have to achieve growth?
available targets, there is value for
Vikram Chakravarty (VC): “Today, we are seeing a VC: “It often takes a long time for companies to
shift in the business and regulatory landscape, where achieve market leadership in their chosen sector or companies to consider alternative
consensus around globalization is breaking down. country through organic growth. It can be quicker to
Traditional powerhouses such as the US and UK are strategically choose existing companies in the right approaches to portfolio management.
adopting a more protectionist approach in a bid to sector to merge with or acquire.
boost their domestic economy. This no doubt impacts
trade and business decisions. However, given the high valuations and fewer available Vikram Chakravarty | EY Asean Transaction Advisory Services Leader
targets, there is value for companies to consider
Particularly, a great deal of geopolitics and regulatory alternative approaches to portfolio management.
challenges such as the Brexit and US-China trade These include carve-outs, alliances, divestments and
dispute took place in the last 12 months. This inevitably joint ventures. However, an important consideration
affects how corporates plan their business, operations that companies must take as they explore these
and supply chain — from where they source through alternative deals is to make sure that the target or
to where they manufacture. deals fit the corporate strategy. Due diligence and
strong execution of the deal will hold the key to a
In that light, Southeast Asia may emerge as a winner. successful transaction.”
As companies look to diversify their supply chain or
manufacturing bases, we can expect more investments MKL: “Another interesting theme coming from the
into the region.” Barometer is that private equity is emerging as a
major acquirer of assets. The rise of private capital,
Mah Kah Loon (MKL): “Geopolitics should not be including private equity, super funds and corporate
overplayed. Companies are pragmatic entities. While venture capital, has fundamentally reshaped the
some may take a wait-and-see approach to deals, funding environment.
there are others that will continue to evaluate
opportunities in the landscape, as value can emerge Data from research houses show that the private
amid uncertainty. Scenario planning and risk market has up to US$2t of dry powder to be deployed.
assessment will become even more important.” As such, they are on the look-out for suitable assets.
Traditionally, private equity firms have shown interest
in the technology, consumer products and retail sectors
Q What other factors are challenging in Southeast Asia.
dealmaking?
With these options, companies should consider which
VC: “Firms are keen to drive scale and restructure
funding source best fits with their needs now and the
their businesses to become more focused. This should
capital structure that is most suited for their future
lead to more consolidation and create larger and more
growth. In addition to funding, private equity can help
globally competitive firms. However, having to evolve
to source for the appropriate talent with specialized
mindsets at family-owned businesses and the high
skills, ideas or new perspectives, who can assist
valuation expectations have made this shift difficult.”
companies to build management strength to enhance
the portfolio and performance of the business. Others
will work with companies to develop new expertise such
as technological capabilities to better navigate today’s
increasingly digital landscape.
However, the most significant value that private
equity firms bring to companies is access to networks
and relationships, which will go a long way in helping
investees reach a wider audience or new markets.”
14 15
Content
Q Are such alternative approaches to
MKL: “Beyond planning earlier and building the right
growth underexploited by companies integration teams, companies should realize that
success comes with a need to invest for that success.
in Southeast Asia? Companies that met or exceeded their estimated
VC: “Findings from the latest issue of the Barometer synergy targets in a deal spent, on average, 8% more
highlighted that Southeast Asian corporates are (as a percentage of announced synergies) than those
still not investing much resources or attention to that failed to meet their ambitions. It is also interesting
alternative approaches. This is a rather interesting that these successful integrators also targeted
finding. From our observations, companies in achieving higher synergies as a share of deal value
Southeast Asia are increasingly recognizing the from the onset.”
benefits of ‘creative’ approaches.
It is important to note that in today’s complex Q Are technology synergies a big bang
environment, companies need to continually review or a slow burn?
their portfolios and align their strategy and growth
VC: “Many companies that underpin their synergy
prospects. With regular reviews, companies can better
targets with monetizing technology, intellectual
identify the underperforming assets and operations
property or customer innovation appear disappointed
that are at risk from technology, digital and customer
with the results. But, unlike top- or bottom-line
disruption for carve-outs as appropriate. Those
synergies, these may just take longer to achieve.
companies that balance acquisitions and divestitures
Companies should incorporate these potential
generally outperform those that focus solely on either
intangible synergies at the earliest stage of the
deal strategy.”
deal process. They should also be prepared to wait
a little longer to realize their targets.” SB
Q Completed deals sometimes do not
deliver on the returns as envisaged.
What is undermining deal value?
VC: “The completion of the deal is just the beginning
of the journey. An important — but often overlooked —
element of M&A is post-deal integration. Companies
The EY Global Capital Confidence Barometer
that spend more on the integration process outperform
is a biannual survey of senior executives
their pre-deal targets. Hence, companies need to start
from large companies around the world. The
preparing for post-deal integration much earlier in the
Barometer provides a snapshot of the findings
deal life cycle.
to gauge corporate confidence in the economic
Acquiring companies will capture synergies effectively outlook and identifies boardroom trends and
only if they map these synergies out upfront and practices in the way companies manage their
“
assign accountability for monitoring their progress. corporate agenda.
However, this requires experience in understanding
The rise of private capital, including and identifying where value can be created, what is
The 19th Barometer has a respondent
community of more than 2,600 senior
proven to work and where the risks lie.
private equity, super funds and corporate executives, including close to 200 from
Southeast Asia (Indonesia, Malaysia,
To secure competitive advantage, value needs to be
venture capital, has fundamentally identified early, often with limited information. Ideally, Philippines, Singapore, Thailand and Vietnam).
those responsible for achieving synergies should This survey was conducted in September
reshaped the funding environment. play a direct role in identifying and valuing specific and October 2018.
synergies. Business units should help develop synergy
Read the full report here: ey.com/ccb
assessments and promote buy-in very early in
Mah Kah Loon | Partner, Asia-Pacific Transaction Advisory Services the process.”
16 Viewpoint 17
Content
Why
successful
innovation
needs data
and purpose
How can organizations “fail fast” and
“scale fast” with innovation? Data and
purpose hold the key.18 19
“
Content
A truly innovative company is
not reflected in its snazzy
By Max Loh
labs and technology gurus but
rather in how it thrives
F 84 %
ew business leaders today the onset — but it can be perfected At the same time, they will need to
will deny that innovation is a
business imperative. Many are
through intentional experimentation
and rigorous evaluation backed by
automate intelligently to realize new
levels of operational efficiencies or
on optimizing the current
investing in internal innovation
hothouses or funding start-ups, which
data and analytics. run the risk of disintermediation.
Transforming operating models is
state through creative
said a strong sense of purpose
has been useful in tapping into and
catalyzing new ideas. “Failing fast” Differentiating with data
a complex initiative that will need
to be guided by data instead of the problem-solving. positively affected their ability
to embrace transformation.
has become increasingly acceptable — Today’s business leaders are at vision and intuition of the business
and even encouraged — in order to an advantage as technological leader alone.
allow the spirit of experimentation advancements have made it possible
purpose, which provides a powerful and into the organization’s ecosystem.
63
to flourish. for data-driven insights to be accessed
%
in real time, which can then be used Innovating with purpose meaningful context to rally buy-in. Organizations need to consistently
Yet, the challenge for most align their decision-making on
to continuously improve and evolve While data and analytics can help Purpose gives the company a way
innovation-seeking companies innovation projects to their purpose.
their innovative ideas from start-up to inform decisions and improve the forward to break out of the shackles
isn’t to fail fast — but to scale fast. In doing so, purpose can help business
scale-up. For example, consider how success of outcomes, technology in of short-term thinking, and creates a
Frankly, many succeed in idea- leaders to focus discussions away
organizations can tap on the borderless itself cannot lead an organization. clearer long-term path for why certain
generation while far fewer succeed in from the emotional sensitivities believed that having a sense of
nature of data to assess different The responsibility of making the right innovation can and should be pursued.
scaling those ideas into something that involved in difficult decisions such purpose and aspiration beyond
geographical markets’ receptivity to choices, growing an organization’s In a study that EY conducted jointly with as killing off ideas that are ingenious their day-to-day commercial
makes a real impact on the business. their offerings as they pursue market potential and soliciting support from the Harvard Business Review, it was but unsustainable. mission made their company
expansion opportunities. stakeholders falls squarely on the found that of the executives surveyed, more innovative.
The paradox is that business leaders
shoulders of the business leader. 84% said a strong sense of purpose The current disruptive environment has
often need separate teams to give Further, with real-time data integrated This includes choosing the right positively affected their ability to made innovation more important than
people the freedom and resources into the lives of the future consumer, innovation project to invest in — or kill. embrace transformation. ever before. In our work with leading
to innovate, yet they also need to customers will increasingly expect
integrate these efforts into the main companies around the world, the
businesses to meet their needs in A truly innovative company is not Further, a report by the Economist
business for deployment so as to most successful businesses are led by
micro-moments and in bespoke reflected in its snazzy labs and Intelligence Unit and supported by
commercialize the good ideas. purpose and data in decision-making —
manners. The responsiveness and technology gurus but rather in how EY revealed a distinct connection and not technology. They focus on
agility demanded of future supply it thrives on optimizing the current between purpose and innovation.
Even with the most detailed business customer outcomes and improving the
chains and operating models will state through creative problem-solving A 63% majority of executives from
plan or strong financial backing, customer experience, continuously
catalyze a disruption throughout the while simultaneously harnessing new across three global industries believed
some innovation projects remain as experiment and test, and show high
entire value chain from design to technologies and business models to that having a sense of purpose and
innovation projects. In going back to levels of automation and agility.
production to delivery. generate new revenue streams. aspiration beyond their day-to-day
the drawing board, many may choose
to abandon their original concept and commercial mission made their In other words, they are not just actors
Data-backed intelligence that informs Yet, it is impossible to innovate
chase after new ideas. company more innovative and in the theatre of innovation; they are
decisions on creating and delivering and transform every aspect of the
therefore more able to disrupt or builders of a better working world for
customer experiences that delight business i.e., systems, operating
This does not have to be the case if respond to disruption. others and themselves. SB
every time and all the time will become models, processes and culture, all at
businesses recognize that behind each
even more vital. Businesses will do well the same time. Therefore, companies However, despite acknowledging the
endeavor, including those that fail,
to build in technological capabilities to need to prioritize change — going benefits of a strong sense of purpose,
lies a treasure trove of data about the
integrate the explosion of customer beyond profitability considerations many business leaders have yet to
customer, the market and the business The writer is Max Loh, EY Asean and
data as production inputs. and centering on its organizational unlock its true value, simply because
model. No idea is ever perfect from Singapore Managing Partner.
the purpose is not well-integrated20 Viewpoint
Fostering a
Content
board-activist
partnership
The discipline in being prepared for an activist campaign
means that the board is aware of its state of governance
and demonstrates that shareholder concerns in all forms
are valued and taken seriously. to self-check and regularly reflect on the year, future plans and any at the business through the lens of
corporate status quo, misguided or missed opportunities. an activist shareholder, and ask the
unsound business decisions. question: what are the shared and
At Annual General Meetings, boards divergent goals of the board and
must be mindful that emotions can run activist shareholders, and how can
Activist shareholders high. Hard questions on management any differences be narrowed and
as stakeholders decisions, financial performance,
By Christopher Wong managed? What is the board’s
Given the evolving and complex dividend payout, and increasingly, the strategy to deal with activism and
business landscape, boards need to company’s environmental, social and is the company communicating
P
see the merits of having engaged governance standards, may be raised. consistently and transparently
ublic-listed companies are under constant and management expect to push through their agenda stakeholders and work glove in hand with its key stakeholders?
Ample preparation to manage these
scrutiny to deliver strong and consistent without much shareholder resistance. with activist shareholders. Active
potential questions means that the The trend towards a more direct and
performance. With the advent of decentralized shareholder engagement gives
issues are discussed constructively, active engagement with shareholders
media platforms, shareholders are increasingly companies a better understanding
Alignment of objectives and perspectives with a clear rationale on why specific
able to quickly and easily vocalize their views and band of investor perspectives and is aligned with the recently revised
Some activist shareholders have earned themselves a decisions are made. This further code of corporate governance, which
with like-minded peers to effect change in or for a access to a valuable feedback loop
bad name, given how their behaviors are perceived provides context for plans in the advocates more transparency and
company. While shareholding typically entails passive to inform decision-making. An
to be disruptive and could jeopardize a company’s next year, laying the groundwork for communication between companies
investment in a company, shareholders have a legitimate amicable relationship with activist
stability when they attempt to overhaul the company’s continued support. Importantly, the and their shareholders. Businesses that
interest in its governance and a legal right to hold the shareholders demonstrates that
leadership team. Others may demand for more returns, board of directors must be open and view activism first and foremost as an
board accountable. shareholder concerns are valued
seeking short-term gains at the expense of long-term transparent, and prepare thoroughly opportunity rather than a threat stand
and taken seriously.
Activist shareholders build their case across a broad shareholder interests. on the details of the hot topic. The to benefit from increased shareholder
range of corporate issues such as strategy, financial and As with any stakeholder engagement, discipline in being ready in the event value and support from shareholders,
Notwithstanding the negative impression, activist of an activist campaign means that
nonfinancial performance, asset and capital allocation, the board needs to engage and who would otherwise be detracting
shareholder campaigns can be a force for positive the board is aware of its state of
conflicts of interest and corporate governance. When communicate to its stakeholders from the board’s goals. SB
change. They are not all good, or all bad, depending on governance, and has a clear purpose
they believe that a company’s management is not up to regularly — even when it is business as
the circumstance. Some view them as the last line of in working towards the company’s
the job, they may even rally for a replacement or a major usual — on the company’s strategy and
defense for long-term value-creation and also a form long-term value.
corporate change. business activities. This engagement
of check-and-balance to protect the company from The writer is Christopher Wong, EY Singapore
culminates at the annual general
In that light, shareholder activism has, over the years, controversial practices, such as excessive executive Given that no company is immune Head of Assurance.
meeting, where the board must be
become a growing concern for many boards and compensation or investments that introduce conflicts to the scrutiny of shareholders,
thoroughly prepared to stand up to
management teams. Gone are the days where boards of interest. It also serves as a reminder to the board companies should proactively look
business decisions made throughout22 Viewpoint 23
Content
By Chiang Joon-Arn
C
ompanies have leveraged corporate Statistics show that in the 1970s, about 80% of
reporting as a form of communication Standard & Poor’s 500 market value was accounted
with capital market stakeholders, to for by tangible assets on the balance sheet; today,
provide information on the organization’s this figure has dropped to less than 20%. EY research
past performance as well as a complete picture that bears this out: in the EY survey, 73% of finance
includes its strategic direction and ability to create leaders said that their performance on nonfinancial
long-term value. KPIs has a significant impact on intangible assets.
However, there appears to be a growing disconnect
with what the corporate reports provide and what Leveraging or processing data?
stakeholders want. As Sue Hohenleitner, Vice Despite having more data than ever before to help
President of Finance, Acquisition & Divestiture them produce the necessary reporting that would
Operation Johnson & Johnson said in the EY study, address investor needs, the fact remains that many
How can the digital transformation of reporting finance teams are overwhelmed by the volume and
build the bridge between trust and long-term value?: variety of data. As a result, many finance leaders
“I think, in some cases, the ability to communicate spend more time gathering and processing data than
long-term value is missing in traditional corporate analyzing it.
reporting because of its historical emphasis.”
The struggle that many teams face is that they
BUILDING
Indeed, investor are increasingly focused on the big are still focused on cleaning up the data — this is
picture, and finance leaders know this. The EY study especially true for organizations that have grown
found that 72% of finance leaders globally agreed over time through acquisitions and yet are never fully
that nonfinancial information is increasingly used in integrated. Hence, information would remain sitting
TRUST
investor decision-making. in different areas and taking varied forms.
Companies have made progress in their reporting
of financial and nonfinancial information, and many
73%
are moving to report against key performance
indicators (KPI), such as in the areas of economic,
strategy, and environmental, social and governance
with
(ESG). However, despite this progress, more should
be done to challenge reporting.
Trust can take a lifetime to For one, there is a tendency to report the wrong
corporate
build and seconds to lose. things: measure what is easy rather than what
of finance leaders said that their performance
stakeholders want to know. This is particularly true
While rebuilding that trust of nonfinancial — or intangible — assets, which has
on nonfinancial KPIs has a significant impact on
intangible assets.
reports
depends on many factors, taken on increasing significance.
reporting can play a vital role.24 Viewpoint 25
Content
Closing
the sustainability
reporting gap
Reporting teams should work In that light, the next action that Beyond traditional While there is greater interest in long-term
towards exploiting the rich, finance leaders need to take is to competencies
multidimensional data they have create a compelling but pragmatic
reporting, the quality of nonfinancial disclosures
The organizational ability to create
access to. Using technological vision for how the function can utilize
long-term value based on reporting
remains questionable, and could be holding back
advances and sophisticated skills, new technologies. The EY survey
transparency and embracing both companies and investors from advancing
finance teams can provide the identified two priorities — exploiting
smart technologies are set to the sustainability agenda.
reporting insights that are needed rapid technological advances in
take center stage in the future of
to give stakeholders visibility automation, artificial intelligence (AI)
corporate reporting. It is important
into the business and support and blockchain, and building trust
to recognize that value-driven
long-term value. into data analytics — to make the
reporting does not just demand
most of the smart technologies in
For reporting to play this role, that finance teams adopt new
corporate reporting.
finance leaders should consider technology — they also require a
three critical actions. According to the respondents, different talent profile and skill sets.
AI will be the most important
First, they need to understand how The finance function will benefit
technology in five years’ time,
their approach to reporting and from team members with a range of
followed by robotic process
transparency measures up against new capabilities beyond traditional
automation and tools based on
their peers. Finance leaders should finance and accounting skills,
blockchain. However, data risk
consider how their peers approach including strategic awareness
remains the number one challenge
nonfinancial assurance so external of new technologies, such as AI,
facing corporate reporting teams.
stakeholders and boards trust and knowledge in disciplines such
that information, while taking into Indeed, finance leaders need to as data science and advanced
consideration risk management and manage the difficult tension statistics. And those who can
opportunities to improve supporting between mitigating data as a risk help the team understand and
processes and systems. and exploiting it as an opportunity. measure the interdependencies
There is an important balance to between nonfinancial and financial
Having comparable and dependable strike between the two. Finance information will prove to be
nonfinancial information builds leaders should drive data innovation increasingly valuable. SB
greater trust in the capital system while avoiding lapses in data
and enables more discerning choices. security and threats to customers’
Assurance over this nonfinancial privacy. This means creating the
information will be key to the way The writer is Chiang Joon-Arn,
right internal culture for data, EY Asia-Pacific Financial Accounting
finance functions evolve in the future with everyone following a clear Advisory Services Leader.
with the infusion of technology such data strategy underpinned by a
as artificial intelligence. code of conduct and data
governance framework.26 27
Content
“
The preference for companies to rebalance
from short-term profits to long-term value
creation has resulted in greater demand
for non-financial performance reporting
and disclosures.
By Simon Yeo
A
s geopolitical tensions, Regulators also recognize that While there are many ESG factors, organization’s progress in to navigate this space and determine To that end, government regulators
rising interest rates investors’ demand for nonfinancial investors are looking to companies growing its intangible value. the most appropriate and credible play a critical role in prescribing
and technological performance information is to determine and report on the measurement option for their needs. and standardizing sustainability
disruptions continue to increasing. In Singapore, the material topics for their organization The biggest challenge facing As a result, many organizations are reporting standards, and this should
weigh on markets, investors are Singapore Exchange has made it and their industry. To be fair, 78% organizations is a shift in mindset. adopting a wait-and-see approach be progressed with consultation
adopting long-term perspectives to mandatory for all listed companies of investors say that most of the They will need to widen their until a dominant trend toward one with businesses and investors so
counter short-term uncertainties. to report on their ESG practices companies that they follow assess definition of value: beyond profits comparable standard emerges. that any prescribed standards will
The preference for companies to from financial year ended ESG materiality adequately. to intangible value created by adequately meet the needs of the
rebalance from short-term profits 31 December 2017. other forms of capital such as Yet in this new era of rapid change, capital markets. SB
to long-term value creation has However, it is important to keep social, human, intellectual can companies afford to wait on
resulted in greater demand for While there is greater interest in in mind that a useful report to and natural capital, which are critical understanding their long-term value?
non-financial performance reporting long-term reporting, the quality investors is one that identifies as to an organization’s long-term
of nonfinancial disclosures well as measures these specific success. Businesses that embrace While companies that proceed to The writer is Simon Yeo, EY Asean Climate
and disclosures.
remains questionable, and could ESG factors, to provide them this mindset are switching from the trial frameworks would gain an edge Change & Sustainability Services Leader.
In fact, environmental, social and be holding back both companies with a useful view of the risks traditional financial reporting model over their competitors, there is
governance (ESG) factors have and investors from advancing the and opportunities that drive the to explore an outcomes measurement still an urgent need for prescriptive
become critical to investment sustainability agenda. Based on long-term value of a company. reporting model. nonfinancial accounting standards
decision-making for most investors. the EY 2018 survey, more than to allow for better comparability
According to the EY 2018 Global half of respondents (56%) said that It is the latter — measures of The concept of outcomes across all companies. More than
Climate Change and Sustainability currently, a company’s nonfinancial accountability — specifically measurement is straightforward half of investors in the EY 2018
Services study of institutional disclosures are either not available information on how nonfinancial enough — it refers to the survey said that prescriptive
investors (EY 2018 survey), nearly or inadequate for meaningful metrics are established and measurement of the difference accounting standards for nonfinancial
all of the respondents globally comparison with those of managed, that are currently that an initiative, program or information would be very beneficial.
compared with 78% in the 2017 other companies. missing. While there is a lot of organization is making. The reality Investors are of the view that national
survey said they conduct either an disclosure about formal governance is that wide-ranging stakeholder regulators are best suited to lead
informal evaluation or a structured, For issuers to close the gap, they documents, policies and practices groups have developed their own efforts to close the gap between
methodical evaluation of a target need to first understand what that are in place, the absence set of frameworks, resulting in a investors’ demand for nonfinancial
company’s nonfinancial disclosures information is required by investors of specific metrics means investors plethora of different sustainability information and the information
when deciding future investments. and how it will be used. are unable to evaluate an reporting tools in the market, which actually provided by issuers.
has made it harder for organizations28 Viewpoint 29
Content
The case for sustainable supply
chains beyond compliance
Companies must move away from approaching sustainability as
a purely regulatory reporting requirement and start integrating
sustainability within its business practices and operations.
“
Dealing with shared risks,
which resides deeply
upstream, requires sustainable
organizations to step up to
influence, collaborate and
drive shared agendas.You can also read
