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22 October 2011
They may be their chief executives’ right-hand men at Singapore-listed companies and possess many talents and qualifications. But, it appears, that having years of experience under their belt is not their forte.
Three-quarters of chief financial officers (CFOs) or equivalents at some 461 listed firms were not CFOs in their previous role.
Half of the CFOs at these companies are less than three years into their current job, including 20 per cent who have held the position for less than a year.
And some 20 per cent of the CFOs were not previously in an accounting, finance or audit-related role. About 20 per cent did not have a background in accounting.
These preliminary but stark findings emerged in a recent study by KPMG Institutes - at a time when the role of finance executives is growing in importance. The full findings of the study will be released next month.
‘The research identified that one size does not fit all when it comes to the professional development of CFOs, and the technical, business and leadership competencies need to be further developed,’ said Tham Sai Choy, managing partner of KPMG Singapore.
This problem is compounded by increased business complexities, especially for companies that serve more than one market, Mr Tham said.
In an environment of ‘information surplus and insight deficit’, the CFO is required to be ‘more than just an information provider but to be a leader of his own and provide insights’ as a strategic partner of the CEO, he added.
Though the full report of the findings is yet to be out, market observers are already expressing concern over the findings.
Stamford Law partner Yap Wai Ming noted that this survey does not reflect well on the quality of CFOs here.
Given the apparent lack of experience among CFOs and senior finance officers, they may not be able to guide the CEO or management or serve as an adequate sounding board for the audit committee, he said.
Mr Yap suggests that regulators make it compulsory for CFOs to become members of the CFO Institute launched by the pro-tem Singapore Accountancy Council so that the less experienced CFOs can learn through secondary experience.
The CFO Institute - an initiative proposed by the Committee to Develop the Accountancy Sector - is envisaged to become the avenue for training of CFOs for Singapore and even the region.
Ravi Arumugam, CEO and managing partner of audit firm LTC LLP, said that the finance officers of a company are the ones that ultimately prepare financial reports so ‘the quality must start with the company’.
But there remains a sense of complacency among companies, which tend to expect the auditors to come in and clean up their financial reports, even though there will be an obvious conflict of interest if auditors do so. ‘That’s not the way it should be and that’s where there’s an expectation gap,’ Mr Arumugam said.
In ensuring that the finance heads of companies are well-qualified, Singapore can take a leaf from the UK’s book, where CFOs are required to be professional accountants and members of a professional accountancy body, he added.
To help plug the skills shortage, KPMG Institutes in Singapore recently signed a memorandum of understanding with the Human Capital Leadership Institute to jointly develop the KPMG C-Suite programme, which is designed for senior finance leaders and will commence next year.
KPMG Institutes in Singapore, the first outside of the United States, was launched in March this year by KPMG to provide insights and thought leadership for businesses through discussion and networking.
Other upcoming collaborations lined up by KPMG Institutes here include the joint development of a tax risk management programme with Singapore Tax Academy and research initiatives with local universities and accountancy bodies to develop relevant Asian-focused business case studies.