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Speech By Mrs Tan Ching Yee, Permanent Secretary For Finance, At The Institute Of Singapore Chartered Accountants (ISCA) Practitioners Conference 2020, on 22 October 2020

22 Oct 2020

Building Up Ourselves, Mastering The Future

Mr Kon Yin Tong, President of the Institute of Singapore Chartered Accountants (ISCA),

Distinguished guests,

Ladies and gentlemen,

Good morning.         

1.         Thank you for inviting me to the ISCA Practitioners Conference. It is my pleasure to join you virtually. Such virtual experiences are becoming commonplace these days!

2.         2020 has been a most unusual year. The COVID-19 pandemic has added on to the headwinds of economic volatilities of 2019.

a.     We are not out of the woods yet.

b.     According to the Monetary Authority of Singapore Survey of Professional Forecasters, Singapore’s GDP is expected to contract by 6% in 2020. This is within the range of MTI’s official forecast.

c.     In labour markets, we are also starting to see the impact of the pandemic, with unemployment and retrenchment numbers rising in the second quarter of 2020.

3.         We are not going to return to the pre-COVID world. We need to chart a new path to emerge stronger from COVID-19 and deal squarely with the structural shifts that have always been there but are now accentuated and accelerated by COVID-19.

4.         Business school professors have gone back to philosophers and strategists of old for inspiration. Among them, Sun Tzu’s Art of War, and the famous stratagem of “Knowing yourself, knowing the enemy. A hundred victories in a hundred battles.”

5.         Even if we do not believe in the 100% success formula, it is nevertheless important to know what we are faced with (let’s call this our enemy) and what we have in us (knowing ourselves), in order to increase our chances of success.

Global Trends

6.         Let me first talk about knowing what we will be faced with. The big trends are well-known – the changing geo-political environment (often simplified to “US-China tensions”); technology as a major force for change (for better or for worse); an ageing population but one of the world’s lowest birth rate in Singapore; and the calls for a new social compact.

7.         I would like to pick up two specific trends that will have an impact on the accounting profession and industry. One is the premium placed on resilience. The other is the constraint posed by declining growth in the local labour force.

8.         After the shock of COVID-19, businesses, even entire nations, will place a premium on resilience. This can come in various forms, like having one regional hub in Northeast Asia and another one in Southeast Asia. Or by placing production facilities closer to markets, or in safer and more reliable locations, not just the cheapest ones.

9.         Singapore has a chance to cement its role as one of the new hubs or centres that are critical to the continued success of businesses. This means playing well as part of a regional, if not global, network. Where businesses go, our accounting professionals and firms will also have to go. Are we ready for a pan-Asia presence?

10.       As for our demographic trends, these have been known for some time. The local labour force will slow down, as years of low birth rates take their effect. Even with extension of the retirement and re-employment ages, we cannot reverse this trend. This means fewer new entrants to the labour force. We need to deliver our services, better and faster, but without more and more workers. How do we manage this?

Local Trends

11.       Let me now turn to learning more about ourselves. What do we know about our strengths and areas for improvement? Are our strengths in areas of future need? There is no point having “fastest fingers first” on the abacus, when the world has moved on to automated calculations using computers.

12.       Let me share a few interesting findings from the latest survey by the Singapore Accountancy Commission (SAC) of 701 Accounting Entities done in 2019 and 2020. One set of findings relates to overseas revenue, and the other relates to technology adoption.

13.       Our Accounting Entities are still very much focused on the local market. About 10% of total revenue in 2019 came from overseas markets. Being local is not a bad thing. But if the fastest-growing economies are in the rest of Asia, our Accounting Entities will need to find ways to match their strengths to where the needs are.

14.       If overseas expansion is not always that easy for smaller practices, what are the options? Some may involve partnering other firms or joining forces with other professional firms to bring multi-disciplinary expertise to clients. Yet another way is to look for fast-growing and high-margin segments in Singapore.

15.       But sticking to what we are strong in today will not be good enough for tomorrow.

16.       On the technology adoption front, I have good news and bad news. The good news is that technology adoption has risen across the board between 2016 and 2019.

a.     For example, about three in five Accounting Entities adopted Know-Your-Client and Anti-Money-Laundering tools in 2019, up from about two in five in 2016.

b.     We are seeing more automation. In financial statement preparation and audits, robotic process automation is replacing some of the more mundane work like bank confirmation. In client on-boarding and customer relationship management for our Accounting Entities, automated on-boarding processes and data analytics are now used.

c.     These findings are consistent with observations in the Accounting and Corporate Regulatory Authority (ACRA)’s 2019 and 2020 Practice Monitoring Programme reports, which suggest that Public Accounting Entities are using more digital tools in audits.

17.       The bad news is that adoption of new and emerging technologies is comparatively low, with far less than half of all Accounting Entities adopting certain new technologies – 22% for cloud accounting software; and only 7% for data analytics for audit. I am afraid that in the world of big data and linking datasets, the use of Excel spreadsheets is not enough.

18.       This is one area where we are not strong enough. If our so-called “enemy” is technology coming into all aspects of our lives, we will need to push harder on technology adoption.

19.       Business may remain subdued for the rest of this year and going into 2021. This is a good time to take stock of what are the big challenges that confront us, what they imply for our way of doing our work, and what new strengths we need to build to be ready for the future.

Work with the Government

20.       The Government will partner the accountancy profession in the journey ahead.

21.       The SAC, working closely with ISCA and other organisations will work with practitioners and Accounting Entities to press on with transformation. Let me highlight a few key initiatives that will be useful to practitioners in your journey of transformation.

a.     Small-and-Medium entities that are looking to adopt technologies in your operations can refer to the Quick Guide to Digitalisation and Business Diversification for guidance on how to adopt technologies for growth.

b.     For individuals looking to equip yourself with new skills to prepare for the transformation ahead, there are several programmes and guidance in place. The refreshed Skills Framework for Accountancy, the Singapore Chartered Accountant Qualification, and ISCA’s Infrastructure and Project Finance Qualification, are a few examples that come to mind.

22.       We are facing a crisis of a generation. Just as it had been in previous crises, there will be new opportunities for growth and renewal. We know what the big trends facing us are. What we need to do is to translate these into how they will affect our work and profession. Then assess if our strengths are enough, and if not, what new strengths we need to develop.

23.       I have suggested two areas of specific interest – how our local firms can plug into a wider regional network as businesses build resilience across borders with Singapore as a key node; and how we can master technology to do more even as we have fewer people.

24.       I have noted that, while we have made some progress, there is still some way to go in our adoption of new technologies.

25.       We will need to accelerate our own journey. I wish all of you well as you embark on this journey.

26.       Thank you very much, and have a most fruitful conference ahead.