Welcome Address By Ms Indranee Rajah, Senior Minister of State For Law And Finance, At The IVAS-IVSC Business Valuation Conference 2017

Welcome Address by Ms Indranee Rajah,

Senior Minister of State For Law And Finance,

At The IVAS-IVSC Business Valuation Conference 2017

On 2 November 2017

Developing Business Valuation for the New Economy

Sir David Tweedie, Chairman of the International Valuation Standards Council (IVSC)

Mr Chaly Mah, Chairman of the Singapore Accountancy Commission (SAC)

Mr Eric Teo, Chairman of the Institute of Valuers and Appraisers, Singapore (IVAS)

Distinguished guests

Ladies and gentlemen

Introduction

1. It’s a great pleasure to be here today. Today’s conference is jointly organised by IVAS and the International Valuation Standards Council.

1. Why do I find a particular pleasure to be here? The reason is because I feel a deep and vested interest in this topic of business valuation. This is actually something which is implementation of a journey that Chaly and I helped to initiate a year ago.

1. A year ago, Singapore embarked on a journey of discovery, known as the Committee on the Future Economy. The whole idea behind that was to search out new growth areas, try to figure out where in a global, evolving landscape we could add value, we could find new areas of growth, and where we could channel the direction of the professional services.

1. Under the Committee on the Future Economy, there was a Working Group that looked at the legal and accounting sectors, that was co-chaired by Chaly and myself. One of the growth areas that we identified was business valuation. It did seem to be a space where not a lot of other people have looked at, and it represented an area of distinct growth for our professional services.

1. Following from that, various moves were made to implement the strategy for developing capability among our accounting profession and indeed many others who want to see how they can develop capability in business valuation. This whole conference is part of that. So that is why I’m very excited to be here.

1. So, what makes a good business valuer?

1. According to a 2017 Market Study conducted jointly by EY and IVAS, business acumen and financial analysis capabilities are two essential skills for a business valuer today. Close to 16% of all respondents also identified financial modelling skills to be important.

1. In my view, it is not just about quantitative and qualitative capabilities. It is also about abiding by strong ethical and professional standards.

Making good progress in our business valuation journey

1. Last year, I was invited to the launch of the Chartered Valuer and Appraiser programme, which is Asia’s first professional business valuation certification programme. The objective of the CVA programme is to build business valuation expertise in Singapore. Through the programme, we want our CVA Charter holders to be recognised, respected and valued for your competency and professionalism. We also want to help our firms that provide business valuation services to grow.

1. The CVA programme represents an important milestone in our business valuation journey, and I’m happy to say that IVAS has made good progress.

1. Within the short span of a year, more than 120 candidates have been enrolled in the CVA programme. 14 industry partners have also committed to sending their staff to the programme. CVA candidates come from diverse backgrounds – accounting, banking, consulting and investment management. This diversity not only enriches the learning experience of all candidates. It also improves the quality of the programme over time.

1. Besides the encouraging enrolment statistics, IVAS has also conferred the CVA Charter to about 120 senior valuation professionals in Singapore and the region, such as Australia, China, Hong Kong, Indonesia, Malaysia, Philippines, Thailand and Vietnam. This is good recognition of the professional excellence and integrity exhibited by these professionals.

1. So I would like to commend IVAS for your efforts in developing and growing Singapore into a Centre of Excellence for business valuation.

Challenges in the new economy

1. There are challenges though, in the journey ahead. Globally, the business environment is changing. Robotics is automating many processes. Artificial Intelligence is also changing the way we make business decisions. The new economy will present a set of new challenges to business valuation.

1. Let me just highlight two trends that will impact business valuation.

1. First, there’s the rising importance of technology as a competitive edge.

1. Today, a company’s competitive advantage is increasingly being determined by technology. As a result, companies are increasingly buying over technology companies to gain access to advanced technology.

1. According to a recent study by Deloitte^[1], M&A investments in disruptive areas such as predictive analytics, robotics and cryptocurrencies totaled US$291 billion globally in 2016. This is a staggering 300% increase from 2012. So, what does this mean for business valuers? It is no secret that tech companies are difficult to accurately measure using traditional valuation methods like the income approach and the market approach.

1. With the rise in acquisitions of tech companies, business valuers will face more challenges when quantifying the value of acquisitions for buyers and sellers.

1. The second trend is the rising importance of intangible assets to companies.

1. Corresponding with the increased focus on technology, intangible assets are becoming even more important to businesses.

1. According to a study conducted by the Chartered Institute of Management Accountants^[2] in 2016, the total value of disclosed intangible assets in Asia has grown by 20% per annum over the past 15 years.

1. For business valuers, intangible assets can be complicated to value. To accurately measure the rising amounts of intangible assets, business valuers will therefore have to expand their valuation toolkits.

1. Business valuers will operate in a different landscape. What worked previously may not in the new business environment. For example, popular methods of the present may not accurately capture value in future. There is therefore a need for continuous thought-leadership and research to improve business valuation.

Getting ready for the new economy

1. We also need to get ready for the new economy. Internationally, valuation standards are evolving in response to the changing business environment. In January this year, IVSC issued a new set of International Valuation Standards, also known as the IVS 2017, with the aim of harmonising global valuation standards. More recently, IVSC consulted on valuation topics that should be addressed or prioritised.

1. Singapore’s business valuers therefore will have to adapt and expand skillsets to areas beyond traditional business valuation, such as data analytics. There are various initiatives to help existing and aspiring business valuers upskill and reskill for the new economy.

1. For existing professionals, the Singapore Accountancy Commission and SkillsFuture Singapore have developed SkillsFuture Study Awards that can be used to cover the expenses of specialist courses, including the CVA programme.

1. For those who aspire to be business valuers, the Skills Framework for the Accountancy Sector will provide a good overview of the skills needed and career pathways available in business valuation.

1. So it’s not all about challenges. There are huge opportunities. But in order to access those opportunities, in order to meet the demand for valuation where the companies are high-tech or have intangible assets, the valuers in Singapore will have to upgrade, upskill and really be ready to meet this kind of demand. So there is opportunity. It’s just a question of building capability and readying yourselves to take advantage of this growing demand.

Conclusion

1. So with this upward trajectory, I urge all of you to reskill and upskill to seize the opportunities.

1. I should like to end by wishing you a very fruitful and successful conference.

Thank you very much.

^[1] The Deloitte M&A Index 2017 (Deloitte, 2017)

^[2] Accounting for the Full Value of the Business (Chartered Institute of Management Accountants, 2016).