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FINANCIAL SERVICES | Contributed Content, Singapore
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Terry Smagh

Should Singapore's executives trust their financial data?

BY TERRY SMAGH

C-suite executives in Singapore, like their counterparts in the rest of the world, base crucial decisions about the future growth and direction of the organisation on financial data. From the front office to the back office, decisions are made and reported on regularly based on this valuable information. The C-suite needs to be able to depend on reliable numbers; however, they may not be getting it.

If the numbers can’t be trusted, where does this leave investors, regulators and other stakeholders?

There is a reason to be concerned, as our recent global survey of C-suite executives and finance professionals in large and midsize organisations revealed that 74% of executives in Singapore believe their organisation has made significant business decisions based on out-of-date or incorrect data.

45% of these executives are concerned about errors that they know exist, but of which they have no visibility. However, between the C-suite and finance professionals, confidence in financial data diverges. Only 32% of Singapore’s finance professionals surveyed claim to completely trust the accuracy of their financial data compared to 40% of C-suite respondents.

In general, confidence is lacking around organisations’ ability to spot errors before reports are made public, as only 27% of respondents believe they could trust that their finance team had identified all errors to ensure they are reporting accurately.

The implications of reporting without identifying financial inaccuracies are serious, with issues such as reputational damage, time spent reworking accounts, and negative impacts on the ability to secure additional investment noted as top concerns.

What are the reasons for this state of affairs?
When asked about why it was so difficult to trust the accuracy of their financial data, Singapore executives cited human error (51%), the complexity of collecting and processing data (50%), and multiple data sources (40%) as the three key factors. The fundamental issue is indeed one of trust, not only with investors or shareholders, but with a broad range of stakeholders who are more exposed than ever to the potential pitfalls of inaccurate reporting.

Removing the potential for human error through the automation of manual processes is a major step towards establishing a foundation of trust. Automation streamlines the most routine, manual work, and opens the door to a fundamental shift in the way accounting and finance teams work. Finance teams accomplish this by embedding automation, control, and period-end tasks within daily activities.

Automating these daily activities allows chief financial officers (CFOs) and their finance teams the visibility they need to provide reports at any time during the month, and help drive more informed, reliable decisions for the organisation. This automated model also empowers real-time financial intelligence, such as fraud detection, strengthens data analytics and reduces compliance risk.

Despite this benefit to the organisation, our research found that accepted margins of error for financial reporting is surprisingly wide as nearly four in ten Singapore executives don’t see $2.7b (US$2b) in accounting errors published in financial statements as substantial. As the accepted margin of error declines, trust in the financial data may be hard to gain.

Recent research from KPMG and PwC found that stakeholders are questioning whether to trust AI and the information these machines are generating. This means that as AI and data analytics solutions become more prevalent in finance teams the challenge to gain the trust of the C-suite and other external stakeholders remains great.

Ensuring that AI systems are trustworthy and responsible has therefore become a top priority and challenge for companies. The Monetary Authority of Singapore (MAS) has responded by releasing fairness, ethics, accountability and transparency (FEAT) Principles for the use of AI and data analytic in Singapore’s financial sector. 

The views expressed in this column are the author's own and do not necessarily reflect this publication's view, and this article is not edited by Singapore Business Review. The author was not remunerated for this article.

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Terry Smagh

Terry Smagh

Terry Smagh has been Senior Vice President of Asia Pacific and Japan at BlackLine, Inc. since March 2018. He is responsible for spearheading the company’s ongoing regional growth strategy including working with partners to accelerate customer acquisition.

Smagh comes to BlackLine with nearly 20 years of experience in financial software, business intelligence and data analytics having held senior APAC positions with leading organizations including Hyperion, IBM, Informatica and Qlik.

Most recently, Smagh was executive leader for IBM Asia-Pacific’s cloud and analytics business where he was responsible for supporting partner development and overall enterprise sales momentum in hybrid cloud software, cloud services and analytics solutions.

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