Spotlight
onBusinessPerspectives that matter Issue 2, 2016
Digital opportunity
The next big thing: Blockchain
Data analytics in treasury
Rise of digital deal-making
Leadership challenge
Get cyber governance right
CFO: fraud and conscience
Disconnects in gender parity
Destination watch
Rising Kuala Lumpur
Anti-tax avoidance in Singapore
The future
of work
Digital technology, globalization and
demographic shifts are displacing and
reinventing the workplace of tomorrow.

In today’s rapidly changing world, having an informed
view of tomorrow is vital. That’s where we come in.
Spotlight on Business offers you global perspectives
and insights into business issues that matter to you.
Knowledge that can help you take your business
forward with confidence.

Max Loh
Managing Partner, Asean and Singapore
Ernst & Young LLP
Welcome
Go ahead, disrupt yourself
It is often said that we’re our worst enemy.
The powerful combination of ignorance and inertia can leave many once-
successful enterprises and people behind in the race for elusive growth.
Your trump card: digital. And winning is less likely about how well you fight
digital disruptions than how ready you are to disrupt yourself.
Fast forward into the future of work, and you’ll see one that is radically
different. It’s not simply about the age-old “man versus machine”; it’s
about creating more value for and by man with machines. Already, data
and analytics are enhancing treasury management and better informing a
broadened spectrum of cyber governance duties by boards. It may not be
long before the impact of blockchain is felt across industries, even as the
market struggles now to know all the questions that the technology will raise,
much less the answers.
The rise of digital technology — its utility and ubiquity notwithstanding —
cannot replace the importance of human insights and relationships that
business decisions are founded upon. For instance, the robustness of thought
achieved through gender diversity and ethical surveillance are proof of why
the human element remains key.
Disrupting oneself also requires honest introspection. In acquiring new
capabilities needed to succeed in a digital world, is it smarter to buy or build?
Deal-making and alliances are on the minds of many executives in Southeast
Asia, judging from our latest Capital Confidence Barometer. Intraregional
investment appetite is strong with destinations like Indonesia and Malaysia
drawing inbound investor attention. Among many factors, the availability
of incentives and clarity of anti-tax avoidance positions will play a part in
influencing investment location decisions.
Clearly, there have been tremendous shifts in the business environment.
Is it happening too much too fast? Perhaps.
Are you doing too little too late? Hopefully not.
1

Contributors
World in numbers
The future of work
4
6
Available on-the-go
10
Issue 2 2016
What the future of work looks like is a question that many — from governments
to business to individuals — are grappling with but find no easy answers to.
Perhaps the most important question that needs a commitment now is:
“Will you be part of this ‘future’, or have a hand in shaping it?”
The next big thing:
Blockchain
The rise of blockchain technology is
revolutionizing conventional notions
of transactions and challenging C-suite
executives to understand its upsides
and risks.
24
Gender diversity:
The three disconnects
Disconnects are holding businesses
back from achieving gender diversity.
Unless organizations make a
commitment to change and take
tangible, measurable actions,
progress will continue to be slow.
18
@EY_Singapore
betterworkingworld.ey.com
ey.com/GL/en/Home/EY-Insights
ey.com/SG/en/Issues/SpotlightOnBusiness SB

21
Big data and analytics in
treasury management
With data analytics, corporate treasury
and finance function can unlock a trove
of valuable insights and information on
their organization.
Act now as anti-tax avoidance
roots in Singapore
Companies need to prepare for a new tax
reality, where the impact of Base Erosion
and Profit Shifting can influence decisions
around almost any tax and non-tax aspect of
the business.45
EY | Assurance | Tax | Transactions | Advisory
About EY
EY is a global leader in assurance, tax, transaction and advisory services. The insights
and quality services we deliver help build trust and confidence in the capital markets
and in economies the world over. We develop outstanding leaders who team to deliver
on our promises to all of our stakeholders. In so doing, we play a critical role in building
a better working world for our people, for our clients and for our communities.
EY refers to the global organization, and may refer to one or more, of the member
firms of Ernst & Young Global Limited, each of which is a separate legal entity.
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.
© 2016 Ernst & Young Solutions LLP. All Rights Reserved.
APAC no. 12000869. ED 0517
Ernst & Young Solutions LLP (UEN T08LL0784H) is a limited liability partnership
registered in Singapore under the Limited Liability Partnerships Act (Chapter 163A).
In line with EY’s commitment to minimize its impact on the
environment, this document has been printed on paper with
a high recycled content.
This material has been prepared for general informational purposes only and is
not intended to be relied upon as accounting, tax, or other professional advice.
Please refer to your advisors for specific advice.
The views of third parties set out in this publication are not necessarily the views
of the global EY organization or its member firms. Moreover, they should be seen
in the context of the time they were made.
48
Entrepreneurs fuel job creation
In this age of uncertainty, entrepreneurs
are more likely than their conventional
counterparts to drive innovation and
create jobs.
34
Digital innovation: buy or build?
Non-tech firms are turning to M&A,
joint ventures and alliances to acquire
innovation as developing capabilities
in-house will no longer suffice.
The CFO’s battle with fraud
and conscience
CFOs may be tempted to meet financial
performance objectives at all costs,
even as corporate misconduct has grave
individual consequences.
35
50
Global IPO market:
a story of stop-start
2Q16 has reversed the downward trend
of the previous quarter in IPO markets,
with Asia-Pacific leading the way as the
most active region.
28
Cyber governance in the digital age
Cyber is among the top three enterprise
risks of most organizations. Yet, its dynamic
risk nature, added to the technical aspects,
makes oversight particularly challenging.
Deals and alliances on
corporate strategies
Despite the current low-growth environment,
companies continue to look to M&A in
Southeast Asia for resilient growth.
32
Rising Kuala Lumpur
Companies looking to invest in Kuala Lumpur
are set to benefit from the city’s continued
economic and urban transformation and
world-class infrastructure.
38

Samir Bedi
Partner
People Advisory Services
Singapore
Ernst & Young Advisory Pte. Ltd.
+65 6309 6648
samir.bedi@sg.ey.com
Samir has extensive consulting experience in
the areas of business strategies linked to people-
organization dynamics across Asean. His experience
includes all areas of human resources particularly in
organization structuring, manpower planning and
optimization, integration of performance, reward and
talent programs, and HR process review and audit.
Jerome Van Staden
Partner, International Tax Services
Ernst & Young Solutions LLP
+6309 6386
jerome-van.staden@sg.ey.com
Jerome is experienced in international reorganizations
and transactions involving Europe MNCs with
investments in Brazil or Brazilian MNCs with operations
overseas. He is also knowledgeable about Dutch and
international tax law, particularly in the reorganization
of MNCs, M&As, and double tax treaties.
Reuben Khoo
Leader, Fraud Investigation and
Dispute Services, Asean
Head of Forensic Technology and
Discovery Services, Asia-Pacific
Ernst & Young Advisory Pte. Ltd.
+6309 8099
reuben.khoo@sg.ey.com
Reuben’s experience of over 30 years spans from
management consulting and systems integration,
business transformation, risk, digital forensics,
data analytics to cyber breach management.
He is also focused on the financial sector
particularly in business and IT transformation,
anti-money laundering, big data, anti-fraud, risk,
and cyber security.
Henry Syrett
Partner, Transfer Pricing Services
Ernst & Young Solutions LLP
+6309 8157
henry.syrett@sg.ey.com
Henry has served clients in various industries on
their transfer pricing planning needs and changes
to transfer pricing models. He is also experienced in
transfer pricing controversy, including management
of audits and dealing with competent authorities
with respect to Advanced Pricing Agreements and
Mutual Agreement Procedure.
Dilys Boey
Leader, People Advisory Services
Asean
Ernst & Young Advisory Pte. Ltd.
+65 6309 6246
dilys.boey@sg.ey.com
Dilys has significant experience in people strategy
and organization development work. She leads in
assignments including industry and market feasibility
studies, organization structuring, people strategies
and corporate governance across sectors including
public, education and retail.
Paul O’Rourke
Cyber Security Leader
Asia-Pacific Center of Excellence
Ernst & Young Advisory Pte. Ltd.
+65 6309 8890
paul.o'rourke@sg.ey.com
Paul’s vast experience is in cyber security, identity
and access management and information security
strategy. He has extensive information risk and
cyber security experience, and has worked on some
of the most complex government and corporate
security projects in the region.
4
Contributors

Sam Wong
Government & Public Sector
Leader, Asean
Ernst & Young Advisory Pte. Ltd.
+65 6309 6727
sam.wong@sg.ey.com
Sam has led projects covering business process
re-engineering and improvements, performance
management and change management. He has
worked with clients from sectors including banking,
securities, oil and gas, hospitality and leisure,
supply chain and government.
Jonathan Rees
Digital Lead, Asean
Partner, Advisory Services
Ernst & Young Advisory Pte. Ltd.
+6309 8680
jonathan.rees@sg.ey.com
Jonathan has extensive experience working in
high-growth technology arenas, systems
integration and digital media. He is focused on
areas including customer experience, service
design, analytics, mobility, digital media, and
digital risk and governance to help businesses
plan and deliver their digital strategy.
Grahame Wright
Partner, People Advisory Services
Ernst & Young Advisory Pte. Ltd.
+65 6309 8701
grahame.k.wright@sg.ey.com
Grahame has significant experience in global mobility
matters. He has assisted clients in industries including
banking and technology on Singapore business
immigration and permanent residency, global mobility
policy and program administration compliance
and advisory.
Managing Editor
Max Loh
Editor
Donna Liew
Editorial
Audrey Bong
Ho Ying Shan
Sophia Mah
Design
Soo Soon Tat
MCI (P) 083/11/2015
Printed by Hock Cheong Printing Pte Ltd
Editor’s note: Spotlight on Business
is published exclusively for clients
of EY. If you would like to receive
copies of our publication or wish
to suggest topics of interest to be
covered in future issues, please write
to: The editor, Spotlight on Business,
Ernst & Young Solutions LLP at
contact.eys@sg.ey.com.
Max Loh
Managing Partner
Asean and Singapore
Ernst & Young LLP
+65 6309 8828
max.loh@sg.ey.com
Max has overall responsibilities for the operations
of the Singapore practice and Asean Region. He has
extensive experience in providing audit practice and
business advisory services, having served various
listed companies, responsible for their financial
statement audits and internal control reviews.
5

6
All data on this page are extracted from EY published materials.World in numbers
New Transaction Advisory Services leaders appointed
Harsha Basnayake is appointed EY Asia-Pacific Leader of
Transaction Advisory Services, while Vikram Chakravarty
succeeds him as EY Asean Leader of the practice. Both
are based in Singapore.
New Assurance leader in Singapore
Christopher Wong assumes the role of Singapore
Assurance Leader, Ernst & Young LLP, bringing with him
vast experience with audit of large global companies,
multinationals and public-listed companies.
Corporate
brief
When mobile meets
financial services
Mobile is increasingly
becoming a preferred
medium for financial
services, driven by
accessibility and ease
of use. The end result:
service innovation.
Banks: how relevant are you?
The EY Bank Relevance Index finds Asian banks more vulnerable to decreasing
relevance, likely due to the prevalence of mobile and non-traditional banking
options and the evolving “unbanked” population.
Is there trust in your workplace?
An EY global survey finds that trust is lacking
in the workplace between employers, bosses
or colleagues.
Average bank
relevance,
by country Finland
IndonesiaChina
India
Italy
Mexico
Brazil
HongKong
Japan
Nigeria
USARomaniaSingapore
Ireland
South Africa
Turkey
UK
Greece
Spain
Russia
Australia
Switzerland
Netherlands
France
M
alaysia
CanadaSweden
Denm
ark
Norway
New Zealand
Germany
Saudi Arabia
Global average
75.1
66.9
69.5
71.1
71.6
71.671.771.7
71.8
71.8
72.2
72.2
73.4
74.1
75.1
75.1
75.6
75.6
76.9
77.6
77.8
80.5
80.5
80.6
81.1
82.7
80.4
80.3
79.478.4
78.4 78.9
59.7
46%
place a great deal of
trust in their employer
Less than half of full-time
workers globally trust
their employer
Important factors in determining trust in employers
Communicate openly
and transparently
Two billion adults, or 38% of adults
globally, continue to be excluded
from the financial system
434m
10mGlobally, approximately
10m dedicated mobile
savings accounts have
been opened so far
Users of mobile payments
are expected to grow at a
compound annual growth
rate of 47% until 2019
Service providers can achieve 96% cost
savings in the average cost per transaction
through mobile bank channels
96%
Mobile credit
witnessed a
50% increase in
the number of
services in 2014
38%
Market opportunity
for mobile financial
services (MFS)
There is a potential near-term opportunity for
MFS in 15 select countries to include 434m
unbanked people in the financial system
50%
47%
Deliver on
promises
Provide
job security
67% 63%
64%
59%
Provide fair
compensation and
good benefits

Strategic thinking for CFOs
A survey by EY and CPA Australia reveals strategic
thinking as the single top skill CFOs urgently need
now and in five years’ time.
7
EY promotes 714 partners worldwide
A record percentage (35%) of promoted partners
was from emerging markets, and women represent
nearly 30% of all new partners.
Leader for consulting
EY has been recognized as a leader in digital innovation
consulting, and business analytics consulting by ALM
Intelligence and IDC MarketScape respectively.
1H16: Asia-Pacific leads IPO volume globally
Asia-Pacific was the most active region worldwide by the
number of deals. A strong pipeline combined with improving
investor sentiments suggests positive prospects for the rest
of the year.
Primed for deals
The latest EY Global Capital
Confidence Barometer finds
that across sectors, strong deal
sentiments remain as companies
seek to achieve commercial
advantage through strategic M&As
amid volatility and disruption.
59%
Oil and gas
59%
Consumer products
and retail
Sector respondents that intend to
actively pursue acquisitions
Few companies are confident
that they can:
51%
Life sciences
46%
Telecommunications
58%
Power and
utilities
55%
Diversified industrial
products
What tasks do you spend the most time on?
What skills do you need most?
Now Five years from now
57%
39%
52%
60%
52%
56%
47%
63%
47%
47%
Working capital and
cash flow management
Risk management
Advising management and
board on business fundamentals
and growth strategy
Strategic business planning
Corporate governance
75%
72%
73%
47%
49%
39%
49%
33%
33%
40%
Strategic thinking skills
Communication and
influencing skills
Leadership skills
People management skills
Risk management skills
Consumer product
companies disrupted
Traditional value-creation tactics
are losing their potency, and
can no longer reliably sustain
profitable growth.
22% innovate to meet
changing consumer
wants and needs
20% work with customers
to gain a real-time,
end-to-end view of
the value chain
10% move beyond conventional
sales forecasting to sense
and shape demand
13% secure talent to translate
insight into action
22% tune supply chains to meet
go-to-market objectives
22% accurately map the
portfolio revenue impact
of individual stock
keeping unit
14% understand the
true profitability of
promotional spending
12% identify and revise
processes that don’t
fuel value creation
Top six exchanges by funds raised
HKEx
Main and GEM
US$5.6b
(37 deals)
SSE
Shanghai
US$2.5b
(28 deals)
SZSE
Shenzhen
US$2.4b
(35 deals)
TSE
Tokyo
US$1.7b
(43 deals)
ASX
Australia
US$1.4b
(33 deals)
SGX
Main and Catalist
US$1.2b
(7 deals)
Buy for digital transformation
Businesses face increased competition from those that have
embraced digital, whether existing competitors or new entrants.
Buying digital capabilities is on the minds of many.
Buy or build? Digital transformation
function
85%
say they have
established a digital
transformation function
59% don't have the in-house
capabilities required
to respond to digital
transformation
68% say accelerating sector
dynamics require a
rapid response and an
inorganic approach
67% plan to use M&A to buy
rather than build digital
capability over the next
two to three years

When “leave” could mean “opportunity”
Brexit marked the first time a member state has left the EU. The
consequences are almost impossible to predict, with repercussions
cascading through governments, businesses and individuals alike.
“Above all else, it is vital that the message that the UK is open for
business should not change,” said Steve Varley, UK Chairman, EY.
Indeed, EY’s latest research on foreign direct investment (FDI) revealed
that the UK continued to be the most attractive location for FDI in
Europe in 2015. Businesses will need to work alongside the government
to ensure that this remains the case.
One thing is certain: Brexit will result in a number of large-scale changes
in areas such as trade, employment, regulation and government policy.
Few changes are likely to happen overnight though. Businesses now
have a prime opportunity to take proactive steps to prepare for the
challenges and opportunities that lie ahead.
8

9

In conversation
The coming evolution of work is unlike
anything the world has ever seen.
Technology has created new sharing platforms, digitally native sectors and forms
of employment that were not seen just five years ago. Artificial intelligence and
robotics are making jobs redundant — even white-collar roles that were previously
thought to be immune to technological displacement are not spared.
At the same time, a truly mobile workforce is emerging from trade liberalization and
globalization of markets. Shifting workforce demographics including a growing silver
population and the flux of Millennials and Gen Z into the workforce are challenging
conventional notions of talent management.
It is an interconnected and complex web of impetuses that is creating a ripple
effect throughout the workforce and economy.
“We’re seeing a hastening pace of change, but we have not fully felt the extent
of disruption. The change that has begun will be pervasive and radically alter
more than business models and value networks — the impact will be felt from
policy-making levels through to the livelihoods of people,” said Dilys Boey,
Asean Leader for People Advisory Services at EY.
Indeed, what the future of work looks like is a question that many — from
governments to businesses to individuals — are grappling with but find no easy
answers to. Perhaps the most important question that needs a commitment
now is: “Will you be part of this ‘future’, or have a hand in shaping it?”
Dilys Boey, Samir Bedi and Grahame Wright, partners from EY’s People Advisory
Services discuss how organizations can — and must — commit to both.
future
of work
The
10

Grahame Wright
Partner
People Advisory Services
Singapore
Samir Bedi
Partner
People Advisory Services
Singapore
Dilys Boey
People Advisory Services Leader
EY Asean
11

Given the pace of change, it’s becoming
pressing for labor-intensive companies
to reinvent their business models, deploy
smart technologies, and rebalance the
roles for human talent and those tasks
that can be undertaken by machines. ”
“
Dilys Boey
EY Asean People Advisory Services Leader
12

What does the future of work mean to you?
Samir Bedi (SB): “The future of work will be starkly different
where artificial intelligence, robotics, virtual reality, Internet
of Things and sharing economy platforms will be much more
commonplace. One result is that work will be unbundled.
Just as disruption unbundled music albums into songs,
it’ll unbundle jobs into tasks based on skills, with each task
to be performed in the most efficient manner.
This could result in a fundamental shift in how talent is
currently resourced, managed and developed. To know what
future skills they require in their workforce, as a starting
point, companies need to know where they’re headed first,
and review whether these skills exist in their workforce.
As new roles and new skills are created, there’ll be increased
competition for highly skilled labor which will drive up salary
premiums. This will ultimately force companies to rethink
employment criteria by recruiting and training staff from
a broader talent pool, and engaging and retaining them in
new ways. With that, companies will need to overcome the
challenges in broadening the talent pool such as removing
barriers of academic qualifications as entry requirements.”
Grahame Wright (GW): “The broadening of talent pool
is also intertwined with the increased globalization and
mobility of the workforce. Greater mobility takes many
forms: frequent travel of workers to deliver services across
markets, or short-term foreign contractors delivering
their services in-country or remotely. Employers will seek
to upskill labor from emerging markets and tap emerging
markets using talent from their more mature operations.
Each of these have different challenges, both from a people
management perspective and for government regulations.
In the future of work, companies need to be more adept
at managing such a talent pool of diverse profiles, and
navigating the myriad of related immigration and taxation
rules that comes with labor mobility.”
Dilys Boey (DB): “The demographic shifts in the workforce
will also create its own disruption. Take for example the
differing career expectations from generation to generation.
Most baby boomers embraced the concept of one career
for life, while millennials are experiencing multiple careers in
life. Now in the ‘gig economy’, people are holding a series
of networked jobs as an independent contractor versus
full-time employment.
In the future of work, the definition and expectation
of a career for the various demographic groups will be
different. Companies need to recognize this in their talent
management strategies if they want to attract the best
in the war for talent.
Furthermore with the increase in the use of contract workers
or contingent workers, companies would need to embrace
a broader definition of talent management to apply beyond
the traditional full-time employee and include the contract or
part-time worker.”
The war for talent has always been in
existence. Do you foresee a war of talent —
one that is “man versus machine”?
DB: “There will be some levels of job displacement with
the advent of technology. But the reality is that not all
jobs will be fully displaced, nor will it be a choice between
man or machine.
There is always a place for human insights. Automation
of manual processes to perform transactional activities
has resulted in companies reducing head counts, or
reallocating staff to other areas of the business. But the
upside is that automating routine tasks can allow humans
to focus on ideas, innovation and higher-value work.”
SB: “History shows that automation surprises us with new
sectors and forms of employment. Just as digital disruption
spawned jobs for web designers and app developers that
few foresaw in the early days of computer revolution, the
machine economy is likely to generate jobs, companies and
even entire sectors that we’re unable to envisage today.”
Q
Q
13

DB: “Whether you see technology as enabling or disrupting
boils down to a ‘glass half full or half empty’ mindset. Given
the pace of change, it’s becoming pressing for labor-intensive
companies to reinvent their business models, deploy smart
technologies, and rebalance the roles for human talent and
those tasks that can be undertaken by machines. These
have implications on productivity and operating costs, which
makes it a strategic business imperative.
The rapid advance of technology can also create emerging
skills gaps among staff and companies should address this
when developing their recruitment and training plans.”
How ready are companies in embracing
this future of work?
SB: “With the national agenda on driving productivity,
employers in Singapore have an opportunity to look at
how they best optimize their talent and technology to be
competitive, efficient and effective. They need to redesign
jobs to meet future requirements as well as to motivate the
current population to embrace the change. To that end,
companies need to transform talent by focusing on the entire
employee lifecycle, ensuring that recruitment, onboarding
and existing talent processes promote the desired culture
and behavioral traits.
As jobs get unbundled into tasks and skill sets, performance-
linked pay practice will become more entrenched. The role
of job evaluation and hierarchy-driving policies will lose
relevance as performance, rather than job evaluation,
will form more of the backbone of HR systems.
Companies also need to demonstrate to employees that
growth in career opportunities goes beyond grades and
levels — something that companies may not traditionally
be good at. Leading companies are already organizing
their talent based on skill sets into teams rather than
allocating fixed roles and departments. This evolution is
therefore not just a HR system but a fundamentally different
business model.”
GW: “Another aspect that challenges companies with a
highly mobile workforce is regulatory compliance.
Employers and workers, particularly independent
contractors, are challenged by the existing structures of
country immigration and tax laws. Ensuring immigration
and tax compliance for a fast-paced mobile workforce that
needs to be on the ground within days, rather than weeks
or months, is difficult to achieve. People are moving faster
than immigration applications can be processed. Mobility
teams may struggle to remain on top of rapid deployments
and managing the risks of frequent business travel, and
to interpret the various country regulations in a way that
manages the risks appropriately.
Technology offers part of the solution to this. Digital solutions
can enable employers to proactively track their mobile
employees and analyze their immigration and tax reporting
needs on a real-time basis. The first step is to detect the
traveler in a reliable and timely manner — whether it’s
through travel bookings and approvals or by a location-based
app. Once the traveler is identified, digital solutions can
provide the necessary analysis and advice on immigration
and tax requirements.”
DB: “All in, the real challenge is the accelerating pace
of change.
Companies are expected to run the business as usual and yet
be geared for the future. They need to reinvent, yet stabilize
amid change. How do you help the different cohorts within
your company grow along this journey, and by that extension,
how do we as a country enable inclusive workforce growth?
It’s a challenge that is already in play. Many acknowledge that
there will be structural unemployment, especially for lower
skilled jobs such as record-keeping. There’s thus a need to
reskill and upskill the workforce and government support
programs such as SkillsFuture aim to address this issue.
Yet, not all workers will know the right skills to pick up and
will need career counselling and job-matching services.
Q
14

Grahame Wright
Partner, People Advisory Services, Singapore
An increasingly fluid global workforce
will challenge countries’ borders as
the workforce structure changes from
the traditional model that existing
immigration and tax laws are built upon.”
“
15

Samir Bedi
Partner, People Advisory Services, Singapore
Just as digital disruption spawned jobs
for web designers and app developers
that few foresaw in the early days of
computer revolution, the machine
economy is likely to generate jobs,
companies and even entire sectors that
we’re unable to envisage today. ”
“
16

It takes the government, corporates, industry bodies
and individuals to work together to keep our workforce
and economy relevant and competitive. But I’d say that
directionally, we need to move away from a reliance on
government to individual responsibility and ownership to
upskill for real change to happen.”
While governments are supporting
businesses for change, are they
challenged as well in the future of work?
SB: “Governments are often the largest employers
themselves and so are exposed to similar issues that
corporates face. Beyond that, they find themselves having
to constantly review their leadership and approach to
manpower development in the country.
The major challenge is to set up the right infrastructure to
serve as a catalyst for businesses and people to change.
This would involve reshaping the governance, regulations,
incentives, learning architecture and pedagogies, to name a
few. Singapore has been at the fore front of this through the
establishment of two new statutory boards namely Workforce
Singapore and SkillsFuture Singapore to create a lifelong
learning infrastructure.
Also, the Committee for Future Economy is recommending
strategies to fundamentally transform industries and jobs
to remain competitive. Future growth industries and markets
are being identified, and companies will be incentivized and
supported to invest in these priority clusters, which will in
turn generate demand for new skills and redesign jobs.”
DB: “The government is also pressed to rethink the relevance
of regulatory regimes. Gig economy start-ups are already
challenging regulations governing the operation of hotels,
restaurants, taxis and more. The trend will accelerate with
the move to machine economy innovations such as driverless
cars and medical algorithms.
Workplace protections are worth a relook too. Globally, in
the growing gig economy, hard-won rights that have become
commonplace such as collective bargaining, the five-day
workweek, paid time-off and insurance against workplace
injuries and unemployment may need some revisiting.
Independent contractors in a gig economy may not have
these protections. The start-ups disrupting work argue that
existing regulations were designed for another era and do not
apply to the gig economy.”
GW: “An increasingly fluid global workforce will challenge
countries’ borders as the workforce structure changes from
the traditional model that existing immigration and tax
laws are built upon. This would also challenge the society’s
expectations around workforce competition and opportunities
that are available to a local versus foreign workforce.”
With businesses and governments pulled in
all directions in response to various change
drivers, what must they bear in mind?
GW: “Governments will need to find the right balance and
create regulatory regimes designed for the workforce of
the future — nimble, real-time and powered by data and
smart technologies.”
SB: “In the future, the ultimate resource that companies will
use more efficiently is the human resource. Employee skills
will be the biggest asset of any company and productivity and
utilization of this asset will drive future performance.”
DB: “And in times of change and transformation, having a
clearly articulated organizational purpose becomes much
more essential. Purpose is more than just what the company
does; it’s what the company stands for and its contribution
to the community and other stakeholders. Purpose will
provide a strong sense of engagement across employees
in a diverse workforce, which is important for any company
to succeed.” SB
Q
Q
17

Viewpoint
18

Gender diversity:
The three disconnects
by Max Loh
D
isruption and gender diversity are two
issues that are most critical to the future
of industries and organizations today.
By treating these as separate, leaders
often fail to realize the nexus between the two.
Disruption demands innovation, and new ideas will
more likely flourish in organizations with diversity
of ideas and experiences borne from different
gender perspectives.
Past commercial experiences point to the
flaws of underestimating gender diversity in
innovation. When voice recognition software for
the automotive industry was launched, it had
a fundamental problem — the software barely
recognized women’s voices. The male-dominated
design team had calibrated the systems to their
own voices and speech patterns. The value of
their innovation was harmed as a result.
As Singapore gears itself up for the future economy
backed by robust corporate capabilities, there is a
growing urgency to promote gender diversity as an
enabler of innovation and competitive growth.
Our local companies are making fairly good
progress on this front. Women’s representation
on the boards of Singapore Exchange (SGX) listed
companies rose more rapidly in 2015: women
held 9.5% of the 5,029 board seats, up from 8.8%
in 2014.
Small improvements were seen across many
industry groups, where women’s representation
clustered between 6% and 12%. Yet, in many
industries where women constitute a large
proportion of customers, women’s representation on
boards is still below the market average of 9.5%.
Unless boards place priority on this issue — and
possibly as a result of greater shareholder
pressure — progress will continue to be slow.
The gap in gender parity is not unique to Singapore.
According to a new EY report Navigating disruption
without gender diversity? Think again, only 1 in 10
industry leaders worldwide expect a real increase in
the number of women in leadership roles over the
next five years.
The report also revealed several disconnects
holding businesses back from achieving gender
diversity. Overcoming these disconnects requires
boards and senior executives to make a commitment
to change and take tangible, measurable actions.
The reality disconnect
It is easy to assume that gender diversity will
simply take care of itself. In reality, it won’t
without conscious intervention.
Boards need to take a critical view of where their
organization is now and where they want to be —
and by when. Until that strategic vision is mapped to
action pathways, such as implementing key enablers
including increased and more inclusive networking
opportunities, formal training, sponsorship and
mentoring programs for women, achieving gender
diversity will remain as good intentions and a product
of wishful thinking.
19

The data disconnect
Even with a strategy in place, companies
may not effectively measure progress
on this front even with the availability
of technology and analytics.
Many companies do not have clear metrics
for gender diversity, and those who use
gender metrics may simply be counting
the number of female employees on the
leadership team. The measurement of the
pipeline is often lacking.
Questions that boards need to ask include:
What about women’s progress through
the business? Do we understand when and
why they leave? Metrics are useful as the
data can be used to identify obstacles and
enablers to female career advancement.
Also, companies may not be measuring
the impact of gender diversity on their
bottom line, and without that, it can
be less compelling for shareholders to
support the investments made in driving
gender diversity.
The pipeline disconnect
Organizations that are good at recruiting
women are not necessary also good at
promoting them. Boards should push for
clarity on the organization’s plan to not
just attract and recruit female talent, but
also retain, develop and promote them to
leadership positions.
Creating a culture of open dialogue is also
important in realigning misperceptions
between men and women on the issue.
The EY report revealed male respondents
as mostly pointing to a shortage of
female candidates as the primary barrier
to gender diversity. Yet, only a small
percentage of female respondents
agreed, listing an unsupportive culture,
organizational bias, and the conflicts of
raising a family as prime concerns.
Clearly, formal programs that consider
such a perception gap and address
challenges from a woman’s perspective
must be part of the solution.
A holistic perspective
The EY report also found that different
industries are making progress at different
paces globally. There were some stark
differences: for example, only 45% of
the respondents in the insurance sector
say that they are effective at promoting
women to leadership, compared with 65%
in life sciences.
While individual boards take the driver’s
seat on gender diversity within their
companies, there is much more leverage
to be gained with the collective will and
effort across the sector.
Given their influence and networks, boards
can take a holistic, cross-sector view of
what is possible in driving female talent
pipeline and progression, as well as how
they and their organizations can play
an active role in improving the sector’s
overall gender landscape.
Ultimately, advancing gender diversity
for the good of business, and by that
extension, greater economic good, is a
shared responsibility that counts on
each organization’s commitment to
make a difference. SB
Forty-five percent of the respondents
in the insurance sector say that they
are effective at promoting women
to leadership, compared with 65% in
life sciences, in the last five years.
45%
65%
Insurance Life sciences
One in 10 industry leaders worldwide
expect a real increase in the number
of women in leadership roles over the
next five years.
1 in 10
Women’s representation on the boards
of SGX-listed companies rose more
rapidly in 2015: women held 9.5% of
the 5,029 board seats, up from 8.8%
in 2014.
9.5%
2015
8.8%
2014
This article was first published in The Business Times and BT Invest (a financial portal of The Business Times), under the column “Boardroom Matters” by the Singapore Institute of Directors.
2015
20

Big data and analytics
in treasury managementby Sam Wong
Viewpoint
21

Against such demands, how can the corporate treasury
obtain the necessary information to deliver the right
insights for them to bring about increased shareholder
value, improved business operations and performance for
the organization?
Creating an analytics-driven organization
In just the last few years, the terms “big data” and
“analytics” have become hot topics in company
boardrooms. The treasury and finance functions are
clear beneficiaries of analytics, which provides greater
insight into customers, competitors, profitability and
processes. Analytics can also strengthen the CFO's
ability to drive strategic decision-making and investment
planning. Thus, creating an analytics-driven organization
has also become the top driver of collaboration between
the CFO and CIO.
Many executives understand that embracing big data
and analytics is crucial to keeping their organization
nimble, competitive and profitable. Yet the challenge
is how to invest and implement data analytics to derive
useful insights for business improvement. For a start, it is
important to get the buy-in from the board of directors.
Board members need to understand the complexities and
have a grasp of the issues surrounding these technology
trends. Equally important, these board members should
be prepared to ask the right questions of the executives
in charge of big data and analytics initiatives.
With the large and disparate volumes of data being
created within the organization, innovative and scalable
technology is needed to collect, host and analytically
process the data.
Big data includes information garnered from social media,
internet-enabled, machine, video and voice recordings,
and is typically characterized by the four “Vs”:
Volume: the amount of data being created is vast,
compared to traditional sources
Variety: data comes from different sources and is
being created by machines and people
Velocity: data is being generated extremely fast —
a process that never stops
Veracity: big data is sourced from many different
places; as a result, one needs to test the veracity and
quality of the data
While big data is often defined by the volume, the
value is equally important. For the CFO and treasurer,
data analytics can offer significant value across a
variety of financial and non-financial activities.
For example, in forecasting, organizations can use
data from various sources, such as unstructured data
from embedded sensors and social media feeds to
understand market signals. Incorporating real-time
market signals, and analyzing their impact on revenue,
creates a new level of forecasting accuracy with
real-time availability.
T
he corporate treasury is under increased scrutiny today. Particularly, as
more and more shareholders are asking companies to demonstrate how
they manage financial resources and financial risks, a global trend toward
centralization of treasury activities has emerged. In addition, treasurers
need to cope with the increasingly complex financial instruments, volatile financial
markets and the introduction of new regulations and accounting practices. For
the treasury, this means a need to continually update know-how in order to bring
about a reduction of costs and volatility, and deliver value and short and expansive
lines of communication to the company.
22

Leveraging big data and
analytics in treasury functions
Big data and analytics can support
treasury management activities. There are
many areas where treasury function can
use data analytics to its advantage, such
as asset liability management, hedging
of interest rate risk and foreign exchange
risk, cash management and compliance.
In asset liability management, treasurers
can leverage data such as foreign
exchange, market value assumptions,
mark to market, bank data, rates and
spread to conduct analytics for insights
for stress testing, interest rate risk
management and fund transfer pricing,
balance sheet strategy and multi-factor
behavior model for consolidation.
In hedging of interest rate risk and foreign
exchange risk, treasurers can turn to
economic fundamentals for each country,
and analyze currency to determine the
necessary time to hedge. Analytics allow
a more efficient process to run simulation
to test effectiveness of hedges and price
complex derivatives.
As well, in cash management, treasurers
can run detailed transaction analysis to
institute cash culture program, compress
payment terms, accelerate initial customer
contact for collections and consolidate the
number of collection paths.
On the same note, data analytics can
be applied to reconcile fixed asset book
to tax differences, review source data
to reconstruct accurate tax fixed asset
records for compliance.
Big data-aligned
treasury agenda
To implement big data and analytics into
the treasury function, organizations can
look into developing a big data-aligned
treasury change management agenda,
covering the management model,
treasury operating model and the IT
architecture. This includes designing a
big data-aligned treasury transformation
strategy; updating the treasury model
and organization management model;
designing a big data-aligned treasury
architecture; optimizing the treasury
operating model; and implementing
big data aligned with the treasury
management system.
Thereafter, the next generation of
treasury operating model can focus
on management activities, including
separating operative treasury
(trading) and strategic treasury (holistic
organization management, optimization
of business performance and shareholder
value). The added insights from data
analytics also mean that the treasury
function can allow innovative and new
services, and play a key bridging role
between the lines of business.
Indeed, with the insights to be gleaned,
data and analytics looks to be the way
forward for the treasury function. SB
23

The next big thing:
Viewpoint
Blockchainby Jonathan Rees
24

B
Essentially, blockchain is a distributed decentralized database
technology that maintains a growing list of transactions, validates
their legitimacy and ensures their permanence. It is a digital
ledger of transactions shared among a distributed network
of computers. It can be public or private based on who has
permission to write to the ledger and verify transactions.
Time-stamped and validated individual transactions are compiled
into blocks, which are linked together into a chain.
Although blockchain is an early-stage technology, the outlook on
its growth and impact is bullish. Large investment firms, venture
capitalists and start-ups are confident that the technology is
“the next big thing”. The two most active development areas
are in developing core blockchain technologies; and developing
business applications to run on top of blockchains.
Many people are familiar with the peer-to-peer virtual currency,
Bitcoin, where blockchain is best known as its underpinning
technology. However the potential of blockchains goes far beyond
monetary transactions. People are actively looking at its potential
across entire industry supply chains.
lockchain is arguably the
“new geek on the block” that
has at once left many curious,
excited and perplexed.
25

With massive potential comes risks
Blockchain has the potential to revolutionize transactions
across industries. This is especially true of transactions that
require multiple authentications and verifications, contracts,
and any type of record verification. Its greatest value lies
in its ability to streamline the transfer of any value (data,
assets, currency and information) in a secure, real time and
cost-efficient way, and administers transactions globally
without centralized oversight.
For example, blockchain technologies can improve
operational efficiency via better asset management
and transform supply chain management and delivery.
Companies can use blockchain to track the movement
of assets throughout their supply chains, coordinate
their back-end operations or electronically initiate and
enforce contracts.
Imagine a near future where smart devices will increasingly
be central to supply chains, from in-factory manufacturing to
global logistics, and how these devices will be able to report
on performance and status of assets and products anywhere,
anytime. We can then integrate all that data into a global,
reliable picture of supply chain performance and reliability.
Another example is in managing global trade, which has
historically been a paper-work intensive process that is costly
to execute but critical to managing large cross-border flows
of trade. Using blockchains, companies can radically simplify
and reduce the cost of trade finance, extending credit and
reducing cost across the global supply chain. This also can be
used to speed up supply chains, by reducing administrative
overheads, and reduce the cost and complexity of tax filings.
Blockchain technologies are also moving quickly to
applications in the Internet of Things (IoT) — and there are,
potentially, powerful spins off from there. The distributed
nature of IoT and the blockchain could lead to a myriad of
applications. In the same way that blockchain could become a
“registry of anything”, it could also serve to decentralize any
number of business processes.
Yet, the huge potential of blockchain also magnifies the risks
and challenges of the technology, including infrastructure
concerns, capacity constraints, computing resources required
to change records, performance risk, questions around
privacy and information disclosure, regulatory hurdles and
potential cyber security threats — of which many businesses
and regulators may yet be addressing fully.
Don’t dismiss it
These emerging opportunities and risks of blockchain are
compelling C-suite executives to move out of their comfort
zones in many ways. As it is, C-suite executives are already
finding themselves in a state of digital tension that is
intensifying with the accelerating pace of change.
On one hand, C-suite executives are expected to be digitally
ready and be able to anticipate, assess, and respond to
the impact of these new technologies on their operational
models, work processes and business strategies.
On the other, many admit to not understanding new
technologies, let alone the disruptions that can seize the
business. Whether as a result of inertia, fear, or simply not
having the time and resources to keep pace, many reasons
could account for the widening digital knowledge chasm
present in many organizations today.
At the same time, organizations need to be careful of the
temptation to “over-hype” this important technology as
this often leads to confusion. Put in simple terms, blockchains
are just “rules-based” data platforms, as opposed to
“controls-based”, where data is validated, added, and
shared, based on pre-agreed rules rather than based on
the control of any specific individual third party.
As a start, C-suite executives can consider some of these
potential implications of the technology.
For the CFO, blockchain could change the role of the finance
function in areas such as corporate reporting, where it could
transform the speed of reporting and help to provide greater
transparency and trust in a company’s financial accounts.
For the CEO, ask yourself: how will your company look to
compete in a market where all transactions are transparent,
secure and validated; industrial assets are shared among
market participants; customers have even more information
than they do today; and regulatory compliance and
tax collection could occur in real time as and when
transactions occur?
These are all intriguing questions that are not yet all clearly
answered. What is certain is that the impact of blockchain
will pull in different industries at different times, and
understanding the nature of that pivot, and the tax, legal,
security and compliance questions that will arise, is of
growing importance. SB
26

©2016EYGMLimited.AllRightsReserved.ED0217
Find out how EY is helping companies
transform the way decisions are made.
ey.com/analytics #BetterQuestions
Is the next
evolution
of big data,
big judgment?

Viewpoint
digitalage
in the
T
he digital era has opened up new
opportunities to reinvent business
models and transform customer
interactions. This holds great
potential but also introduces significant risks
at all levels for the business and every part
of the C-suite in different, often subtle and
not easily recognized, ways.
Traditionally misconceived by many as a
technology issue, digital and the associated
cyber risks is very much a business issue and
cannot remain solely in the IT domain. While
cyber management must be an enterprise-
wide responsibility, there should be a clear
owner for cyber risk within the business.
In many organizations, increasingly, the
CFO owns the responsibility for the overall
cyber risk management strategy. This often
makes sense as they are well-positioned to
determine that key issues around metrics
and reporting on cyber risks are reviewed
with an overall business lens.
The growing prevalence and sophistication
of digitization, and resultant cyber attacks,
has quickly elevated cyber into the top three
of many organization’s enterprise risks.
Yet, the dynamic nature of the risk, added
to the technical aspects, makes oversight
particularly challenging for boards. Many
boards are thus still grappling with the
underlying risk, and trying to assess their
level of exposure.
Regardless, judging from the potential
of cyber breaches in inflicting significant
financial, regulatory and reputational
damage on organizations, boards should
have an updated knowledge of this
fast-rising new risk category and understand
the practical methods of governing the
cyber risk position in their organization.
by Paul O'Rourke
Cybergovernance
Viewpoint
28

digital
security
security
human
data
mobile
risks
cyber security
cyber security
insight
insight
enterprise
privacy
privacy
internet
information
cyber intelligence
29

Rethinking cyber governance
There are several reasons why yesterday’s approach
to cyber governance may no longer serve in today’s
digital age. First, the legacy mindset of governance
as a control mechanism does not work when information
flows are fluid. Second, digital governance overly
rooted in mitigation will limit organizations from the
potential upsides.
Boards need to factor in these new realities when
executing their governance function. Governance in
the cyber and digital era is not chiefly through rules,
but through a combination of rules, processes, values,
monitoring and listening, and the explicit development
of infrastructure and services to not just mitigate risks,
but support and shape how digital can help to create
value for the business.
To a large extent, the management of cyber risk needs
to draw on the well-tested processes used for dealing
with more conventional risk types. Fundamental to this
alignment is the fact that cyber risk cannot be completely
eliminated. The core focus for boards, from their
vantage point, is to determine that appropriate cyber
risk mitigation strategies are both established and
embedded in the business.
The reality is that cyber attacks will likely happen to every
business at some point, so it is important for boards to
establish an acceptable level of cyber risk appetite, as part
of the organization’s overall risk management framework.
To that end, boards need to clearly understand the
cyber risks that confront their organization in order
to meaningfully assess the investment needed and
initiatives that should be prioritized to tackle these risks.
Boards should also expect information on the
organization’s risk profile to be provided to them in a
timely and insightful manner. Such information should
be relayed in a clear business context. In particular,
lead indicators, focusing on governance and metrics,
will help boards to identify how well issues are being
managed today, as well as provide valuable insights
into the potential future-state risks.
Increasingly, boards are requiring cyber insurance
be taken out as part of the organization’s cyber risk
management approach. While cyber insurance can
be a valuable investment to protect against the impact
of cyber incidents, it is essential for boards to understand
what is — and is not — covered.
Often, cyber insurance will require the organization
to maintain its cyber security to an agreed standard.
In these cases, specific reporting for the Board is required
to determine that cyber insurance compliance remains
in place. Businesses also need to demonstrate that they
have the evidence to support claims, which insurance
providers are likely to require.
The core focus for boards, from their vantage
point, is to determine that appropriate cyber
risk mitigation strategies are both established
and embedded in the business.[ ]
30

Areas of focus
One of the core areas that boards need to focus on
is education, awareness and culture. Cyber security
is a shared responsibility — organizations are only as
strong as their weakest link.
Cyber attacks that are enabled by human error are a
significant contributor to the overall risk organizations
face today. Such incidences cannot be addressed using
technology alone. It is thus important that the entire
organization and relevant third parties are aware of the
cyber risks that they may be exposed to in their everyday
operations, and be educated as to how they should
respond in the event of cyber breaches.
Another important area for boards to focus on is
determining the organization’s most critical assets are
identified and prioritized for protection. An improved
return on investment will be achieved by allocating capital
to key areas of cyber risk, rather than taking a blanket
approach across the whole organization.
For this reason, boards should demonstrate that the
business focuses its investments on its critical assets, and
expect appropriate reporting on how well these assets
are being managed. Critical assets may include M&A data,
customer data, intellectual property, financial data or
sensitive company information that can sway share price.
Effective boards are also cognizant of the range of
their directors’ skills and experiences. They continuously
reassess and adapt so that the skill sets are commensurate
with the company’s current risk profile. It may not be
necessary to add someone with IT experience to the board
to address cyber security risk if the board can mitigate
its “knowledge gap” in other ways. In some instances,
boards are leveraging independent advisors who can
provide insights on trends related to cyber risk present
in the industry.
A cyber-intelligent board
More than ever, boards are faced with increasing
complexity in governing cyber in the context of rapidly
changing business models, emerging technology
and new market entrants.
What is certain is that digitization, mobility and cloud
technology are essential to driving increased productivity,
competitiveness and innovation. Therefore, importantly
for boards, the fear of or lack of understanding of
cyber risks should not deter them from supporting
the deployment of these new technologies. A better
response is for organizations to learn how to deploy
these technologies securely, and embed a culture
around active defense and “security by design”.
Smart boards know that the best offense is a strong
defense, and an organization’s value and reputation can
hinge on how well it responds to an unforeseen cyber
event. Security does not have to be the price to pay for
innovation and growth; the converse is true as well. SB
Boards should establish an
acceptable level of cyber
risk appetite, as part of the
organization’s overall risk
management framework.
Boards should expect
information on the
organization’s risk profile
to be provided to them in a
timely and insightful manner.
Boards are requiring
cyber insurance be taken
out as part of the
organization’s cyber risk
management approach.
31

News
Deals and alliances
on corporate strategies
D
espite their muted confidence in the state of the economy today,
Southeast Asian (SEA) corporates continue to look to M&A
for growth.
According to 2016 June issue of the SEA edition
of the EY Global Capital Confidence Barometer,
39% of the respondents said that they planned
to actively pursue an acquisition in the next
12 months, retracting only marginally from
42% six months ago. They also expected M&A
markets to improve over the next 12 months.
Deal fundamentals were favorable as vast majority
of SEA corporates believed that the number and
quality of acquisition opportunities and likelihood
of closing deals were stable or positive. Deal
pipeline remained robust too, with many indicating
that they were working on three or more deals.
Their expectations around M&A are not surprising,
said Harsha Basnayake, EY Asia-Pacific Managing
Partner, Transaction Advisory Services. “We’re
moving into a phase where low GDP growth will
become the norm. Resilience is an important
theme. And in a low-growth environment,
businesses are going to continue to look
for alternative strategies to grow.”
He added that there is a lot more consolidation
opportunity to build scale in SEA. “We’re confident
that this trend is going to hold, so long as the region
remains strongly committed to good capital flows,
liquidity and a healthy business environment. SEA,
among other emerging economies, continues to be
conducive for M&As.”
32

Contact us
Harsha Basnayake
Asia-Pacific Managing Partner
Transaction Advisory Services
harsha.basnayake@sg.ey.com
Vikram Chakravarty
Asean Leader
Transaction Advisory Services
vikram.chakravarty@sg.ey.com
Read the full report Southeast Asia
edition of the EY Global Capital
Confidence Barometer at www.ey.com/
SG/en/Services/Transactions/EY-capital-
confidence-barometer
Attractiveness of alliances
The survey also revealed that companies
were seeking alternative avenues, apart
from M&As, for inorganic growth. Close to
half of the respondents expected to enter
into alliances to create better value from
underutilized assets.
Corporate alliances are preferred in
the current fast-changing business
landscape, given its more informal and
less permanent nature, together with the
ability to mitigate significant risks.
Basnayake pointed out that SEA is not
insulated from the impact of the digital
sharing economy. “As such, seeking
competitive scale and advantage through
alliances appears to be a smarter option —
because it creates innovative possibilities
to seek better returns from both
tangible and intangible assets owned
by businesses,” he said.
The survey also revealed that SEA
executives were concerned about the
political stability in both local and global
markets; volatility in commodities and
currencies; and the slowing growth
in China.
Many saw changing customer behavior
as the major source of disruption to
the core business, together with advances
in technology and digitalization, and
sector convergence or increase in
competition from companies in
other sectors. SB
44%
Are focusing on creating
strategic transactions
and alliances to drive
growth in the next
12 months
23%
See changing
customer behavior and
expectations as most
disruptive for its core
business in the next
12 months
57%
Perceive the
global economy
today as stable
83%
Expect to complete
up to three acquisitions
in the next 12 months
64%
Expect the M&A
market to improve in
the next 12 months
39%
Expect to actively
pursue acquisitions in
the next 12 months
33

Digital innovation: buy or build?
A
s the world goes digital, developing innovation
in-house is no longer enough, according to a new
study from EY. Instead, with constraints around time
and capital, non-tech firms are turning to M&As, joint
ventures and alliances to acquire the innovation they need.
The EY Digital Deal Economy Study found that 90% of the 600
corporate executives — from large companies globally that
were surveyed — faced increased competition from businesses
that have already embraced digital technology. Responding to
heightened competition and a disruptive environment, more
than two-thirds of global executives now plan to use M&A to
upgrade their digital capabilities.
Joongshik Wang, Partner, Corporate Finance at Ernst & Young
Corporate Finance Pte Ltd in Singapore observed that
companies in Southeast Asia are also moving toward
digitalization.
“However, the speed of digital transformation of companies
in this region appears to be much slower than that of global
players, as they’re still exploring the returns of investment
for digital before taking the plunge. For instance, we see
brick-and-mortar companies in the consumer and retail sector
frequently talking about e-commerce opportunities, but very
few of them take real action to transform or buyout capabilities
as they’re still concerned about cannibalization,” he said.
Focus on strategic capital allocation
Although the majority (85%) of survey respondents have an
established digital-transformation function in place, more
than half (59%) of companies said that they do not possess the
in-house capabilities required to keep pace with the speed
at which technology is evolving. In addition, only 55% of
businesses have sophisticated processes in place to quantify
the capital needed to pursue digital transformation.
Tony Qui, EY Chief Digital Officer — Transaction Advisory
Services, cautioned against seeing digital as an IT strategy
or one-off investment.
“The scale of transformation needed requires a long-term
digital capital strategy,” he said. “The key challenge for many
companies will be a lack of sufficient capital to meet their
digital ambitions. Businesses need to take a holistic view and
incorporate their digital strategy into their ‘capital agenda’ —
an enterprise’s strategy for capital allocation — and confirm
that leadership is committed in the long term to creating a
digital mindset and a culture of agile innovation.”
While 87% of survey respondents said that they are explicitly
considering digital transformation needs in their capital
allocation planning for the next two or three years, only 55%
have a sophisticated method in place to quantify the capital
needed to pursue digital transformation.
A significant proportion of companies are using analytics and
seeking advice to improve effective inorganic growth. More
than three quarters (79%) have employed analytics and fully
leveraged big data to achieve digital transformation objectives,
while a similar number (77%) of respondents have turned to
third party advisors for pre-deal analysis.
Technology can also be used to support and accelerate deal
success. “The smart use of digitally enabled analytics will
help companies make the right investment choices, whether
it’s acquisitions, alliances or joint ventures, alongside organic
routes,” Qui added.
Effective digital transformation — to accelerate growth and
create new opportunities — requires a business model
supported by a capital and digital strategy that is both
adaptable and agile, the study finds.
Three-quarters of companies surveyed said strategic vision
mapped to digital needs is the most important element of
digital transformation. More than half of respondents (59%)
said digital is embedded in the major decisions they make.
However, 44% of respondents said that they do not have
clarity when it comes to accountability around digital
transformation, which can negatively impact funding and
create leadership-related issues. “Aligning the capital strategy
to support the digital strategy is fundamental to success,
as is accountability at the board level around decisions to
future-proof your business model,” Qui said. SB
Contact us
Joongshik Wang
Partner, Corporate Finance
joongshik.wang@sg.ey.com
Read the full report EY Digital Deal
Economy Study: Dealing in a digital
world at www.ey.com/GL/en/
Services/Transactions/EY-digital-
deal-economy
Tong Qui
Chief Digital Officer — Transaction Advisory Services
tony.qui@sg.ey.com
News
34

The CFO’s
battle with
fraud and
conscienceby Reuben Khoo
C
FOs today face immense pressures. They
need to meet aggressive financial targets
in the midst of a slowing global economy.
In addition, they are increasingly being
scrutinized for individual culpability by regulators
around the globe for corporate misconduct.
It would seem like the law is justified in turning the
spotlight on CFOs: findings from the 14th Global Fraud
Survey 2016 by EY showed that 36% of the CFOs
polled globally admitted they could rationalize unethical
conduct to improve financial performance. Sixteen
percent of finance team members below the CFO would
make cash payment to win or retain business.
It might come as a surprise that executives in Singapore
are not closed to unethical business practices. The same
survey has shown that the top three unethical behaviors
which Singapore respondents would be willing to engage
in are allowing for more flexible product return policies;
changing assumptions in determining valuations or
reserves, and extending the monthly reporting period —
so as to meet financial performance objectives.
This high degree of tolerance toward unethical
behaviors juxtaposes sharply against an increase in
efforts by global authorities to fight against fraud,
bribery and corruption. In May 2016, world leaders,
business and civil society met in London for a landmark
anti-corruption summit, where world leaders pledged
to tackle corruption and are committed to setting up
a public registry of beneficial ownership. Also, a few
countries like China have strengthened its anti-bribery
and anti-corruption regulatory framework and its
aggressive anti-graft campaign has already resulted in
several high profile prosecutions.
Viewpoint
35

Global operations, global risks
Against this backdrop where regulators
are feeding a growing appetite to hold
companies accountable, Singapore
companies — many of which are fast
expanding into new markets through
setting up of overseas operations,
M&A ventures or third-party — could
find themselves exposed to fraud risk
liabilities overseas.
Our survey found that just over half of
all companies that exited investments
in Africa, Brazil, China, Eastern Europe
or India had cited fraud, bribery and
corruption risks as a contributory factor.
In addition to the costly withdrawal from
an investment, this can lead to time-
consuming and reputation-damaging
investigations, remediation action
and regulatory fines. To that end, due
diligence prior to market entry on
both existing and new third parties
is key. Given that the operations of
multinationals span multiple locations,
organizations should establish clear
whistleblowing channels and policies that
not only raise awareness of reporting
mechanisms, but also encourage
employees to report misconduct.
Apart from relying on whistleblowing
channels, organizations should also
leverage technology to detect fraud risk
and incorporate forensic data analysis
as part of a comprehensive anti-fraud
compliance program.
While the entire senior management
ought to be responsible for driving the
tone on anti-fraud, CFOs play a pivotal
role in mitigating fraud exposures, given
their broad optics of the entire business,
which makes them uniquely positioned
to drive market investments while
tempering risks of growth.
What this means is that there is mounting
pressure on the CFOs to manage risk
exposure — fraud included, yet at the
same time, there is ironically a certain
level of willingness in some CFOs to
justify unethical behaviors to meet
financial performance.
Global enforcement,
individual liability
Such a tension is highly concerning, given
the reliance that boards and investors
place on CFOs and finance team
members to provide accurate financial
information. Clearly, this has implications
for the boards where such unethical
behaviors place the business at continued
risk of illegal conduct, which could lead to
subsequent enforcement action.
CFOs and senior executives might
not realize that in cases of corporate
misconduct, there are individual
consequences. “One of the most
effective ways to combat corporate
misconduct is by seeking accountability
from the individuals who perpetrated
the wrongdoing," said Sally Yates,
Deputy Attorney General of the US,
Yates Memo, 2015. This global trend to
prosecute individuals should be a wakeup
call that the responsibility to guard
against fraud risk falls on the CFO
and senior executives.
There are some positive indicators that
enforcement and individual prosecution
are gaining traction. In India, for
example, where steps to increase
transparency and crackdown on
corruption have been taken by the
government, EY survey showed that the
proportion of respondents from India
believing that bribery and corruption
happens widely in their country had
declined from 67% in 2014, to 58% this
year. In China, 74% of local respondents
reported that enforcement is effective,
indicating the apparent effectiveness of
the Chinese Government’s commitment
to tackle corruption.
Clearly, an unrelenting tone from
governments and zero-tolerance for
fraud and corruption is fundamental.
As Singapore Prime Minister Lee said
at the launch of the Corrupt Practices
Investigation Bureau’s exhibition in
April 2016: “Keeping a system clean
must start at the very top." And CFOs
must play a key role in “cleaning up the
system”. In view of the intensity of the
global crackdown on fraud, bribery and
corruption, and the growing complexities
of doing business, it is urgent that
CFOs start keeping their house — and
conscience — in order. SB
16%
of finance team members below
the CFO would make cash payment
to win or retain business
36%
of the CFOs polled globally admitted
they could rationalize unethical conduct
to improve financial performance
Just over
1/2of all companies that exited
investment in Africa, Brazil, China,
Eastern Europe or India had cited
fraud, bribery and corruption risks
as contributing factor
36

Is understanding
the industry as key
as understanding
the problem?
With a global network of forensic technology and
investigation professionals who also are knowledgeable
on industry issues, EY eDiscovery matches your needs.
ey.com/FIDS #BetterQuestions
©2016EYGMLimited.AllRightsReserved.EDNone.

Country
“The significant transport infrastructure
investments committed will transform
KL’s urbanscape and raise the city’s
connectivity with market centers, locally
and regionally.”
Dato' Abdul Rauf Rashid
Managing Partner,
Ernst & Young Advisory Services Sdn Bhd,
EY Asean Assurance Leader
38

isingKuala Lumpur
M
alaysia’s economic diversity and resilient
track record, including strong economic
trade partnerships with regional and world
markets, have driven Kuala Lumpur (KL),
the capital city of Malaysia, to be a major regional hub
with strong linkages to the global supply chain.
39

KL is already a pivot point and headquarter destination for
global regional businesses. Over 3,600 MNCs have set up
their global and regional representative offices in Malaysia,
according to EY's investor guide, KL Calling 2016.
The significant transformation of its rail infrastructure and the
recently introduced Principal Hub tax incentive bode well for
KL’s growth to be a leading hub for Asia.
Dato' Abdul Rauf Rashid, Managing Partner for EY in Malaysia
and EY Asean Assurance Leader, points to KL’s continued
economic and urban transformation and its world-class
infrastructure as catapulting its progression. “The significant
transport infrastructure investments committed will transform
KL’s urbanscape and raise the city’s connectivity with market
centers, locally and regionally,“ he said.
The ongoing transformation of KL is part of Malaysia’s
2010 — 2020 Economic Transformation Program. By 2020,
KL aspires to be among the top 20 global metropolises.
KL, Malaysia’s most well-developed city, is well-regarded
as an affordable city and a leading commercial and financial
center in the region.
Over the last two decades, KL city development activities have
expanded from the city center to the periphery areas across the
state of Selangor. This larger area is known as the Klang Valley
or Greater KL.
Encompassing 10 municipalities, Greater KL now spans an area
11 times larger than KL city. Each is covered by local authorities
located around Klang Valley. Greater KL's population of 7.2m is
forecasted to expand at a compound annual growth rate (CAGR)
of 6% to reach 10m by 2020. Its economy by Gross National
Income (GNI) is expected to grow from US$75b to US$98b at
3% CAGR in view of current global economic conditions.
Overall, Malaysia is favored for its pro-business environment.
According to Bank Negara Malaysia, strong global investor
interest saw Malaysia receive global foreign direct investments
(FDI) amounting to US$9.9b (RM$39.5b) in 2015. Based on A.T.
Kearney’s Global Services Location Index 2016, Malaysia is the
next favorable destination among 55 countries — after India and
China — for offshore and outsourcing services.
Under the infrastructure pillar, Malaysia is well-ranked at the
24th position among 140 countries in the World Economic
Forum’s Global Competitiveness Report 2015-16. Malaysia
is also highly ranked at the 15th position for road quality and
13th for railroad infrastructure quality. The implementation of
significant road and rail infrastructure upgrades in key urban
and regional transportation networks from 2015 to 2022 will
further boost KL as Malaysia’s central logistic hub.
40

Export-driven economy
Malaysia has attracted significant FDI
into export-oriented industries, producing
a wide range of products and services
which have integrated Malaysia into
the global supply chain. The country’s
export-oriented manufacturing and
services sectors have recorded 4.9%
and 6.2% CAGR over the past five years
respectively. Among Asian economies,
Malaysia is the fourth most open trading
economy — its trade to GDP ratio stands at
157%, after Hong Kong (434%), Singapore
(359%) and close to Vietnam (164%).
Malaysia’s active participation in
strategic trade and economic partnership
agreements including the ASEAN
Economic Community (AEC) and the
Trans-Pacific Partnership Agreement
(TPPA) continues to shape its trade
and growth directions. With the AEC,
Malaysian trade has access to a combined
population of 630m people, and a total
GDP of US$2.5t. TPPA participation will
expand Malaysia’s trade access to 11
other TPPA members with a collective
GDP of US$28t.
In addition, Malaysia has six regional
free trade agreements (FTAs), seven
bilateral FTAs and a number of upcoming
agreements in the pipeline including
the Regional Comprehensive Economic
Partnership, ASEAN-Hong Kong FTA and
Malaysia-EU FTA.
In anticipation of higher flows of trade of
goods with the ratifications of bilateral and
regional FTAs as well as economic trade
partnerships, Malaysia has developed
a comprehensive Logistics and Trade
Facilitation Masterplan (2015 — 2020).
The Masterplan outlined three phases and
five thrusts to elevate the competitiveness
of the logistics industry, reinforcing the
country’s bid to be the preferred logistics
gateway to Asia.
Yeo Eng Ping, Tax Leader for EY in
Malaysia and Asean commented:
“Malaysia has been progressively
reshaping herself toward providing
high-value added services. In both the
manufacturing and services sector,
Malaysia is well-positioned in the global
supply chain and with more FTAs and
economic partnerships, Malaysia is
gravitating to become the region's core
activity nucleus.”
The tax factor
Today’s increasingly challenging global
business environment spurs business
models to aspire for a “high-value,
high-impact” central operating model.
In optimizing operating models, the
search for flexible tax regimes becomes
imperative. Malaysia launched the
Principal Hub incentive in April 2015,
making it attractive for MNCs to locate
their regional HQ operations in
the country.
By definition, a Principal Hub is a
locally incorporated company that uses
Malaysia as a base or regional nerve
center for conducting its regional and
global operations to manage, control
and support its key functions, including
the management of risks, decision-
making, strategic business activities,
trading, finance, management and
human resources. In addition, corporates
can leverage the Principal Hub model
to streamline their global and regional
resources and enhance consistency
across its group of companies.
Principal Hub incentive: features and qualifying criteria
1Three-tiered rates
Three-tiers of concessionary corporate
income tax rates are based on level
of business spend; value-added
functions; risks transferred to hub;
level of high-value job creation;
and number of countries served.
2Exempted income
The incentive allows for all types
of income to be exempted to the
extent they are generated from
the qualifying activity.
3Flexible qualifying criteria
The incentive accommodates varied
business models, allowing a mix of
commitments that meets Malaysia’s
investment criteria*.
4Multi-country control
Organization serves and controls
network companies in at least
three countries outside Malaysia.
5Extended duration
Incentive is for five years with
a potential extension of five years.*Investment criteria: Creation of high-income jobs,
Gross National Income impact through local spending
and multiplier effect and having strategic functions
driven through Malaysia
41

Tax savings aside, qualified companies
can optimize their supply chain operating
model and also benefit from KL’s highly
competitive operating costs.
To qualify for the Principal Hub benefits,
investors will be required to maintain
critical management, operational and legal
functions as well as conduct value-based
economic activity in Malaysia.
Such substance requirements are timely
given the current global tax climate,
particularly the OECD’s Base Erosion and
Profit Shifting (BEPS) initiative, which aims
to ensure that profits are recognized where
economic activities generating the profits
are performed and where value is created.
Sectors in focus
With Malaysia being the second largest
global exporter of Liquid Natural Gas (LNG),
KL’s position as the regional HQ hub for
oil and gas is well-anchored.
KL is the headquarter address for
Malaysia’s national petroleum company,
Petronas along with its key suppliers
and service contractors.
In addition, KL is Malaysia’s capital bedrock
and the central hub for banking and capital
market activities. The active participation
of domestic and foreign Islamic banks,
which offer both conventional and Islamic
products, continues to drive KL's growth
to be the region's prime and holistic
financial hub. Other contributing factors
include the continued growth of bond and
sukuk issuances as well as the insurance
and takaful markets.
As Malaysia transforms her economy,
it is anticipated that the services sector
will be a key growth contributor. In 2015,
the services sector contributed 54% to
Malaysia’s GDP and grew 6.2% CAGR
(2010 to 2015). By 2020, the contribution
of the services sector is targeted to
increase to 58%.
Under the Economic Transformation
Program, Malaysia has set her aspirations
to be a leading Global Business Services
(GBS) hub through the development of
globally competitive shared services and
outsourcing services.
Half of Malaysia’s GBS export revenue
was from the business process outsourcing
and IT outsourcing sectors. Knowledge
process outsourcing (KPO), which is
presently at 5% of the aforementioned
GBS export revenue is expected to expand
as Malaysia enhances its policy initiatives
and talent pool toward the provision of
knowledge-based services.
According to Chow Sang Hoe, Advisory
Leader for EY in Malaysia and Asean,
“KL is Malaysia’s pivot point to service the
global needs of tomorrow’s sharing
economy — the continued transformation
and advancement of her intellectual
assets — her people — will determine the
direction of KL’s KPO service segments.”
“In fact, KL’s aspiration to be the preferred
regional services hub in the new sharing
economy sectors such as KPO is synergistic
to Malaysia’s industry capabilities in
financial services, including Islamic finance,
aerospace, engineering construction,
halal food, healthcare, education, oil and
gas and a wide range of business services,”
added Dato’ Rashid.
Future vision
Today’s rapid integration of the global
economy, fueled by digital technologies
and the continued global outsourcing
of production and services, provides
significant opportunities for KL to be a
key regional player in servicing the new
global sharing economy demands.
That said, the optimization of KL's
growth potential will be subject to
Malaysia's ability to grow its economy
and generations of talent; to transform
and adapt to new technologies; develop
flexible and accomodative business
policies; and provide a stable and
responsive government.
“ KL is fast transforming to be one of the
world’s most connected cities, from
the implementation of world-class rail
transport links to the deployment of
ICT infrastructure.“
YB Datuk Seri Utama Tengku Adnan bin Tengku Mansor
Minister of Federal Territories
42

Briand Greer
President, Honeywell Southeast Asia
shares his thoughts about KL as a
principal hub.
In the market
What was behind Honeywell’s decision to
locate its Southeast Asia principal hub
in KL?
“Honeywell is a long-term investor in Malaysia.
Our Malaysian operations started in 1985 and since
then, all of our businesses are present here. We’ve more
than 1,500 employees in six cities: Kuala Lumpur,
Petaling Jaya, Shah Alam, Penang, Kemaman,
and Johor Bahru.
KL provides strong infrastructure, connectivity to the
rest of the region, a significant highly skilled labor force,
and government entities like Invest KL and MIDA are
supportive facilitators for building up our presence.”
How does KL complement Honeywell on
its strategic and business objectives?
“Malaysia is a fast-growing, upper-middle income nation.
Malaysia’s rapid urbanization, growing affluence of its
citizens, demand for energy and resources, and both
investments in KL’s infrastructure and Malaysia’s national
projects across the country are fascinating opportunities
for multinational companies like Honeywell.
KL is an excellent base for companies like ours to be located
in a diverse, dynamic market with excellent local business
opportunities, while also being able to conveniently do
business in the many high-growth markets across the region.”
What strategic services will Honeywell
perform in this principal hub?
“We view our principal hub in Malaysia as an
opportunity to bring more senior decision-making
and high-value services into the dynamic, growing
Southeast Asia region.
We'll be performing regional P&L and business
unit management; strategic business planning and
corporate development; project management; sales
and marketing; business development; technical
procurement and distribution as well as logistics
services in our KL principal hub.
By joining the Principal Hub initiative, we look forward
to investing and placing more resources to support
Malaysia’s and Southeast Asia’s growth.
We’ll bring in best-in-class technologies into the
country, and join hands with our local partners to
build a nation that is more sustainable, more secure,
connected, energy efficient, and productive.”
How has Honeywell fared in building
the capabilities of Malaysian talent?
“Of our 1,600 employees across Malaysia, more
than 95% are Malaysians, and we’ve a very strong
representation of local employees across our mid
and senior level management.
Our employees are our ultimate differentiator.
We believe in hiring the right people, providing
them with meaningful jobs, development opportunities
that enrich and enhance their capabilities, and
career opportunities.
We focus and invest on promoting from within,
as our internal talent is the single most valuable
resource to us. Providing internal opportunities is
not an aspiration; it’s fundamental to our ongoing
success, and we’ve been successful in achieving
this at Honeywell Malaysia.” SB
43

0
billion m3/per annum
Qatar
Malaysia
Australia
Nigeria
Indonesia
20 40 60 80 100 120
KL at a glance (2015)
Sector highlights
Oil and gas
Halal food
Global business services
Financial services
Malaysia holds the
4th largest
oil reserves in Asia-Pacific
Malaysia is the
2nd largest
global exporter of LNG
US$576b
Total assets
73%
27%
Conventional Islamic
Malaysia — share of total
banking assets, 2015
KL, the HQ address
for conventional and
Islamic banking groups
Malaysia is a major halal player exporting over US$11b
(RM$42b), positioning KL well to become the region’s
halal food hub.
Half of Malaysia’s global business services revenue is from business process
outsourcing and IT outsourcing sectors.
Growth of global KPO market, 2014 - 2019
Strong growth of Malaysia’s halal exports
8 19
Domestic
Banks
Foreign
banks
Knowledge process outsourcing (KPO)
services include:
• Analytics
• Animation and design
• Market and business intelligence
• Database management
• Finance shared services
• Finance modelling
• Patent research
• Legal services
• Research and development
• Tax and financial consultancy
• Training and development
60
45
40
35
30
30
25
20
15
10
5
0
20
20142010 2011 2012 2013 2014 2015e 2019f
CAGR: 23%
2014 - 2019
US$b
0
20
40
56
CAGR: 23%
2010 - 2015
15
24
32 33
38
42
US$266b
GDP (constant prices)
US$8,273
GDP per capita
(constant prices)*
US$9.9b
Foreign direct investment
31m
Population
74%
Urban population**
74.8 years
Life expectancy
Contact us
Dato' Abdul Rauf Rashid
Managing Partner, Ernst & Young Advisory Services Sdn Bhd
EY Asean Assurance Leader
abdul-rauf.rashid@my.ey.com
Yeo Eng Ping
EY Asean Tax Leader
eng-ping.yeo@my.ey.com
Chow Sang Hoe
EY Asean Advisory Leader
sang-hoe.chow@my.ey.com
US$316b
global sukuk
53%
US$168b
17%
4.7%
3%
4.9%
10%
7.4%
Indonesia
Qatar
Turkey
Others
Malaysia — share of global sukuk
outstanding, 2016
Malaysia
Saudi Arabia
UAE
Read the full report
KL calling 2016 at
www.ey.com/klcalling2016
* Note: US$1 = RM4.00 (23 March 2016)
** Latest available data, 2014
44

Act now
as anti-tax
avoidance
roots in
Singaporeby Henry Syrett and Jerome van Staden
T
he biggest evolution in tax is upon us — locally. Singapore has
announced that it would become a Base Erosion and Profit Shifting
(BEPS) Associate and formally unite with other governments to
implement a number of measures against tax avoidance.
Firstly, let’s dispel a couple of misconceptions. For one, BEPS is more than just
tax; its impact can influence decisions around almost any non-tax aspect of
the business. Secondly, BEPS is not just of concern to large multinationals in
G20 or OECD member countries. It affects any company that has cross-border
businesses and operations, regardless of size or country of origin.
Viewpoint
45

Companies in Singapore are obviously not
immune to international tax reforms given the
openness of its economy. With the country
committed to specifically implementing the
OECD’s BEPS standards on countering harmful
tax practices, preventing treaty abuse, transfer
pricing documentation, and enhancing dispute
resolutions, companies need to prepare
themselves for this new tax reality.
Increase in transparency
With increased transparency standards comes
requirement for more comprehensive reporting.
Companies can expect more queries and
challenges on their structures and transactions
from authorities in their home country and
wherever they invest.
Governments will be able to raise more tailored
and context-specific queries, as they perform
analytics on the information that is collected.
Consistency in the information that companies
provide to the authorities is key, as any
incongruence will prompt more controversy
with the authorities, amid a higher level of
inter-government information sharing.
There is also a risk that propriety tax information
of companies may eventually be made public. For
instance, the European Union is open to making
data from country-by-country (CbC) report
public, and the Australian Tax Office has stated
that it may share certain information about large
taxpayer entities in Australia.
This means that companies, in addition to
supporting a technical position to governments
in accordance with law, will also have to deal with
public perception of whether their tax payments
are “fair”.
In Singapore, the government has assured
taxpayers on the confidentiality of information
in the CbC reports and that it will only exchange
CbC reports with countries if certain relevant
conditions are met.
Substance requirements
The focus on substance will only get stronger
and companies will, more than ever, need to
demonstrate alignment of where tax is incurred
to where their substantive economic activities
are performed and value is created.
Companies enjoying preferential tax rates in
Singapore may come under scrutiny. If they
are unable to justify the appropriate substance
to enjoy the tax benefits given, the tax incentive
could be withdrawn or the ruling made no
longer applicable.
Therefore, companies should review the
sustainability of existing tax incentives or
rulings now, so as to avoid surprises where the
preferential tax treatment is denied, resulting
in a higher tax cost that erode their earnings.
46

Sustainability of
existing legal and
operating structures
Companies may also be
challenged in accessing double
tax treaties to minimize or
eliminate withholding tax on
cross-border payments.
Treaty shopping, which
was frowned upon in the
past, is definitely gone and
exploiting low-tax and tax
haven regimes for businesses
will require substantiation.
The Inland Revenue Authority
of Singapore has a tax
shelter group, which is active
in challenging structures,
especially financial structures
that involve the use of an
entity in a treaty country
to access the benefits
on payments such as
interest payments.
Tax residency may no longer
be sufficient to provide
guarantee that a company can
obtain the tax treaty benefits.
Authorities may argue that the
sole purpose for a taxpayer
to enter into the arrangement
is to obtain the tax treaty
benefits, and if so, the
onus is on the taxpayer to
defend otherwise.
Companies should therefore
review the level of substance
of their holding, operating
and financing companies to
determine the sustainability
of their current holding,
operating financing and
structures now.
Some pertinent questions
include: what is the initial
design of your business and
are your tax strategies in sync
with how your operations have
evolved? Have you maintained
legal documentation of the
business model and updated
it to reflect the latest set of
facts? Do you have robust
internal control procedures
to ensure tax compliance and
manage tax risks?
Increase in disputes
Tax authorities may become
increasingly aggressive
in challenging the cross-
border arrangements that
multinationals enter into.
This may result in more
disputes and increase the
risk of double taxation as
countries take opposing
views, notwithstanding the
efforts of the Organisation
for Economic Co-operation
and Development to improve
dispute resolution in this area.
Depending on the extent of
dispute, companies may need
to involve the authorities in
their countries to assist to
resolve the issue on hand.
They can also monitor how
countries relevant to their
company plan to implement
different parts of the BEPS
project and if possible, work
with policymakers during
this process.
Collaborate and act
Clearly, as the compliance
and administrative burden
increases with the heightened
reporting obligations,
companies will need to invest
more resources in the
tax function.
If BEPS has far-reaching
implications for companies
beyond tax, then any key
business decision ought to
be considered in light of the
possible tax risks.
Therefore, the tax function
must proactively partner other
functions, including HR, supply
chain, financial planning,
M&A, legal and operations, to
view their decisions through
a “BEPS lens”. The structure
of the tax function definitely
needs to change so as to
better collaborate with other
functions, if not already so.
Singapore’s latest
commitment toward
anti-tax avoidance is
welcomed in that it offers
much needed clarity and
certainty for businesses.
Perhaps the greatest certainty
arising is that a “wait and
see” approach to BEPS is not
sufficient and risky. Proactive
action is now needed. SB
The focus on substance will only get stronger
and companies will, more than ever, need to
demonstrate alignment of where tax is incurred
to where their substantive economic activities
are performed and value is created.
47

Entrepreneurs
fuel job creation
Taking into account all anticipated
workforce changes for 2016,
entrepreneurs expect to expand their
overall global workforce by 9.3%, and
expect 12% of new hires to be young
people in their first jobs.
Disruption and innovation
drives employment
The survey also showed that the more
disruptive and innovative the company,
the more they hire and the faster
they do it.
The most disruptive entrepreneurs — the
17% of respondents who said they have
changed all or many of the rules in their
sector — are more likely to forecast an
increase in their overall workforce in 2016
compared to their more conventional
competitors. At 18%, the net workforce
growth level of these most disruptive
entrepreneurs is twice the average
global figure.
When companies that are changing only
“some” of the rules are added to
this group, the impact of disruption
remained clear: they are 46% more likely
to grow their workforce compared to more
conventional businesses and, at 12%,
net workforce growth is still higher than
the global average of 9%. This suggests
that any level of disruption has a positive
impact on anticipated workforce growth.
“The disruptive force of technology is
transforming individual companies and
creating entirely new sectors, said Mark
Weinberger, EY Global Chairman and CEO.
“In this environment, entrepreneurs are
pivotal drivers of global job creation, and
in some cases are navigating economic
and political uncertainty better than
established players.”
Innovative entrepreneurs — those who said
they have created an entirely new product
or service in the past year — have similar
hiring plans. They are 95% more likely to
expect to grow their workforce in the next
year compared to those who have not
created a new product or service. Their
net workforce growth levels, like their
disruptive counterparts, are also twice
the global average figure.
Uschi Schreiber, EY Global Vice Chair ‒
Markets, added that the findings could
serve as a stark warning to businesses
that are not embracing innovation, change
or disruption, as they risk being left behind
by disruptors. “We know from the survey
that disruptive companies are laser-
focused on attaining the talent that will
allow them to attract customers and drive
growth. Governments too need to focus
on fostering an environment in which
innovative and disruptive entrepreneurs
can flourish,” said Schrieber.
Large corporations
28%of respondents expect to
increase thier total global
workforce in the next
12 months
Most disruptive
entrepreneurs
58%more likely to forecast an
increase in their overall
workforce in 2016
compared to their more
conventional competitors
All disruptive
entrepreneurs
46%more likely to grow their
workforce compared to more
conventional businesses
Contact us
Uschi Schreiber
EY Global Vice Chair, Markets
Chair, Global Accounts Committee
uschi.schreiber@eyop.ey.com
Read the full report Does disruption drive
job creation? EY Global Job Creation
Survey 2016 at betterworkingworld.
ey.com/disruption/global-job-creation-
survey-2016
E
ntrepreneurship continues to be an important source of
economic growth, judging from the EY Global Job Creation
Survey 2016, which found that over half of the entrepreneurs
surveyed globally expect to increase their total global workforce in
the next 12 months — double that of large corporations.
News
48