Isca panel urges firms to ditch boilerplate guidance, bridge trust gap

[SINGAPORE] Building trust with investors requires clarity, as well as a stronger alignment between business strategy and finance teams, panellists at an industry forum said on Monday (May 11).

Singtel’s chief financial officer (CFO) Arthur Lang said that it took about two-and-a-half to three years before its management team and board were convinced to begin sharing guidance for earnings before interest and taxes, describing it as a “huge mindset shift”.

Speaking on a panel at the Value Unlock Forum by the Institute of Singapore Chartered Accountants (Isca), he pointed out that listed companies in Singapore are generally cautious in providing forecasts.

A more “measured” approach could be better, he said, adding that this would help to build trust and credibility, versus a “big-bang” approach that risks overpromising and failing to deliver. 

Lang was responding to a question on how companies can translate strategy into financial numbers and key performance indicators that investors trust.

“Once you have all these forecasts, everybody is so focused on making sure you can deliver,” he said, adding that this alignment also makes the CFO and finance team’s job easier.

Clarity is crucial

Panellists at the forum, which was held in partnership with the Singapore Exchange (SGX), said that the current volatile environment is increasingly affecting how companies connect with investors. 

Liew Nam Soon, EY Asia East deputy regional managing partner and EY Singapore managing partner, said that companies must have “the ability to articulate about the uncertainty” and “form an opinion in terms of applying materiality under uncertainty”.

He added that acknowledging uncertainties while applying reasonable assumptions builds investor confidence. “The right assumptions give more trust and confidence… and auditors have a big role in playing that as well.”

Liew also pointed to the increasing value that auditors provide beyond signing off financial statements, such as in commentary. 

“This is where auditors can also work with the audit committee and finance team, to be very clear and deliberate about putting forth some of these assumptions.”

Bridging information asymmetry

Another factor the panellists flagged is the need to bridge the information asymmetry between companies and investors.

The starting point, Lang said, can be to connect finance with the business.

“It’s not just the numbers that our stakeholders care about,” he explained. “It’s also the business strategy, where would the business be and what kind of numbers that we generate from the business.”

To achieve this, finance teams need to be deeply involved in business discussions.

At Singtel, for example, both Lang and chief executive officer Yuen Kuan Moon sit on the executive committees of all business units. The investor-relations team also attends discussions focused on business and financial performance.

“It is very important to have internal synchronisation with our various businesses,” Lang added. “Finance needs to be there with the executives to understand how the business is going and also have a seat at the table in terms of how business is going forward.”

Nevertheless, there can be situations where narratives and numbers do not align.

Geoff Howie, market strategist at SGX, acknowledged that such mismatches can occur when a company increases dividends despite reduced cash flow or adds capacity with lower utilisation.

“Having guidance that is not a boilerplate is super important, because once that’s published, the research analysts will then take that and make the projections,” he said.

He further noted that relevance is crucial for both investor decision-making and for overall market effectiveness. A lack of relevance has historically been a challenge in the marketplace. 

Connecting with investors

Separately, speakers at a fireside chat said that companies should focus on quality investor education and meaningful engagement.

This is to draw shareholders’ attention to business segments, strategic direction, trends and future prospects, said Ch’ng Li-Ling, partner and founding member of RHTLaw Asia’s financial services, technology practice and sustainability practice.

Fellow speaker Yang Eu Jin, partner and co-head of RHTLaw Asia’s corporate and capital markets practice, added that companies must “connect in a meaningful way with the investor base”.

Companies with a loyal long-term investor base, he observed, are often those that have successfully built trust through engagement, even during periods when returns may fall short of expectations.

“Because they believe in the value of the company and the business, they don’t just jump ship,” he said, adding these companies have likely earned the trust of long-term retail investors.

Speakers at the fireside chat also highlighted the importance of strong leadership and collaboration between finance teams and boards in driving sustainable growth and investor confidence.

“CFOs need to move beyond the numbers and help the executive team extract the value of an organisation,” Ch’ng said.

Yang added that the connection between business leaders, such as the chief executive officer or chief operating officer, and the CFO or finance director is important, so “investors can believe in what you’ve said”.