Everyone loves a successful moonshot. In Singapore, some tech start-ups have been reaching the skies, with more than 10 homegrown companies achieving unicorn status. Zilingo could have been another sterling example if not for a series of incidents which exposed its corporate governance lapses.
Things were going well and reportedly, Zilingo was negotiating a new funding round earlier this year which, if successful, would have elevated it to unicorn status.
However, complaints of alleged financial irregularities led to a forensic investigation that eventually saw the termination of co-founder and CEO Ankiti Bose in May.
Denying any financial shenanigans, Bose had said when interviewed that she was waiting for advice from her auditor and adviser, and “couldn’t touch the accounts since I’m not a qualified chartered accountant”. While chartered accountants (CAs) should be more familiar with accounting concepts — as Bose has pointed out — the profession has also evolved to provide wider corporate contributions.
Start-ups must establish a corporate governance framework
In Singapore, the chartered accountant is a professional designation accorded to accountants who have fulfilled ethical and professional requirements and have been acquiring continuous professional education (CPE) hours annually to keep their skills and knowledge up to date.
See also: MAS issues mandatory standards for corporate finance advisers
CAs play an instrumental role in corporate governance: from informing decision making and assessing investment scenarios to designing internal controls, measuring performance, reporting and providing assurance. CAs can help start-ups internalise a culture of stewardship that emphasises responsibility to a wider audience than those sitting in the corner offices.
A properly designed financial system with clear accountability for financial reporting is also critical for startups to impress both existing and new investors. Additionally, well-prepared performance forecasts and project reports can help tech start-ups ace their funding reviews by presenting business prospects in a grounded yet compelling way without fear of getting called out on inaccurate data or unintended errors.
Internal controls are a safeguard against errors, irregularities and abuse. At the heart of corporate governance is a clear tone at the top to foster the right mindset and control culture, with clear expectations on the management of activities.
See also: Yeo Hiap Seng completes review of loss understatement, finds no fraud nor other significant errors
A strong corporate governance framework communicates clear and consistent rules, which is a necessary condition to foster personal ownership across the company and reflect the company’s ability to deliver on promises.
When a company’s CEO and management begin to distance themselves from financial information — more often than not — it is a red flag. For a CEO to lead, internal controls are especially important when managing employees with multiple responsibilities and reporting lines.
Hastily thought-out internal controls or a shabby control system might create blind spots in the corporate leadership and a high potential for financial leakages, poor control of resources and other irregularities to go unnoticed.
Among start-ups, where being quick and nimble is an existential skill, there sometimes exists a misconception that corporate governance creates onerous, annoying roadblocks that slow them down.
But rather than thinking of corporate governance as just increasing the number of traffic lights that will painfully disrupt the journey, effective corporate governance strives to ensure that the traffic lights are strategically placed. With synchronised green lights, it enables a vehicle to arrive quickly at its destination without accidents or traffic tickets along the way.
Fast but steady wins the race
Today, Singapore is home to a thriving start-up scene. With an increasing number of start-up accelerators offering access to a gamut of financial assistance and business loans — and more than 1,000 Singapore-based fintech companies — the city-state has the top start-up ecosystem in the Asia Pacific region.
Sink your teeth into in-depth insights from our contributors, and dive into financial and economic trends
As these start-ups speed off in search of fame and fortune, they should plan for the quickest route but without any illegal short cuts or running any red lights.
That might just win them the race and more importantly, ensure they have the time to enjoy the after-party.
Willy Leow is a member of the corporate governance and risk management committee at the Institute of Singapore Chartered Accountants. He is also partner and head of risk advisory services at BDO