SPH Media to review risk culture, internal controls after circulation data investigation

SINGAPORE - SPH Media will improve its internal controls and enhance its risk management, the media group said on Wednesday after releasing a report detailing the findings of an investigation into

its overstated circulation numbers

.

SPH Media chief executive Teo Lay Lim said the incident had revealed inherent weaknesses, some of which had been addressed and fixed immediately, such as requiring that two approvals or the chief financial officer’s sign-off be obtained for certain decisions.

The company is also commissioning outside parties to look at its governance, control and compliance, and is in the process of adopting a new enterprise resource planning system that meets these requirements, she added.

In short, the media group will act on the recommendations in the report, Ms Teo said at an internal briefing to journalists from the media group’s newspaper titles. This includes benchmarking the reporting of its circulation numbers with internationally accepted standards.

The report was put together by

SPH Media’s audit and risk committee

, following investigations by legal adviser Allen & Gledhill and assisted by accounting firm Deloitte, which began in January.

Using August 2021 numbers, it found that the average daily circulation numbers across the media group’s newspaper titles had been overstated by 82,600.

In the report

, the committee said SPH Media should take the opportunity to evaluate its risk culture, enhance risk management practices and continually improve internal controls and processes.

“SPH Media Group has a legacy of operating within individual departments, given the specialised nature of each operation or function,” it said.

It urged the media group to conduct a comprehensive review of its control environment and practices, so as to balance operational effectiveness and efficiency with its expected standards of conduct and accountability.

Separately, the committee concurred with Allen & Gledhill’s recommendation to

file a police report,

as investigators had found matters that could potentially constitute offences.

Key principles of internal controls the report emphasised included the segregation of incompatible duties to prevent fraud; appropriate approval levels to prevent invalid transactions; having a mechanism to verify that transactions are for the correct purpose and amounts; record-keeping to ensure the accuracy and completeness of transactions; and safeguards for data and assets.

“(Such controls) ensure the integrity of financial and accounting information, improve operational efficiency, comply with laws and regulations, promote accountability, protect assets and minimise errors and fraud,” said the report.

Mr Max Loh, who chaired the committee, said the report detailed such controls as they are key, and not because they are all lacking.

“We’re not seeing that every one of these things is broken, not at all,” he said.

“But it’s a continued improvement process, and as part of this investigation, or the findings that have come out, I think it is a good catalyst, if you will, for us to relook all this and see how we can strengthen (them).”

The report had flagged a barter deal with another media organisation as questionable, as counting bulk copies that were returned, unsold or undelivered flouts industry rules.

At the briefing, Ms Teo said that, going forward, the company may still enter into barter or volume deals, which in themselves are not a problem.

“What we need to do differently (is) we need to execute the intent of the barter deal,” she said. For example, a committee could be formed on both sides to track the targets set and to report the outcomes of the deal.

“That would be what we would have to do if we have the next barter deal, in order not to be guilty of or in order not to fall into this situation where it seemed to be not well-executed,” she said.

SPH Media will also continue with the practice of making bulk deals, for which arrangements with various agencies currently exist.

The company will have to make sure it is executing the arrangements right, such as making sure that cancellations are not counted, said Ms Teo.

The report also said no evidence was found that the journalism and editorial departments were involved in the overstatement of circulation numbers, which was first discovered in an audit in 2022.

It urged SPH Media to embrace and adopt a robust risk culture, alongside one of performance and teamwork.

While all organisations need to take risks to achieve their objectives, an inappropriate risk culture translates to certain individuals and teams undertaking activities that the rest of the organisation ignores, condones or is blindsided by, the report said.

In essence, it said, risk culture is a key indicator of how risk is managed by an organisation, especially when under stress or when it fails to meet key performance indicators.

SPH Media’s leadership must set the tone by balancing commercial considerations and risk management. Performance and rewards should likewise be linked to well-informed risk decisions and appropriate risk-taking, said the committee.

The company should also create a culture where people are comfortable talking openly about risk and challenging others, including superiors, who should then positively address the concerns raised.

Employees should also take personal responsibility for managing risks, be committed to accountability, and proactively seek to involve others in making appropriate risk-based decisions, it added.

Finally, the committee urged SPH Media to critically review its corporate governance practices, and ensure that its risk mitigation practices are pervasive and that implementation is robust and effective.

In relation to the ongoing rebasing exercise on how it reports its readership numbers, the committee said the formula should be benchmarked with internationally accepted standards and audited by an external, independent third party if possible.

The methodology should also be clearly recorded in guidelines available to all its employees, and be reviewed regularly to ensure compliance with international standards, it added.

Ms Teo said the company is “pretty close” to contracting with an external organisation to validate this methodology.

If the partnership takes place, the methodology will also continue to evolve over time as news consumption habits change.

“Reach is very important to us... We want an independent view as to what is kosher by industry standards to count as reach,” she said.

This includes whether and how to measure new forms of reach, such as through platforms like TikTok, LinkedIn and Instagram, she added.

“But certainly it’s not about us defining it alone,” she said. “It’s us getting someone to say – is this the right way, is this a practice that five or six global news organisations use?”