Information - News - Page 5

19 October 2025

Katrina F. Francisco

Navigating uncertainty in the mining and metals industry

In brief:The mining and metals industry is facing heightened operational complexity due to aging mine sites, regulatory pressures, and the need for sustainable practices, which complicate productivity and increase costs.License to Operate (LTO) is becoming crucial as stakeholders demand greater returns, necessitating alignment with environmental, social, and governance (ESG) factors to secure necessary permits and build community trust.Sustainability commitments are facing achievement and measurement challenges, while emphasizing community partnerships and technology for effective sustainability monitoring. “As the mining and metals industry navigates this complex landscape, it must prioritize operational efficiency, stakeholder engagement and license to operate, workforce development, and sustainability.”The mining and metals industry is entering a new phase of uncertainty, with operational complexity identified as the primary risk for 2026, as highlighted in the EY Top 10 Business Risks and Opportunities survey, which gathered insights from 500 senior executives in the sector globally. This article discusses four of the top risks identified in the survey.Operational complexityThe growing complexity in mining operations stems from aging mine sites and the need to replace old mines to meet rising demand. As mines go deeper and ore grades decline, challenges such as geotechnical issues and water management become increasingly intricate throughout the mine's lifecycle. In the Philippines, the implementation of regulations related to environmental, social, and governance (ESG) factors, including watershed management and biodiversity conservation, adds another layer of complexity, although highly necessary, requiring companies to adopt compliance measures. This heightened complexity not only impacts productivity but also raises operational costs and shifts expectations regarding brownfield expansions and the initiation of new mines. Predictability is essential for maintaining investor confidence, securing capital, and ensuring strategic flexibility. Therefore, rethinking mine design and operations to simplify processes while adhering to regulations is crucial.License to OperateLicense to Operate (LTO) is becoming increasingly significant as external stakeholders, including governments and local communities, demand greater returns from mining assets. This shift is driven by rising nationalism and tightening government budgets, compelling companies to reassess their operational strategies. The recent passing of the Enhanced Fiscal Regime for Large-Scale Metallic Mining Act exemplifies this trend.As the focus on LTO intensifies, it becomes clear that both LTO and ESG factors play a crucial role in the permitting process. These elements are increasingly influenced by national objectives, making it essential for mining companies to align their practices with regulatory priorities to secure necessary approvals. Locally, LTO and ESG are intertwined as regulators and the industry work to address past environmental and social issues that have continued to hound the industry. Regulations aimed at biodiversity conservation and aligning the Social Development Management Program with the Sustainable Development Goals will continue to position ESG as a key driver of LTO.Miners have the opportunity to build trust with stakeholders by prioritizing sustainable and ethical practices over mere compliance. By doing what is right, companies can foster stronger relationships and enhance their reputation within the communities they serve. Ongoing collaboration with local communities is vital for success, as engaging with stakeholders not only addresses their concerns but also creates a more sustainable and mutually beneficial relationship.Attracting a skilled workforceThe global mining sector continues to grapple with a significant challenge: a reputation that hampers its ability to attract a diverse and skilled workforce. As the industry evolves, addressing this issue is essential for future success. Companies must focus on mapping talent and predicting workforce needs, transitioning to long-term workforce planning to align with broader mine strategies. This proactive approach will enable organizations to anticipate and meet their staffing requirements effectively.Additionally, there is a pressing need to reevaluate the employee value proposition (EVP). By establishing clear career pathways, mining companies can make the industry more appealing to potential employees. Embracing technology is also crucial; implementing tools that support onboarding and just-in-time learning can help build specialized skills, enhance safety culture, and optimize production processes. By investing in the workforce and fostering a positive work environment, mining companies can improve their reputation and secure the talent needed to thrive in a competitive landscape.Achieving sustainability goalsAs the mining industry faces increasing pressure to adopt sustainable practices, leading companies have set ambitious goals to become nature-positive by 2030. However, measuring progress toward these targets remains a significant challenge. In the Philippines, the voluntary adoption of the Towards Sustainable Mining (TSM) Protocols by the Chamber of Mines and its members demonstrates the industry's strong commitment to sustainability, particularly in areas related to communities and people, climate change and environmental impact.A crucial aspect of achieving sustainability goals lies in forming strong partnerships with local communities, whether Indigenous or not, which is also expected under the TSM Protocols. These collaborations not only help miners meet their sustainability objectives but also play a vital role in maintaining their LTO, as also mentioned above. To enhance the measurement and monitoring of sustainability efforts, the increased use of digital tools and data analytics is essential. By leveraging technology, mining companies can gain better insights into their environmental and social impact and track their progress more effectively.Enhancing resilience for long-term successAs the mining and metals industry navigates this complex landscape, it must prioritize operational efficiency, stakeholder engagement and license to operate, workforce development, and sustainability. By addressing these interconnected challenges, companies not only enhance their resilience but also position themselves for long-term success in an increasingly demanding environment.Katrina F. Francisco is a Sustainability Partner of SGV & Co.This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinions expressed above are those of the author and do not necessarily represent the views of SGV & Co.

13 October 2025

Noel P. Rabaja

Unlocking value through human-centric transactions

In brief:Successful transactions require leaders to prioritize transformative goals over mere deal completion, emphasizing a compelling vision that engages employees and drives long-term success.Addressing the human elements of a transaction is crucial; fostering an environment where employees feel valued and supported significantly enhances the likelihood of successful outcomes.Organizations must be prepared to manage pivotal moments throughout the transaction process, leveraging decisive action and transparent communication to build trust and maintain momentum.“By fostering a bold vision for transformation and creating an environment where employees can thrive, organizations can navigate challenges and enhance performance, ultimately preparing for future transactions and transformations.”Transactions can serve as powerful catalysts for transformation when leaders create the right conditions for high performance. The EY-Parthenon CEO Outlook Survey indicates that 96% of global CEOs plan to engage in some form of transaction in the coming year. These transactions are essential components of corporate strategies, enabling businesses to enhance shareholder value and differentiate themselves in competitive markets. While they present unique challenges, transactions also provide opportunities to accelerate transformation and reshape a company's future.Research from EY identifies three key factors that contribute to successful transactions. First, bold leadership is crucial; 59% of transaction leaders believe that an organization's capacity for transformation is vital for its long-term viability. The more ambitious the vision behind a transaction, the greater the potential for value creation. Second, addressing the human elements of a deal is equally important as financial considerations. Leaders must foster an environment where employees feel valued and engaged. Finally, leaders should be prepared to navigate critical moments throughout the transaction process, as effective management can turn challenges into opportunities.By focusing on these elements, leaders can significantly enhance the value derived from transactions. This article draws on findings from a collaboration between EY and the University of Oxford's Saïd Business School, which examined transformation programs and gathered insights from senior leaders and workforce members involved in transaction-driven transformations.In the Philippines, recent observations indicate a growing trend in mergers and acquisitions (M&A) across various sectors. In particular, there is a lot of investor interest in the consumer sector due to rapid urbanization and the growing middle class. There has also been increased M&A activity in the renewable energy (RE) space following the liberalization of foreign ownership in RE projects. This increase in M&A activities reflects the necessity for companies to consolidate resources and strengthen their competitive position in a rapidly changing market. Such transactions can enhance financial performance, but the company will need to focus on the integration of diverse corporate cultures and the importance of maintaining employee engagement throughout the transition process. Otherwise, the contemplated benefits of the transaction may not be fully realized.Emphasizing bold leadership in transactionsTo maximize value, leaders must prioritize transformative goals over merely completing transactions. Successful transformations involve operational changes that aim to improve performance and drive sustainable growth. However, transactions often face distinct challenges, such as tight deadlines, public scrutiny, and prolonged uncertainty.Organizations frequently focus on finalizing deals rather than pursuing genuine transformation, which can lead to diminished value. Nearly half of transaction leaders report that they do not achieve the expected value from their transactions, with only 46% meeting their innovation key performance indicators (KPIs). Therefore, leaders should concentrate on establishing a transformative vision that engages employees, shifting the focus from mere completion to long-term success. Moreover, fostering a culture of open communication and collaboration can empower employees to contribute ideas and solutions during the transition. This engagement enhances morale and leads to innovative approaches that can drive the success of the transaction. Leaders who actively involve their teams in the process are more likely to achieve desired outcomes and create a sense of ownership among employees.Creating conditions for successEstablishing the right conditions is essential for fostering high-performance environments that empower employees to overcome challenges. A human-centric approach significantly increases the likelihood of successful outcomes. A compelling vision is critical; employees must believe in a purpose that transcends financial metrics. Additionally, adaptive leadership is necessary, as leaders should be present and responsive, actively engaging with teams to navigate the complexities of transactions.Psychological safety is another vital aspect, as leaders must create an environment where employees feel secure and valued. By promoting disciplined freedom, organizations can empower teams to make decisions quickly, facilitating agile responses to challenges. Furthermore, collaboration across departments is essential for effective integration or separation. Leveraging technology purposefully can also help illustrate the potential of the new organization, enabling employees to visualize the benefits of the transformation.Navigating turning points for maximum valueDecisive action is crucial at various stages of a transaction to effectively manage employee turning points. Research indicates that nearly all transactions encounter pivotal moments, with 98% experiencing turning points that necessitate leadership intervention. As transactions become public, organizations must manage heightened uncertainty, and leaders should quickly form a deal team, establish clear governance, and support the workforce through effective communication. Transparency in decision-making is vital for building trust and addressing potential concerns.Once the deal closes, the new leadership team must align with the transformative vision and establish new ways of working. Providing emotional support for employees is critical, as many may struggle to adapt to the new organizational identity. Celebrating early successes can reinforce the new entity's direction and build confidence among employees. Embracing transformationTransactions have the potential to significantly reshape a business' future. The approach leaders take in managing these deals will greatly influence the value derived from them. By fostering a bold vision for transformation and creating an environment where employees can thrive, organizations can navigate challenges and enhance performance, ultimately preparing for future transactions and transformations.Noel P. Rabaja is the Deputy Managing Partner, Strategy and Transactions Leader, and Markets Leader of SGV & Co.This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinions expressed above are those of the author and do not necessarily represent the views of SGV & Co.

08 August 2024

Not available

Balancing act: Asia-Pacific CEOs embrace cautious optimism

The convergence of market dynamics, policy changes, and geopolitical tensions is forging a wave of cautious optimism among Asia-Pacific businesses. Following a period of spiraling costs of business and a significant drop in mergers and acquisitions (M&A) to multiyear lows in the region, the persistent challenges in the economy and of geopolitical uncertainties have dampened earlier expectations of faster recovery. Initially brimming with bullishness in early 2024, CEOs and investors are now recalibrating their forecasts to consider a more conservative view.. Reflecting the region's more measured outlook, the Philippines earlier revised its own GDP growth forecast to a more conservative 6-7%, down from the previous 6.5-7.5% projection. The National Economic and Development Authority (NEDA) also raised the budget deficit ceilings until 2028 to provide greater flexibility in funding government infrastructure programs. Despite these headwinds, 55% of CEOs feel optimistic about their company’s revenue growth, and 61% remain confident in their profitability, as revealed by the latest 2024 EY CEO Outlook Pulse survey. The report surveyed 340 CEOs and 100 institutional investors across Asia-Pacific and found that CEOs are reworking their strategic playbooks. From mere business expansion goals a year ago, businesses in the region are now zeroing in on strategic investments in innovation and sustainability to achieve long-term resilience and better prepare for the future. However, while investors are keen to support genuine sustainability efforts, they also demand strategies that deliver long-term financial value. Achieving both the desired sustainability impact and positive financial benefits remains crucial to both CEOs and investors. Here are the key findings from the survey, providing salient insights for Philippine businesses. Competitive edge through technology and sustainability With AI's potential to boost productivity and provide a competitive edge, over a third (39%) of Asia-Pacific CEOs are prioritizing advanced technology, including AI, in their strategies for the next 12 months. To navigate the complexities of the digital landscape and ensure they reap the full benefits of advanced technologies, 35% of CEOs are also focusing investments in data management and robust cybersecurity. Over two-thirds of CEOs (68%) and investors (70%) believe that technology and AI can seamlessly bridge short-term financial goals with long-term sustainability. Meanwhile, over the next three years, CEOs are focusing their agenda on sustainability, with 49% of CEOs now seeing it as even more critical than a year ago. This shift to prioritize the green imperative rather than pay mere lip service is fueled by rising consumer demand for sustainable practices that extend beyond the point of sale. While consumers may balk at a "green premium," they still expect companies to implement comprehensive sustainability strategies across their supply chains. Stronger push for greater government action Asia-Pacific CEOs and investors stress the need for governments to take coordinated and consistent action to combat climate change, calling for greater infrastructure investments to spur regional growth and support the energy transition. A key barrier they emphasized is the region's lack of sophisticated public-private partnerships and innovative funding models. While many Asia-Pacific CEOs are pleased with current government infrastructure efforts, a vocal minority calls for more robust actions. They see subsidies, tax incentives, and direct investments as crucial for regional growth and energy transition, whereas mandatory reporting standards and financial penalties are less favored. Moreover, Asia-Pacific CEOs show willingness to accept tighter profit margins and higher costs to protect domestic manufacturing, though their commitment to such sacrifices is more cautious compared to leaders in other regions. M&As to accelerate transformation Asia-Pacific CEOs are seizing new opportunities through mergers, acquisitions, divestitures, and strategic alliances to advance their transformation agendas. Nearly all (99%) are planning or considering transactions this year, with 54% targeting mergers and acquisitions, far surpassing their counterparts in the Americas (36%) and Europe (40%). To ensure that sustainability is not just a box to tick but a core component of their strategic growth plans, companies are embedding sustainability considerations into their M&A framework. This forward-thinking approach aligns with the triple bottom line principle, balancing people, planet, and profit for long-term success. Three strategic actions The following are strategic actions CEOs can take to balance immediate productivity and profitability goals with long-term imperatives to ensure sustainable business growth and climate action alignment: Strength in numbers. By working together, e.g., by way of partnerships or strategic collaboration — particularly given the continuing challenges in the market — companies can have better access to the necessary funding and support from investors and governments to accelerate their transition toward more sustainable operations. Pursue public-private partnerships. When governments are deciding sustainability policy, CEOs, as key stakeholders, must actively engage with them. They are well-informed and ideally placed to advise on the most effective mechanisms to support policy objectives while minimizing economic downsides. Tell a better story. Investors are broadly positive about the outlook for dealmaking. However, they emphasize the need for companies to articulate why acquisition returns will surpass organic investments. They also want to see how integrated sustainability initiatives drive long-term value. Given the need for APAC CEOs to balance short-term productivity and profitability with longer-term imperatives, close collaboration and dialogue between companies, investors and governments will be key to sustaining economic growth while also addressing climate risk concerns. Noel P. Rabaja is the Strategy and Transactions Leader of SGV & Co.This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinion expressed above are those of the author and do not necessarily represent the views of SGV & Co.

08 August 2024

Not available

Balancing act: Asia-Pacific CEOs embrace cautious optimism

The convergence of market dynamics, policy changes, and geopolitical tensions is forging a wave of cautious optimism among Asia-Pacific businesses. Following a period of spiraling costs of business and a significant drop in mergers and acquisitions (M&A) to multiyear lows in the region, the persistent challenges in the economy and of geopolitical uncertainties have dampened earlier expectations of faster recovery. Initially brimming with bullishness in early 2024, CEOs and investors are now recalibrating their forecasts to consider a more conservative view. Reflecting the region's more measured outlook, the Philippines earlier revised its own GDP growth forecast to a more conservative 6-7%, down from the previous 6.5-7.5% projection. The National Economic and Development Authority (NEDA) also raised the budget deficit ceilings until 2028 to provide greater flexibility in funding government infrastructure programs. Despite these headwinds, 55% of CEOs feel optimistic about their company’s revenue growth, and 61% remain confident in their profitability, as revealed by the latest 2024 EY CEO Outlook Pulse survey. The report surveyed 340 CEOs and 100 institutional investors across Asia-Pacific and found that CEOs are reworking their strategic playbooks. From mere business expansion goals a year ago, businesses in the region are now zeroing in on strategic investments in innovation and sustainability to achieve long-term resilience and better prepare for the future. However, while investors are keen to support genuine sustainability efforts, they also demand strategies that deliver long-term financial value. Achieving both the desired sustainability impact and positive financial benefits remains crucial to both CEOs and investors. Here are the key findings from the survey, providing salient insights for Philippine businesses. Competitive edge through technology and sustainability With AI's potential to boost productivity and provide a competitive edge, over a third (39%) of Asia-Pacific CEOs are prioritizing advanced technology, including AI, in their strategies for the next 12 months. To navigate the complexities of the digital landscape and ensure they reap the full benefits of advanced technologies, 35% of CEOs are also focusing investments in data management and robust cybersecurity. Over two-thirds of CEOs (68%) and investors (70%) believe that technology and AI can seamlessly bridge short-term financial goals with long-term sustainability. Meanwhile, over the next three years, CEOs are focusing their agenda on sustainability, with 49% of CEOs now seeing it as even more critical than a year ago. This shift to prioritize the green imperative rather than pay mere lip service is fueled by rising consumer demand for sustainable practices that extend beyond the point of sale. While consumers may balk at a "green premium," they still expect companies to implement comprehensive sustainability strategies across their supply chains. Stronger push for greater government action Asia-Pacific CEOs and investors stress the need for governments to take coordinated and consistent action to combat climate change, calling for greater infrastructure investments to spur regional growth and support the energy transition. A key barrier they emphasized is the region's lack of sophisticated public-private partnerships and innovative funding models. While many Asia-Pacific CEOs are pleased with current government infrastructure efforts, a vocal minority calls for more robust actions. They see subsidies, tax incentives, and direct investments as crucial for regional growth and energy transition, whereas mandatory reporting standards and financial penalties are less favored. Moreover, Asia-Pacific CEOs show willingness to accept tighter profit margins and higher costs to protect domestic manufacturing, though their commitment to such sacrifices is more cautious compared to leaders in other regions. M&As to accelerate transformation Asia-Pacific CEOs are seizing new opportunities through mergers, acquisitions, divestitures, and strategic alliances to advance their transformation agendas. Nearly all (99%) are planning or considering transactions this year, with 54% targeting mergers and acquisitions, far surpassing their counterparts in the Americas (36%) and Europe (40%). To ensure that sustainability is not just a box to tick but a core component of their strategic growth plans, companies are embedding sustainability considerations into their M&A framework. This forward-thinking approach aligns with the triple bottom line principle, balancing people, planet, and profit for long-term success. Three strategic actions The following are strategic actions CEOs can take to balance immediate productivity and profitability goals with long-term imperatives to ensure sustainable business growth and climate action alignment: Strength in numbers. By working together, e.g., by way of partnerships or strategic collaboration — particularly given the continuing challenges in the market — companies can have better access to the necessary funding and support from investors and governments to accelerate their transition toward more sustainable operations. Pursue public-private partnerships. When governments are deciding sustainability policy, CEOs, as key stakeholders, must actively engage with them. They are well-informed and ideally placed to advise on the most effective mechanisms to support policy objectives while minimizing economic downsides. Tell a better story. Investors are broadly positive about the outlook for dealmaking. However, they emphasize the need for companies to articulate why acquisition returns will surpass organic investments. They also want to see how integrated sustainability initiatives drive long-term value. Given the need for APAC CEOs to balance short-term productivity and profitability with longer-term imperatives, close collaboration and dialogue between companies, investors and governments will be key to sustaining economic growth while also addressing climate risk concerns. Noel P. Rabaja is the Strategy and Transactions Leader of SGV & Co.This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinion expressed above are those of the author and do not necessarily represent the views of SGV & Co.

03 July 2023

Not available

Managing liquidity risk in today’s environment

After several years of abundant and cheap liquidity, banks are facing new liquidity risk management challenges in today’s rapidly changing environment. Between June 2022 and May 2023, the Philippine benchmark interest rate moved from 2.5% to 6.25%. Similar interest rate trends have been noted across the Asean markets, impacting bank balance sheets and creating tougher economic conditions for customers. Borrowers are dealing with increased loan payments on variable-rate loans, decreased savings rates due to inflation, and general uncertainty about economic conditions.The recent data are tracking significant growth in bank fixed-income securities investments, which are susceptible to unrealized losses in a rising interest rate environment. Securities growth was 60% from April 2020 to April 2023. Banks hold these securities to collect cash flows from interest and principal, but long-term securities with large unrealized losses are not typically sold to avoid realizing a loss. Thus, these investments do not represent true access to liquidity, unless banks undertake repurchase agreements at market value.Another factor driving up liquidity risk was demonstrated in the recent overnight failure of certain US banks. The sudden collapses show how, in the age of instant communication and social media, a financial panic can go into hyperdrive, facilitated by the ability to make instantaneous bank transfers and withdrawals.Although underlying problems caused the failure, banks need to recognize the additional liquidity risks now that social media has become interwoven into our social and financial lives. In an analog, bricks-and-mortar world, the US banks in question could arguably have had time to reach out to (and be propped up by) the Federal Reserve. But the speed at which social media fanned the flames of customer panic meant that, by the time banks opened the next morning, it was already too late to save them.Conditions can change quickly. Banks must stay on top of their liquidity management. TRADITIONAL STRESS-TESTING ASSUMPTIONSBanks need to take another look at their liquidity stress testing assumptions in light of:• The new speed of bank runs given the evolving role of technology in banking, including the ability of social media to turn a drama into a crisis. All the evidence suggests that a bank run precipitated by social media has the potential to cause even a healthy bank to fail in a matter of days.• The inflationary environment, with some observers predicting interest rates could climb into the low — or even the high — teens.• The potential need to support entities or funds, such as money market funds or unit investment trust funds (UITF), even though banks are not contractually obligated to do so.The new reality in which banks find themselves operating means current estimates of their contingency funding requirement may be significantly too low. They may also be underestimating the need to deal with intense media coverage or to incorporate reputation risk considerations into funding decisions. At its core, a contingency funding plan (CFP) is a crisis management tool. The plan should set out strategies management expects to use to address liquidity shortfalls. In this environment, now is a good time for banks to review their CFP and test its operational components.When updating stress testing, it’s vital not to ignore the worst-case stress tests. Monitoring and reporting functions are normally performed routinely, by the numbers on hypothetical, forward-looking scenarios. Management should look beneath the surface to highlight potential problems. Banks can no longer afford to “play it safe” with liquidity.The point is stress tests are not predictions. These are not events we think will likely eventuate. They are tools for revealing vulnerabilities — which means we must base them on worst-case scenarios. For example, what would the balance sheet look like if 80% of depositors pulled out their funds in a short period of time? It’s important to assess the impact of extreme but plausible scenarios like this on an institution’s earnings, liquidity, and solvency positions.SOLVENCY AND LIQUIDITY ARE TIGHTLY INTERTWINEDBanks also need to think more deeply about the link between their solvency and liquidity, which affects their liquidity buffer. The liquidity buffer is a pool of ear-marked, high-quality, and liquid assets used to meet immediate liquidity needs when faced with adverse conditions.Capital is not a substitute for liquidity. But the two are very closely intertwined. The more solvent a bank is, the less likely will a run ensue. Therefore, the weaker a bank’s solvency position, the more careful the bank has to be about maintaining a higher capital buffer.Apart from solvency concerns, the size of the liquidity buffer is also affected by a bank’s survivability horizon and risk appetite. The board should have a view on how long the bank is intended to survive a stressful environment when there is no access to new wholesale funding. Discussing these types of conditions will help to determine the size of the liquid asset buffer the bank needs. BUILDING LIQUIDITY RISK INTO DECISIONSIn tackling this issue, bankers should ensure liquidity risk strategies are clearly articulated and understood throughout the institution, especially in business units that generate and consume liquidity. This will help to drive corporate strategy that addresses liquidity risk and prudent business decisions. Otherwise, there may be gaps between business and financial plans, which can greatly weaken liquidity positions in the current environment.For example, institutions may not adequately prepare for the implications on the liquidity of actions taken in normal business activities, like focusing on a new customer segment, or strategic initiatives, like acquisitions or entering new markets. Liquidity costs must also be taken into account to more accurately reflect the true costs of products and services, leading to more appropriate deposit pricing.For banks looking to embed liquidity risk into day-to-day business decision-making, incentives can play an important role. Are targets sufficiently designed to achieve an appropriate balance between risk appetite and risk controls? Between short-run and longer-run performance? Or between individual or local business unit goals and firm-wide objectives?UNDERSTANDING BANK FUNDING RISKAn important piece of managing liquidity risk is to understand how the bank is funding its balance sheet. Normally, this involves a mix of core deposits, noncore deposits, wholesale funds and equity. Management should understand concentration risks, including large fund providers or large depositors, concentrations to certain industries, concentrations of noninsured deposits or concentrations in certain types of wholesale funding. Part of the CFP should be potential responses to those concentration and funding risks. Deeply knowing your customers and a study of historic deposit behaviors can also help the bank understand the expected maturities on its deposits. DATA QUALITY MAY NEED TO BE ADDRESSEDThe experience of helping banks to assess liquidity risk in institutions around the region highlights the need to address data problems. Accurate risk assessment depends on aggregating data across multiple systems to develop a group-wide view of liquidity risk exposures and identify constraints on the transfer of liquidity within the entire banking group.If banks are adjusting their stress-testing scenarios and assumptions, this is also an opportunity to check the validity and accuracy of data used in all reports feeding into liquidity risk management. Improving the accuracy of liquidity metrics and liquidity positions can identify significant liquidity opportunities.INDEPENDENT REVIEW OF LIQUIDITY RISK MANAGEMENTFinally, in a rapidly changing environment, an independent review can be helpful to evaluate liquidity risk management processes for their alignment with regulators’ guidance and industry sound practices.All these efforts will deliver strong returns on their investment. The better banks manage liquidity, the less it will cost — an increasingly important differentiator in today’s market. This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinions expressed above are those of the author and do not necessarily represent the views of SGV & Co.Vicky B. Lee-Salas is a partner of SGV & Co.

26 June 2023

Not available

How embedded finance elevates the customer experience

The global market continually evolves as customers look for ways to better integrate financial services into their daily lives. Consumers now prefer a holistic customer journey rather than siloed transactions. As such, banks and other financial institutions must identify opportunities in this developing ecosystem to stay competitive and drive long-term growth.On a micro-scale, individuals can locally use e-wallets and online banking apps to send and receive money, pay bills, and perform cashless transactions on their mobile phones. These integrated experiences have evolved past digital financial services, bringing us closer to the next economic revolution.NOVEL FINANCIAL EXPERIENCESNon-financial organizations have started recognizing the value of offering seamless financial services to meet the needs of “digital citizens.” These businesses are now capitalizing on customer data and analytics to boost brand loyalty, generate new growth, and refine the customer experience. In this new age of technology-driven finance, services are most effective when delivered conveniently and frictionlessly.Changing and developing customer expectations are driving this new era of integrated finance. E-commerce platforms, online marketplaces, and retailers are starting to embed financial products and services into their end-to-end customer journeys.Fundamentally, embedded finance involves a non-financial services company integrating financial products or services into its value chain to bolster its customer experience.According to an EY market survey, with respondents from 21 technology providers across the Americas, EMEIA, and APAC, 94% of global financial technology leaders said that addressing customers’ needs in real time is a significant feature of financial products. As such, there is a burgeoning interest for financial and non-financial institutions to collaborate and identify opportunities for mutual growth. Additionally, EY financial research predicts the valuation of global embedded finance to grow from $264 billion in 2021 to $606 billion in 2025.THE RISE OF EMBEDDED OFFERINGSBanking-as-a-service (BaaS) providers use modern application program interfaces (API) to provide regulated banking solutions to non-financial institutions. These platforms and related technologies make it easier for financial technologies (Fintechs) to work with brands. The advancement of cloud computing and the omnipresence of mobile devices enables considerable connectivity between brands and consumers.Moreover, other integrated value propositions are on the rise. For example, a local e-commerce platform allows buyers and merchants to transact within its mobile app through its e-wallet feature. This service eliminates the need for a separate, traditional bank account. Another example is what started as a ridesharing app, but which now has transitioned to payments, food delivery, e-wallets, and more. Furthermore, the EY market survey shows that over 70% of respondents think that non-financial institutions will offer more financial products and services in the future.For a non-financial services company, having customer transactional data can help the organization create bespoke offerings for its consumers. Online marketplaces, retailers, and software companies, among others, are expected to play a crucial role in the future of the finance sector. Hence, organizations must rethink their positioning, strategic vision, and value propositions to capitalize on this nascent market opportunity.THE VALUE OF PAYMENTSEmbedded finance is manifold, but payments are the most significant in terms of revenue. According to EY research, the value of embedded-channel payments will grow to $6.5 trillion by 2025 from $2.5 trillion in 2021. Non-financial businesses make use of payments as the first touchpoint of customer transactions. With various offerings like discounts, gifts, and pre-orders, payments can help an organization create new experiences and increase customer retention. Furthermore, brands can integrate other services like insurance into this transactional flow the further it evolves.Likewise, consumers worldwide have increasingly adopted the use of digital wallets. This development has revolutionized the payment process for customers and merchants. According to an EY report, The Rise of Paytech — seven forces shaping the future of payments, mobile commerce comprised 52% of e-commerce spending, surpassing that of desktop users. Mobile wallets also held a 49% share in worldwide e-commerce payments in 2021. Finally, according to Juniper Research, an analyst house specializing in digital technology market research, the number of digital wallet users globally may exceed 5.2 billion by 2026, up from 3.4 billion in 2022.THE ROLE OF FINANCIAL SERVICES PROVIDERSEmbedded finance is a disruption that forces traditional financial institutions like banks to embrace this development. It is crucial for banks to adapt, as non-financial institutions have shown that they can now occupy the traditional role of banks. Brands that integrate finance into their customers’ end-to-end journeys create a convenient and robust user experience, which can cement their place in the global market.Once organizations clearly grasp their capabilities, leaders can devise strategies to incorporate embedded finance in the following ways:1. Customer- or product-centered approach This is a traditional model where banks can extend their services to others while innovating their core offerings. This approach means financial institutions are agile and introduce new products that will retain their customer base as market conditions evolve.2. Enabler approachThis approach centers on banks extending their products and services via a platform business model. Additionally, they must set up a digital set of core offerings while embedding services into other third-party platforms. By doing so, banks must understand which products and services could synergize with third-party platforms. They also need to consider various partnership models based on their existing capabilities.3. Builder approachThis technology-heavy approach involves the creation of platforms that house internal and external products. This method relies on agility and functionality as the model continuously adapts according to third-party functionalities. The bank must consider what offerings they can build in-house and which ones they must outsource. 4. Owner orchestrator approachIn this scenario, the bank owns the platform and customer distribution channels while also delivering its products. As such, it must invest in the right technology to bolster customer interactions. This method requires a scalable operating model that continuously improve the functionalities. The bank needs to measure the platform’s success and identify ways to increase brand recognition and retain customers.The conundrum that banks face is that consumers are opting for embedded channels to tap financial services. Financial institutions must find ways to innovate their products and services, lest they fall behind. As the digital age progresses, banks and other institutions should seize the opportunity to differentiate themselves from their competitors. Ultimately, innovation will drive the advancement of financial services toward integrated customer experiences. The discrepancy between what brands offer and what consumers want creates an opportunity for organizations to develop a new strategic vision to drive long-term growth. Banks and other organizations can explore new options, reimagine offerings, and embrace non-traditional revenue channels as they pivot to a financially embedded world. This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinions expressed above are those of the author and do not necessarily represent the views of SGV & Co.Janet A. Paraiso is an assurance partner and the FSO assurance leader of SGV & Co.

19 June 2023

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How sustainable supply chains enable business transformation

Supply chains underscore sustainability and serve as the core of an organization’s ESG-related goals and objectives. With this in mind, supply chain leaders are taking the necessary measures to safeguard resources while identifying new opportunities to drive results. EY teams conducted a global supply chain survey, the EY Supply Chain Sustainability 2022 Report, which polled respondents from countries like Argentina, Canada, and the US for insights from the retail, technology, and agriculture sectors. The findings indicate that several executives have long-term goals for sustainable supply chains, but only some have the acumen, programs, and technology to assess their progress. Some challenges included costs and a need for a strong business case to justify expenditures. According to the US Environmental Protection Agency, more than 90% of an organization’s greenhouse gas emissions and around 50% to 70% of its operating costs are attributed to supply chains. As such, executives can clearly realize significant sustainability-related benefits to greening their supply chains in the long term. The study discovered that eight in 10 supply chain leaders are gearing their initiatives toward more sustainable operations. They are increasing efforts toward decarbonization, proper use of natural resources, ethical sourcing, and fair trade. They are also trying to increase innovation, lessen risk, and realize a greater return on investment for ESG-related initiatives. In the Philippines, many manufacturers, retailers, and local governments have taken steps to reduce plastic use in favor of more environmentally friendly materials. For example, several cities have implemented ordinances banning the distribution and/or use of single-use plastics for onsite dining. Several cities have also banned the distribution of plastic bags in their establishments. With the Philippines counting as a significant contributor to the plastic problem, accounting for 750 thousand metric tons of plastic waste entering the ocean in 2010, the Philippine Alliance for Recycling and Materials Sustainability (PARMS) and its member companies have committed to the Zero Waste to Nature, Ambisyon 2030 (ZWTN 2030) initiative. The initiative aims to divert waste from landfills by recycling materials and resources, supported by strategies and a roadmap with specific implementation timelines and targets to ensure that none of the industrial or post-consumer packaging waste generated by PARMS members ends up in nature by 2030. In addition, with the government’s passage of Republic Act No. 11898, also known as the Extended Producer Responsibility (EPR) Act of 2022, obliged enterprises established their own EPR programs for the EPR registration deadline in February. With the Act now being implemented, there is greater anticipation that the country will see a significant increase in its overall recycling rate. While the EPR Act initially covers plastic packaging, the coverage will gradually expand to encompass other materials as well. This article will delve deeper into the most salient insights from the report with the aim of supporting executives in achieving their sustainability-related goals. LACK OF TRANSPARENCY AND ROI-BACKED SUSTAINABILITY EFFORTSThe demand for supply chain-related visibility has increased with the burgeoning expectations of employees, regulators, and stakeholders. Consumers are becoming more mindful of ESG-related matters, such as sustainable sourcing, organizational health, and work conditions. The report showed that supply chain visibility was a top priority that year for executives, compared to it being a second priority for previous years. In addition, there is a crucial need to assess risks and plan for disruptions and crises. However, only 37% of respondents reported end-to-end supply chain visibility. Collaboration programs, data analytics, and digital tools can help businesses set KPIs and establish overall governance. Organization-wide visibility is a comprehensive initiative, and companies can use it to assess program effectiveness, track resources, and understand labor conditions. Management can also capitalize on technology to identify and home in on operational efficiencies. Notably, the report revealed that 33% of organizations lack a business case for sustainable supply chains, whereas almost half of the respondents reported that their companies have difficulties in measuring sustainability-related returns. Consequently, lacking a solid business case could lead to a shortage of financial support for long-term efforts. FOCUS ON END-TO-END SUPPLY CHAIN TRANSFORMATIONAs much as 61% of businesses reported that cost savings and efficiency were primary motivators for undergoing supply chain sustainability initiatives. Even so, financial gain was not the only benefit. According to Andrew Winston from a Harvard Business Review Whiteboard Session, organizations should prioritize four elements to concretize return on investment for supply chain sustainability: 1. Cost reduction. Improve operational efficiency, lessen material waste, and minimize carbon footprint. 2. Revenue growth. Assess how sustainable supply chains influence market share, profitability, and stock price. 3. Supply chain risk management. Create long-term sourcing strategies and manage compliance and regulatory risks. 4. Intangibles. Delve into sustainability’s relationship with brand reputation, customer loyalty, and talent retention. Moreover, 55% of supply chain executives expect improved operational risk management in the next three years, whereas 31% already reported more efficiency and productivity. Regarding long-term returns, 54% of respondents said they expect an increase in share price or other benchmarks of shareholder value. TAILOR-FIT SUSTAINABILITY-RELATED INITIATIVESExecutives must determine how sustainable supply chains fit into their business strategies. Businesses can structure their efforts by identifying how supply chains enable their goals. Deploying technological capabilities to improve visibility can boost supplier and stakeholder engagement. Organizations can broaden their RoI metrics to include intangible impacts and sustainability results. Given the ever-changing nature of the global market, companies need to go beyond standard business-case drivers such as customer loyalty, market share, and revenue. Enterprises should adopt an end-to-end approach, focusing on cross-functional collaboration, planning, and distribution to identify new opportunities. C-LEVEL CONSIDERATIONSAround 10% of respondents stood out in terms of progress in sustainability-related areas, and their organizations are realizing considerate benefits. One thing they have in common is their considerable focus on transparency. More than half (57%) of this group have public-facing sustainability goals. In terms of material gain, almost half of these trailblazing leaders have already reported a better employee experience. Compared with other respondents, these executives are reaping financial gains despite focusing less on cost-saving measures. At least 25% have reported increased revenue from their supply chain sustainability initiatives, while 43% expect an increased share price in the next three years. Lastly, the data show they are more likely to use sustainable supply chains to protect their corporate brand. Supply chain sustainability has become increasingly important as global market expectations evolve. Organizations are starting to identify financial and nonfinancial opportunities of ESG-related efforts, and executives who know which KPIs to prioritize are already reaping the benefits. This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinions expressed above are those of the author and do not necessarily represent the views of SGV & Co. Benjamin N. Villacorte is a partner from the Climate Change and Sustainability Services team of SGV & Co.

12 June 2023

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The role of micro transformations in organizational growth

The global market and economy continually grapple with various disruptions and crises, and it has become imperative for chief information officers (CIOs) to maintain day-to-day operations with a reduced margin of error. It is incumbent on CEOs to balance technological investment with budget constraints while executives continually face the pressure of showing their clients and stakeholders the value of their operational strategy.The burgeoning demand for investment value underscores the importance of micro transformations in businesses. Micro transformations are incremental yet substantive initiatives that target an organization’s key performance indicators (KPIs) based on their overall business strategies. Compared to traditional projects, micro transformations can help identify bottlenecks and strengths of pre-existing processes. CIOs can use this agile methodology to generate value for their companies.Organizations can effect sustainable change across their people, processes, and technologies by focusing on gradual changes rather than larger-scale and time-consuming efforts. Micro transformations can help businesses adapt to and address disruptions while targeting their most valuable KPIs.Launching a new feature such as an automated customer service chatbot to address customer-specific pain points and adopting the cloud to streamline internal processes are examples of micro transformations. Another example of a micro-transformation project is the implementation of an online deposit account opening solution. In a remote world, financial institutions benefit from a completely digital, user-friendly and seamless customer experience. We see this demonstrated in some digital banks that allow the opening of deposit accounts with only a mobile phone. The ability to open a deposit account at any time and place provides immediate customer value.It should be noted, however, that micro transformations should also be guided by an overall transformation strategy to ensure that all micro transformation initiatives are cohesive. The small victories resulting from smaller, bite-sized technology upgrades can create instant value for organizations while paving the way for more robust digital initiatives, projects, and solutions later on.ADDRESSING DIGITAL TRANSFORMATION FATIGUEDigital transformation can be a cumbersome and intimidating process that may appear promising at the start but fail to deliver results. On the other hand, micro transformations can target benchmarks that would be most impacted by a new offering or service, reducing the time it would take for businesses to realize gains. Organizations can further develop operational efficiencies, risk mitigation, and resource optimization by clearly delineating KPIs.For example, an up-and-coming startup envisions a new strategy after having difficulties with launching its first product offering. This strategy involves interfacing with potential clients and investors while bolstering the former with recent market research. Getting fresh perspectives can help management focus on and refine critical areas most relevant to their strategic priorities. Considering the customers’ needs is vital in formulating a sustainable business plan, which organizations can do via smaller-scale initiatives.If one were to dissect a micro transformation, one could say that it is underpinned by more than just the solution and execution of the work. It also goes beyond automation and changes because it entails continuous improvement and deep process design efforts. This process incentivizes organizations to think big while creating an agile, scalable plan to materialize gains. By returning to the drawing board, companies can identify market opportunities and streamline their day-to-day operations, even if it means upending pre-existing processes. Micro transformations involve adapting to change with a data-substantiated, systematic approach coherent with the organization’s business strategy.REDUCE COMPLEXITY, ADD CONNECTIVITYTraditionally, an organization focuses on initiatives involving collaboration platforms, feedback mechanisms, and workflow plans. While these could yield positive results, siloed efforts often require considerable micromanagement, which could introduce more variables to an already complex system.Micro transformations take a more systematic approach by focusing on project-centered priorities. Data is fed to the appropriate teams, ensuring that the same workflow plan governs everyone. Knowledge is provided to the digital system, which continuously evolves with each project stage. This consolidated approach gives organizations a level of connectivity that would have been a challenge had they abided by standard and traditional practices. Micro transformations assist businesses with streamlining their day-to-day operations to adapt and respond to different risks, which could boost client and customer confidence.As companies pivot into the digital space, micro transformations allow them to capitalize on value-driven core capabilities and identify market opportunities without immense commitments. This streamlined process allows management to deconstruct silos and test the waters with less risk than traditional, larger-scale transformations. In this case, end-to-end digital transformation may be able to help businesses materialize value faster with minimal disruptions to day-to-day operations.ELEMENTS OF MICRO TRANSFORMATIONS1. Processing of data and identification of KPIsIdentifying and articulating KPIs are vital to micro transformations. Organizations can strengthen their overall strategy using analytics-driven data by focusing on metrics that directly impact the business.2. Optimization of KPIsOnce the organization has identified its KPIs, management can identify opportunities and pain points of the company. Consequently, they can refine their product offerings and address underlying areas of improvement.3. Engagement of clients and stakeholdersCommunicating with stakeholders at different points of the project is essential for the success of micro transformations. Organizations should align initiatives and engage interest to foster investor confidence.4. Identification of appropriate technologiesTechnology underpins successful micro transformations, and the former is requisite for implementing changes on an organization-wide scale. By leveraging suitable technologies, businesses can engineer KPI-specific solutions and implement agile application frameworks for various strategic initiatives.GETTING STARTED WITH MICRO TRANSFORMATIONSMicro transformations are holistic approaches that create business value based on their strategy-related benchmarks. This manifold process allows companies to enhance their operating models based on insights-driven data. Management must select projects carefully, delineate the appropriate KPIs, and focus on customer experiences and needs to boost confidence.While micro transformations can yield immediate gains, instant gratification is not the end goal. Ultimately, it is a systematic approach that can help organizations position themselves in the global market and pave their way toward bigger digital transformation agendas. This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinions expressed above are those of the author and do not necessarily represent the views of SGV & Co.Armand N. Cajayon, Jr. is a technology consulting principal of SGV & Co.

05 June 2023

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Rethinking value: The evolution of consumer spending (Third Part)

Third of three partsAfter learning to live with less during the height of the pandemic, many consumers have shifted to pursuing simpler, less consumerist values, according to the EY Future Consumer Index. The study surveyed over 21,000 consumers in 27 countries to determine how consumers see changes in their values and how they look at life. With consumers less willing to spend, businesses have the opportunity to rethink the concept of growth and how to evaluate it.In the previous parts of this article, we discussed the drivers that could reshape consumption patterns, the significant changes in those patterns that are predicted to occur over the next few years, the factors affecting drivers of growth, and their implications for consumer companies.In this last part, we discuss how redefining success will reshape business as we know it and how companies can further understand changing consumer expectations.HOW REDEFINING SUCCESS WILL RESHAPE BUSINESSConsumer companies will need to examine their strategies, business models, and operational structures for them to adapt to this shifting consumer climate and make sure they are relevant to the evolving definitions of value. While not all potential changes will occur suddenly, the current trends already show significant changes in how consumer companies will define and assess success.The Future Consumer Index identified the following drivers that can reshape the existing measures of success:Peer-to-peer models. Peer-to-peer activities are expanding quickly thanks to community platforms, online marketplaces, social selling, and agile payment systems. This makes it possible for customers to independently sell, buy, trade, exchange, and gift goods and services. While this is not a new concept, the sudden growth of backyard businesses during the pandemic, as we have seen in our Philippine market, has given rise to a new generation of microentrepreneurs.Pricing at ‘true cost’. The desire for “true prices” that take into account social, environmental, and health concerns is growing despite the fact that algorithms can already optimize prices in real time for commercial impact. Product pricing may become more individualized to user profiles as data quality and analytics capabilities continue to advance.Well-being as status. As consumers promote lifestyles that emphasize well-being instead of wealth, exercise, sports apparel, healthier meals, and wellness getaways serve as status symbols.Co-creation with consumers. Through social influencers and crowdsourcing, interactive media has given rise to a wave of user-generated content. According to the Digital 2023 Global Overview Report, a social media study produced in partnership with social media agencies Meltwater and We Are Social, Philippine social media users account for as much as 72.5% of the population. Less restrictive intellectual property laws, 3D printing, and open-source tools may also potentially make it easier for customers to collaborate with brands to co-design, manufacture, market, and share the value of goods and services.Enhanced leadership through AI. The delivery of optimized insights that support operational and strategic direction will come more frequently via AI and automation. When business leaders outsource certain judgments and make more decisions based on facts and data, this could ultimately redefine functional positions within boardrooms.UNDERSTANDING CHANGING CONSUMER EXPECTATIONSCompanies will need to adapt to a world where growth and wealth are no longer the exclusive measures for development and success. Businesses will have the ability to control what lies ahead for them by recognizing what factors can potentially influence consumer expectations and behavior through the following points of action:Developing fresh value pools. While some existing value pools will provide revenue, others will make additional contributions that will help to create a more comprehensive understanding of how “good” is defined. Having strong financial balance sheets alone will not help a business succeed in the market, especially if they come at the expense of other factors, such as environmental, social, and governance (ESG) considerations. A company’s success cannot be determined solely by how many or how much of a product it can sell, but also by the services it can provide, the impact it can make, and the values or communities it can support.Innovating ways to meet consumer needs. Through scaling AI, releasing new manufacturing techniques, and unlocking efficient operating constructs, technology will allow consumer companies to deliver personalization at a lower cost and with less resource use. By enabling customers to participate in value creation through peer-to-peer selling and brand collaboration, service-based models that span several categories and industries will become more prevalent in order to meet consumer expectations. A new corporate mission that satisfies expectations for wellbeing by evaluating the true costs and benefits beyond those measured in financial currency will be foundational for this development.Reviewing impact and contribution. Retailers can offer more value in terms of the insights and data they share back to brands, their contributions to employee wellbeing, and their position in the community on top of the revenue generated by their stores. The success of consumer goods companies may also depend just as much on their capacity to address systemic environmental problems or enhance consumer health as it does on their capacity to persuade customers to buy their goods.REDEFINING SUCCESS TO BUILD LONG-TERM VALUEOf all the factors discussed, long-term value remains the most important. As social and environmental key performance indicators join financial metrics as drivers of long-term value, intangible assets are likewise becoming more significant in driving value. New definitions of success will challenge the prioritization of growth as stakeholder knowledge and influence expands through increased connectivity and transparency.Growth and profitability are currently viewed as indicators of how well consumer companies are able to meet the demands of the market. However, given rapidly and dramatically changing consumer behavior and priorities, companies will need to reimagine new strategies to build long-term value and sustainably deliver the products and experiences that consumers, both today and in the near future, truly want. This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinions expressed above are those of the author and do not necessarily represent the views of SGV & Co.Maria Kathrina S. Macaisa-Peña is a business consulting partner and the consumer products and retail sector leader of SGV & Co.

29 May 2023

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Rethinking value: The evolution of consumer spending (Second Part)

Second of three partsPeople are buying less and/or buying better in various ways, a trend that is creating new consumption patterns. While consumption is still crucial for economic growth, companies will need to adapt as customers increasingly prefer experiences and digital goods over tangible items. To remain competitive, companies will need to know what is causing those changes, how they will affect their goods and services, and what future success will look like as redefined by evolving consumer needs.With consumer spending such a large source of economic growth, the consumer is truly king. While it has become widely accepted that consumption drives growth, two years of lockdowns have left a lasting impression on consumer preferences. According to the EY Future Consumer Index, which surveys over 21,000 consumers in 27 countries, many consumers have developed simpler, less consumerist values as a result of learning to live with less during the height of the pandemic. Whether by preference or circumstance, we’ve seen the Filipino consumer become more selective in where and how they spend their money. With consumers demonstrating a decreasing appetite for spending, businesses are faced with the opportunity to redefine the concept of growth and how to measure it.In the first part of this article, we discussed the drivers that could reshape consumption patterns and the significant changes in said patterns that are predicted to occur over the next few years. In this second part, we discuss the factors affecting drivers of growth and their implications for consumer companies.DRIVERS AFFECTING PERCEPTIONS OF GROWTHTraditionally, businesses are evaluated by how much they can increase their revenue and profit margins, while entire economies are measured by how much they can grow their GDP. This makes changes in consumer values and spending habits crucial to their success. The measurements used to gauge development and growth will inevitably change as the foundations of consumption change as well.Growth defines progress; strong GDP growth or increases in revenue both indicate that things are moving in the right direction, and when they are declining, they raise red flags. However, the importance of growth is being questioned, with increasing pressure to switch national development indicators from financial measurements to a “well-being economy,” which measures success by the well-being of the environment as well as consumers.Wealth and well-being have long been correlated with each another, and focusing on well-being instead of assuming that wealth itself delivers well-being creates a significant change in how economies develop. This is being increasingly reflected in the development of business strategies. Environmental, social, and governance (ESG) concerns are further influencing investment choices, and ESG goals are being reported more often alongside financial ones.The EY Future Consumer Index identified the following drivers that could reshape existing perceptions of growth and progress.Alternative business models. As resources become scarcer, investments are being driven to find alternatives. This will open up new opportunities, reducing related costs and delivering a new wave of goods and services as a result of rising technologies, data proliferation, alternate food sources, and renewable energy.Immersive virtual economies. As consumers spend more time and money online, alternative digital economies are emerging and becoming larger, more numerous, and more complex. This will open up new opportunities for the creation of value-utilizing digital assets or currencies that are transferable between the real world and the virtual one.Well-being economy. Alternative metrics that produce better social and environmental results are beginning to replace the emphasis on using financial growth and wealth to measure progress and development. There is also the previously mentioned increasing pressure to replace metrics like GDP with ones that instead focus on enhancing the well-being of the environment and the general populace.Social evaluation. Algorithms that monitor factors such as social conduct, consumer spending patterns, media consumption, and credit history can produce holistic and comprehensive ratings that reflect the social value of individuals and organizations. As these scores become more widely used, they may be used to determine who has access to financial, travel, and healthcare privileges.Converging public and private services. The gap between businesses and governments is narrowing as corporations use resources and infrastructure for functions previously performed by the public sector, such as taking back and recycling waste, providing healthcare or education, or using social media for emergency communications. Local fashion corporations in particular have employed ongoing recycling initiatives, incentivizing their customers to adopt more circular lifestyles.IMPLICATIONS FOR CONSUMER COMPANIESThe previously discussed factors show that simply measuring financial growth may not be sufficient anymore when it comes to measuring overall progress. For example, value creation will shift away from physical economies and toward virtual economies due to the scarcity of certain resources and the growing availability of others. Non-financial goals will take precedence over hard currency, pushing back the impact on time, people, and the environment.The well-being of our planet and its inhabitants will be combined with financial security and economic growth on national agendas. The demographic dividend that has sustained economic advancement for centuries will be undermined by declining population growth, while technology may result in shorter workweeks and the need for new welfare programs.In the last part of this article, we discuss how redefining success will reshape business as we know it and how companies can further understand changing consumer expectations. This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinions expressed above are those of the author and do not necessarily represent the views of SGV & Co.Maria Kathrina S. Macaisa-Peña is a business consulting partner and the consumer products and retail sector leader of SGV & Co.