2025 Articles - Suits the C-Suite

29 December 2025

Noel P. Rabaja

Embodying resilience in a disrupted world

In brief:Volatility is a current feature of the global economy, and CEOs are redesigning their businesses with confidence that they can operate effectively in this environment.Companies are adapting hybrid operating structures that balance global scale with regional and local resilience, creating new opportunities and competitive pressures for the Philippines and such other markets that can serve as demand hubs for global companies.As companies rethink how to serve Asian markets, the country’s large domestic consumer base, young demographics, English-speaking workforce, and improving infrastructure make it a credible destination for localized and regional operations.“As global CEOs redesign their strategies for a volatile world, markets that combine demand growth, talent availability and improving digital infrastructure are gaining relevance.”For decades, globalization rewarded scale, cost efficiency and geographic dispersion. That model is now under pressure. Trade tensions, industrial policy shifts, regulatory divergence and geopolitical disputes have turned volatility from an episodic risk into a current feature of the global economy. What is striking is not that disruption persists, but how decisively corporate leaders respond. According to the latest EY-Parthenon CEO Outlook Survey, 57% of global CEOs expect geopolitical and economic uncertainty to extend beyond the following year, yet confidence is rising, not falling. The CEO Confidence Index climbed to 83 in September 2025, suggesting that leaders believe their organizations are better equipped for this scenario than they were a year ago. Proactive CEOs embrace disruption as a catalyst for change. Rather than retreating in the face of challenges, over half of surveyed leaders (52%) are increasing their investments to accelerate portfolio transformation, recognizing that adapting to shifting market dynamics is essential for long-term success.In the Philippines, while CEO optimism may be affected by some other local concerns, the leading CEOs are expected to continue their strategic investments in portfolio transformation and long-term value creation. For instance, in the real estate sector, the leading players are heavily investing to reimagine and redevelop their existing malls and build new ones over the next few years. They are looking to unlock the full potential of their retail spaces by creating greener, more innovative and vibrant spaces for better lifestyle experiences and connections.In the banking sector, the race toward digital banking continues to heat up as close to half of the population remains unbanked and presents a significant opportunity for both the incumbents and new entrants to the digital banking space. These players are expected to continue making strategic investments to build or acquire new capabilities needed for them to get ahead of competition.In the restaurant space, the country’s leading quick service restaurant (QSR) chain is expected to continue optimizing its brand portfolio and accelerating its international expansion. Alongside a focus on transformation, CEOs are also balancing short-term financial performance with long-term value creation. This dual approach helps in navigating immediate challenges while building trust and strengthening stakeholder relationships. In fact, 41% of CEOs are transforming their portfolios specifically to improve financial performance, underscoring the importance of strategic investment in a rapidly changing environment.For the leading CEOs, volatility is no longer something to be waited out. It is increasingly treated as a strategic input, shaping how firms allocate capital, structure supply chains, and deploy technology.From reaction to strategyOne of the clearest strategic responses emerging from the survey is the move toward localization and regionalization. Nearly three-quarters of CEOs report localizing at least part of their production within the country of sale. At the same time, just over half have reorganized supply chains around regional blocks.This is not a short-term hedge against tariffs or election cycles. As much as 72% of CEOs say localization is now a long-term strategy. The pandemic exposed the vulnerability of overly centralized supply chains, and subsequent geopolitical challenges confirmed it. Many executives concluded that efficiency without resilience is no longer effective. For the Philippines, this shift creates both opportunity and pressure. As companies rethink how to serve Asian markets, the country’s large domestic consumer base, young demographics, English-speaking workforce, and improving infrastructure make it a credible destination for localized and regional operations. At the same time, competition within ASEAN for investments has intensified.Different globalizationLocalization should not be confused with retreat. Few multinational companies are abandoning global scale altogether. Instead, they are pursuing hybrid operating models, maintaining centralized advantages where they matter while decentralizing production, sourcing and decision-making closer to end markets.In practice, this means that global companies are increasingly viewing markets like the Philippines not simply as export platforms or cost centers, but as demand hubs. Production closer to consumers reduces logistics costs, shortens lead times and mitigates exposure to trade disruptions. It also enables faster response to local preferences, regulatory changes and competitive dynamics.For companies serving Southeast Asia, regionalization often means designing supply chains that can flex across ASEAN rather than relying exclusively on distant hubs. The Philippines, with its strategic location and improving connectivity, can play a more prominent role in these regional networks, provided policy stability and ease of doing business continue to improve.Localization of technology and dataTechnology and data stand out as the business areas where localization and regionalization are most advanced. According to the survey, 41% of CEOs are localizing technology and data operations while 44% are regionalizing them, both higher than in any other function.This reflects a structural change in how scale is achieved. Automation, cloud computing and artificial intelligence have reduced the need for massive, centralized hubs. Digital platforms allow companies to maintain global standards while tailoring products, services, and processes locally.For the Philippines, this trend is particularly consequential. The country has long played a role in global services, notably business process outsourcing. However, the nature of that role is changing. As companies regionalize technology, data analytics and digital operations, the opportunity shifts from labor arbitrage to capability-building in software development, data management, cybersecurity and AI-enabled services.Regulation is also an important driver. Governments worldwide are asserting greater control over data, digital infrastructure and technology ecosystems. Localizing data and technology operations helps companies comply with evolving data privacy and digital sovereignty rules. Jurisdictions that offer regulatory clarity and digital infrastructure stand to benefit.Beyond operational efficiency, localization increasingly serves a reputational and political function. Operating closer to customers and communities improves transparency and strengthens relationships with regulators and policymakers. In the Philippines, where foreign investment is sometimes subjected to public scrutiny, visible commitment to local employment, skills development and sustainability can materially affect a company’s license to operate. Trust has become an economic asset that can lower operating risk and improve long-term returns.Deal-making shiftThe landscape of mergers and acquisitions (M&A) is also evolving. The survey also points to sustained interest in deal-making, though with a notable shift in form. Rather than large-scale acquisitions, CEOs increasingly favor alliances, joint ventures and targeted investments, particularly in technology and intellectual property.This trend allows companies to share risks and access new markets or technologies without the full commitment of ownership. In a regulatory environment that scrutinizes traditional mergers, these partnerships provide a more agile path to innovation and growth.More than half of CEOs are investing to accelerate portfolio transformation, viewing it as central to long-term value creation. In the Philippines, while we still see more of traditional M&As in the deal market, partnerships sometimes provide faster market entry, better regulatory navigation and access to local knowledge than outright acquisitions. Just recently, we saw one of our largest local conglomerates entered into various partnerships in some of the sectors that they are in – retail, logistics, and healthcare. We may soon see more of our major local players also entering into strategic partnerships. This preference for modular growth reflects a broader desire for flexibility.Navigating a volatile business landscapeBy investing in transformation, balancing immediate and long-term goals, embracing localization, and exploring strategic alliances, CEOs are not just surviving but actively shaping the future of their industries. Their proactive mindset and commitment to resilience position them to capture opportunities and drive growth in an ever-evolving business landscape.Taken together, the trends discussed suggest that the Philippines stands at an inflection point. As global CEOs redesign their strategies for a volatile world, markets that combine demand growth, talent availability and improving digital infrastructure are gaining relevance. The opportunity is there, but capturing it will require policy consistency, continued investment in infrastructure, and a focus on digital capability development. The lesson is clear: volatility is not a pause button on growth. It is a filter, separating organizations and markets that can adapt from those that cannot. Companies that succeed will be those that treat uncertainty not as an obstacle, but as a design constraint to build with accordingly. Noel P. Rabajais 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.

22 December 2025

Earvin Darren Lee and Hazel Valerie Sy

The role of blockchain in promoting trust and transparency in the national budget

In brief:Blockchain technology has gained prominence in public and policy discussions for its potential to enhance security, transparency, and operational efficiency.Legislative measures proposing the use of blockchain in managing the Philippine national budget have been filed in both chambers of Congress, led by Senator Paolo Benigno “Bam” Aquino IV in the Senate and Representative Javier Miguel “Javi” Benitez of Negros Occidental’s Third District in the House of Representatives. On 15 December 2025, the Senate approved Senate Bill No. 1506 or the Cadena Bill.Aligned with the theme of Trust, Transformation, and Transparency, the 4th SGV Tax Symposium held in October 2025 featured a presentation on blockchain, highlighting recent developments and practical government use cases aimed at improving transparency and efficiency in public-sector operations.“Financial institutions and startups have begun integrating blockchain into payment and remittance systems, while the government is studying its use as a mechanism to combat corruption and promote transparency in public transactions”Blockchain technology, a decentralized digital ledger that enables secure, immutable record-keeping, has gained global prominence across multiple industries. By allowing transactions and data to be recorded transparently and verified by network participants without intermediaries, blockchain improves efficiency, streamlines processes, and reduces fraud risk. Sectors such as finance, supply chain management, healthcare and public administration increasingly rely on blockchain to automate operations, ensure data integrity, and strengthen trust among stakeholders.In the Philippines, blockchain adoption is steadily advancing as both the private sector and government explore its potential. Financial institutions and startups have begun integrating blockchain into payment and remittance systems, while the government is studying its use as a mechanism to combat corruption and promote transparency in public transactions. Pilot initiatives and consultations are underway to assess how blockchain technology can enhance government services, ensure accountability, and build public trust through tamper-resistant digital records.Blockchain and the national budgetThese developments were highlighted during SGV’s 4th Tax Symposium, where Armand N. Cajayon, SGV Principal under Technology Consulting, discussed the role of blockchain in public financial management, particularly in relation to the national budget. His discussion covered blockchain fundamentals, public-sector-use cases, and global examples demonstrating its impact.Blockchain has also entered the legislative arena. Senate Bill No. 1330, authored by Senator Paolo Benigno “Bam” Aquino IV, and known as the “Blockchain the Budget Bill,” proposes placing the entire Philippine national budget on a blockchain-based system. The measure seeks to enhance transparency, accountability, and public trust by making government spending traceable and auditable in near real time through a public portal.Under the proposal, the Department of Information and Communications Technology (DICT), the Department of Budget and Management (DBM) and the Commission on Audit (COA) would jointly implement the National Budget Blockchain System. Access would be extended to citizens, journalists, and watchdog organizations. If the bill is enacted and implemented, the Philippines could become the first country to fully integrate its national budget into blockchain technology. The Bill has since evolved and been substituted by Senate Bill No. 1506, otherwise known as the Citizen Access and Disclosure of Expenditures for National Accountability or CADENA Bill. The revised bill mandates the creation of a digital budget portal to serve as the official and publicly accessible portal for all public budget data, which should be in an open-source, interoperable, tamper-resistant and structured digital format. This substitute bill was introduced on 12 November and has been approved on its third and final reading last 12 December 2025.A counterpart measure, House Bill No. 4380, has also been filed by Representative Javier Miguel “Javi” Benitez of Negros Occidental’s Third District.At the Tax Symposium, Mr. Cajayon framed the discussion with a central question: Is blockchain a silver bullet for the Philippines’ governance challenge?Understanding blockchainBlockchain is a distributed ledger technology in which all participants maintain synchronized copies of transaction records. Transactions are encrypted and validated through consensus mechanisms, making authorized alterations extremely difficult. Unlike centralized systems, no single entity controls the ledger. Smart contracts, such as self-executing code embedded in the blockchain, enable automated, rules-based transactions that further reduce human intervention and operational risk.Why use blockchain in public finance?Applied to public financial management, and as discussed during the Tax Symposium, blockchain offers several advantages: Trust: Multiple validation points reduce reliance on single authorities. Transparency: Immutable records allow transactions to be traced end to end. Efficiency: Automation lowers administrative costs and minimizes fraud. Modernization: Integration with digital payment systems improves fund disbursement and control.However, Mr. Cajayon pointed out that blockchain is not universally applicable as it does not always operate in real time, particularly in large networks where validation may take longer. Implementing blockchain also requires substantial investment, making careful evaluation essential.As a framework for evaluating suitability, he outlined a five-point test focused on key conditions: the involvement of multiple parties; the importance of trust among participants; the management of finite resources; reliance on shared and complex business logic; and processes that operate across an extended business network.Blockchain delivers clear value only when all these conditions are present. Implementation considerationsEven if enabling legislation is passed, nationwide implementation would be gradual. Mr. Cajayon outlined a phased roadmap beginning with a feasibility and alignment stage during which high-value cases would be identified and key stakeholders aligned, followed by a pilot development phase focused on building permissioned pilots with key agencies. The initiative would then move into expanding participation and adding smart contract pilots. The final phase would concentrate on governance and operations, with the formalization of governance structures and supporting legal frameworks. A proposed governance model includes a National Budget Blockchain Governance council to oversee policy, compliance, and validation authority. An inter-agency working committee led by the DICT would manage technical standards, security protocols and overall project execution.A real-world example: TorontoTo illustrate blockchain’s practical benefits, Mr. Cajayon cited the case of Toronto, which processed over two million interdivisional transactions in 2018, requiring extensive manual reconciliation, and delaying financial reporting.The city implemented a pilot blockchain proof of concept, which consolidated data from multiple systems, digitized asset tracking, classified expenditures and automated reporting. The pilot focused on the Fleet Services division, which has the highest transaction volume.The results were significant. Manual reconciliation time dropped from approximately 160 hours to nearly zero. Improved expenditure tracking increased forecast accuracy, enhanced transparency, and provided timely insights into asset utilization. By shifting from nominal to actual budget allocation, the city strengthened accountability and enabled staff to focus on higher-value activities. While Mr. Cajayon concluded that blockchain is not a silver bullet that cannot, by itself, guarantee good governance, its effectiveness ultimately depends on how it is implemented and how citizens engage with it.Technology can enable transparency, but accountability requires informed and vigilant stakeholders. For blockchain to meaningfully improve public financial management in the Philippines, it must be paired with active citizen participation, institutional discipline and sustained political will.Earvin Darren Lee and Hazel Valerie Sy are Global Compliance and Reporting (GCR) Senior Managers 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 authors and do not necessarily represent the views of SGV & Co.

15 December 2025

Jaclyn Ordonez, Virly Jane Tiare and Grace Desuasido

Tax Conversations with C-Suites

In brief:Businesses are reframing compliance from a regulatory obligation into a strategic driver of trust, transformation and transparency, enabled by deeper collaboration with regulators. AI-driven automation is reshaping tax governance by reducing manual workload, enhancing accuracy and enabling agility, while requiring continuous upskilling to keep pace with regulatory and technological change. Digital payments and integrated platforms are modernizing the tax experience, positioning fintech as a key partner in streamlining tax administration and supporting a future-ready, digitally enabled tax ecosystem. ““…Innovation, combined with collaboration, can turn tax compliance from a regulatory obligation into a driver of efficiency, transformation and transparency.”As regulations shift and consumers grow more exacting, businesses are reconsidering how they handle compliance. What was once treated as a routine requirement has become a cornerstone of trust, transformation and transparency. Companies are beginning to treat compliance as a strategic function, using technology and changes in workplace norms to strengthen their operations and bolster confidence. This was the central theme of the Conversation with C-Suites panel at the 4th SGV Tax Symposium held on 23 October 2025. With the theme “From Compliance to Confidence: Trust, Transformation and Transparency”, the discussion brought together C-Suites from IBM Philippines, Inc., Microsoft Philippines, Inc. and Maya Bank, Inc., as panelists to articulate how Artificial Intelligence (AI) and digitalization are reshaping tax governance, planning and compliance.AI: The Game-Changer for Tax ComplianceAs businesses embrace AI and automation, technology is no longer optional but a strategic imperative. Charlene Ang, ASEAN Regional Tax Manager at IBM, shared how IBM Watson X is revolutionizing tax processes and compliance. At IBM, the use of AI has freed up significant workforce hours by eliminating routine tasks in preparing tax returns and reducing human error through elimination of manual tasks such as data entry, form preparation and invoice scanning. As IBM gears up to automate its tax preparation processes, this shift will allow it to redirect valuable resources to strategic initiatives rather than repetitive compliance tasks.Ang expressed her optimism about the Bureau of Internal Revenue’s (BIR’s) rollout of the Electronic Sales Reporting System, which she believes will further enhance transparency and accountability for both the BIR and the private sector. She emphasized that proactive collaboration and advocacy for the timely release of regulations are also critical, given the resource-intensive nature of implementing automation and system upgrades. She highlighted that innovation, combined with collaboration, can turn tax compliance from a regulatory obligation into a driver of efficiency, transformation and transparency.Agility and Upskilling: Tools for AutomationTransitioning into a digitally driven future, businesses can succeed by having the ability to adapt quickly, leverage emerging technologies and foster a culture of continuous innovation.Sharing her insights at the Conversation with C-Suites, Cherry Kua, GP Controller, Statutory and Tax Lead of Microsoft Philippines, underscored that staying agile and consistently upgrading skills in line with digitalization must be a key capability for tax professionals. To stay up to date with changes in tax legislation and implementing regulations, Kua uses AI to monitor key issuances. This has helped her identify what is critical and what should be implemented. At Microsoft, AI automates financial reconciliations and key financial reports, resulting in significant time savings and enhanced efficiency. For Kua, the ability to analyze large datasets and adapt to constant regulatory changes is now a non-negotiable skill for efficient tax teams.Driving Digital Payments: Fintech’s RoleTax compliance in the Philippines is undergoing a digital revolution, and fintech players are already at the forefront. Kristoffer “Toff” Rada, Head of Corporate Affairs at Maya, discussed how fintech is reshaping the tax payment experience by working closely with government agencies to simplify the process. The goal is to make paying taxes seamless, eliminating the need for taxpayers to wait in long lines at Revenue District Offices (RDOs). Digitizing government services enable secure, seamless transactions. Soon, payments to the BIR and the Bureau of Customs (BOC) may be accessible on a unified platform. This demonstrates how fintech can go beyond being just a payment processor but also a strategic partner in modernizing tax administration to deliver a faster, easier and more transparent compliance experience. From Compliance to Confidence: Shaping the Future-Ready Tax EcosystemAs businesses accelerate digitalization, modernizing tax administration has become an urgent priority. Ang, Kua and Rada acknowledged the private sector’s responsibility to support this shift, not only as a key pillar of the economy but also a major contributor to the government’s revenue collection. While the government advances its mandate toward digitalization, the panelists agreed that businesses must invest in employee education and emerging technologies, foster readiness for AI adaptation and maintain proactive collaboration with the regulators. This alignment will pave the way for faster, seamless adaptability to the government’s digitalization efforts, ultimately driving trust, transformation, and transparency.In summary, the discussions at the Tax Symposium underscored that trust, transformation and transparency are redefining tax compliance. With AI, digitalization and upskilling at the forefront, business can move beyond mere compliance towards confidence. Enabling innovations that build trust, leveraging upskilled engagement and strengthening government collaboration will help shape a future-ready tax ecosystem that drives sustainable growth and resilience for all.Jaclyn Ordonez and Virly Jane “VJane” Tiare are Tax Senior Managers, while Grace Desuasido is a Tax Manager, at 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 December 2025

Margaux A. Advincula

PEZA Steadies Investors’ Confidence Amid Shifting Economy

In brief:The Philippines underscores that sustained investor confidence is built on strong economic fundamentals, bold tax reforms, and a transparent, digitally driven investment environment led by trailblazing IPAs like PEZA.PEZA’s “no red tape” governance, cutting-edge digital systems, and globally competitive ecozones reinforce its role as a safe haven for investors and a model of predictability, efficiency and trust.Despite political shifts and external uncertainties, the government and private sector emphasize that the resilience and excellence of Filipino talent remain the country’s greatest asset and the strongest reason to invest in the Philippines.“Agencies like PEZA help ensure stability through the high standards of transparency, efficiency, and predictability.”The Philippines remains open for business, and Filipino talent continues to support investors in creating value. Strengthening investor confidence means creating an environment that is secure, predictable, and competitive. At the 4th SGV Tax Symposium held on 23 October 2025, with the theme “From Compliance to Confidence: Trust, Transformation and Transparency”, the Honorable Director General Tereso Panga (DG Panga) spoke about the role of Investment Promotion Agencies (IPAs), particularly the Philippine Economic Zone Authority (PEZA) in the broader topic of Driving Investments through Tax Reforms and Digitalization.PEZA and the Importance of Policy ReformsIPAs, like PEZA, drive investments by implementing regulatory reforms and accelerating digital transformation. PEZA oversees 431 economic zones that host more than 4,000 companies in the electronics, information and technology business process management (ITBPM) industries, with investors from Japan, the United States, the Netherlands, and others.DG Panga discussed recent policy reforms intended to attract more investment. He emphasized the importance of the 2024 Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy (CREATE MORE) Act, which extends tax incentives for up to 27 years and clarifies value-added tax zero-rating procedures, building on the CREATE Act of 2021. The CREATE Act, as amended by CREATE MORE, is a landmark tax reform, which introduced the presidential power to grant a special incentive package for up to 40 years. According to DG Panga, this set of reforms “gives investors renewed confidence by offering one of the most generous and competitive incentives packages in the region, where businesses can truly thrive”.PEZA’s Technology-driven InitiativesInvestors’ confidence is also improved by ease of doing business. Transformation using technology is a key to building this. Digitalization has become equally critical to boosting investor confidence. Companies increasingly seek simpler, faster, and more predictable processes. Technology supports these needs by reducing corruption, improving transparency, strengthening policy consistency, and signaling that the country is committed to modern, fair and efficient governance. Digital transformation is therefore more than an administrative upgrade because each technological improvement is a step toward enhanced trust, efficiency, and competitiveness. PEZA has been at the forefront of recent modernization initiatives. Its “no red tape” governance model ensures streamlined services, with many processes—such as permit applications and clearances—handled electronically. According to DG Panga, PEZA is a trailblazer in digitalization. It was the first to implement electronic import permits and automated export documentation. Recent developments include the Ecozone Transfer System, a data-sharing agreement with the Bureau of Customs on electronic cargo tracking and the PEZA The One Portal System (PTOPS). PTOPS consolidates all PEZA-related transactions into a single platform, providing investors with an agile and digitally capable ecosystem that reduces processing time and enhances accountability. PEZA and Its Pivotal RoleDG Panga noted that while broader bureaucratic challenges may persist in the country, agencies like PEZA continue to serve as reliable and predictable partners for investors. This has contributed to sustained investor trust even during period of uncertainty. The United States government, in its 2025 Investment Climate Statement, commended PEZA and the Board of Investments (BOI) for maintaining regulatory transparency, upholding a “no red tape” policy and offering efficient one-stop-shop services. The report emphasized that although the wider bureaucracy can sometimes be slow, the business environment in special economic zones remains more conducive. Recent domestic issues have occasionally created uncertainty for investors, but DG Panga stressed the importance of evaluating how institutions adapt and respond. The government continues to assure investors that economic fundamentals remain strong, government institutions continue to function, and its commitment to protecting investors is clear. Recent appointments in key economic agencies have been positively received by the business community, reinforcing confidence that investment priorities remain consistent and well supported. As examples of these changes, the recent appointments of economic officials—including former Special Assistant to the President for Investment and Economic Affairs Frederick Go as Secretary of Finance and former Department of Finance Undersecretary Charlie Martin Mendoza as Commissioner of Internal Revenue (CIR)—reflect this direction.Agencies like PEZA help ensure stability through the high standards of transparency, efficiency, and predictability. The private sector also remains resilient and forward-looking, providing additional assurance that long-term investments in the Philippines continue to thrive. While political or administrative changes may occur over time, the steady commitment of IPAs and the private sector creates strong confidence among investors. Recent public statements of President Marcos Jr. highlight the importance of public-private sector collaboration in strengthening the country’s investment landscape. Partnerships with agencies like PEZA introduce global companies to the skills and capabilities of the Filipino workforce, generating employment, expanding training programs, and bringing new opportunities for Filipino families. These collaborations reinforce the country’s position as a competitive and promising destination for international businesses.PEZA and the Future of the Filipino TalentThe Philippines is building a future driven by innovation, competitiveness, and talent. This is a vision that extends beyond political cycles. Challenges will inevitably arise, but opportunities can be endless when companies invest in Filipino creativity, resilience and expertise. Filipino talent remains diligent, adaptable and committed to supporting business growth. With PEZA’s leadership and the strength of the Filipino talent, the Philippines offers a reliable and future-ready environment where the public and private sector can work together to shape the future of a better Philippines where investments can grow and create long-term value. Margaux A. Advincula is a Tax Partner and the Foreign Direct Investments Leader of SGV & Co. She also heads SGV Clark and is the Markets Leader for SGV Baguio.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.

28 November 2025

Juan Paulo C. Santos

Fostering growth and tax policy innovation with RPVARA

In brief:At the SGV 4th Tax Symposium, Executive Director Consolacion Agcaoili emphasized the Bureau of Local Government Finance's (BLGF) commitment to modernizing local fiscal management and enhancing transparency in property valuation through the implementation of the Real Property Valuation and Assessment Reform Act (RPVARA) by 2028.Pursuant to RPVARA, the BLGF is leading the development of a comprehensive digital roadmap, which will empower local government units (LGUs) to automate real property assessments, streamline tax collection processes, and allow electronic payments.The creation of a centralized property valuation system under RPVARA will grant government agencies immediate access to updated property records and market values. This innovation is expected to resolve persistent bottlenecks in infrastructure projects, especially those involving land acquisition, valuation, and compensation. “By prioritizing transparency and digitalization, RPVARA not only enhances the accuracy of property valuations, but also fosters a more equitable system for property owners and local governments.”At the SGV 4th Tax Symposium, Executive Director (ED) Consolacion Agcaoili of the Bureau of Local Government Finance (BLGF) highlighted the agency’s commitment to modernize local fiscal management and promote transparency in property valuation, aligning with the symposium’s theme “From Compliance to Confidence: Trust, Transformation, and Transparency.” As Republic Act No. 12001 or the Real Property Valuation and Assessment Reform Act (RPVARA) moves toward full implementation by 2028, its twin features of digitalization and transparency are expected to bring about consistent property valuations nationwide and enable LGUs to generate accurate property valuations, which will boost their tax collection capacity and strengthen fiscal autonomy.Prior to the enactment of the law, real property valuation was done by referring to the BIR schedule of zonal values, or the schedule of fair market value of the LGUs. As a result, there are varying and sometimes even conflicting bases for determining real property valuation.To address this issue, RPVARA has established a standard basis of valuation through the Philippine Valuation Standards (PVS) and the Schedule of Market Values (SMVs).ED Agcaoili mentioned that, after extensive consultations with stakeholders, the BLGF is ready to launch the 2025 edition of the PVS, which will be the basis of LGUs in the preparation of SMVs.The law requires that all SMVs be developed through stakeholder consultations, making the entire process transparent and open to scrutiny. Prior to the submission of the proposed SMV to the BLGF, LGUs must conduct at least two public consultations and hearings, with the proposed values being posted on official websites and in public spaces.These measures ensure that property owners, businesses, and the broader community can understand and participate in the preparation of the SMVs. By embedding transparency into every stage — from policy formulation to implementation — RPVARA not only reduces opportunities for political intervention, but also fosters accountability and fairness in the valuation of real properties.This inclusive process allows property owners to actively participate in determining the SMVs, which will serve as the official benchmark for adjusting assessment levels, setting property tax rates, calculating local and national taxes, and determining fair compensation for land acquisition and public land disposition.This article explores the implications of RPVARA, its foundational principles, and the anticipated benefits for property owners and local governments alike.Digitalization and local innovationED Agcaoili discussed the development of the Real Property Information System (RPIS) mandated by RPVARA, which is a nationwide electronic database that will consolidate all real property transactions, valuations, and related data. As part of BLGF’s digital roadmap, the RPIS will enable LGUs to automate property assessments, streamline tax collections, and allow electronic payments. She also added that the national government agencies will have free access to the system. However, private sector users will need to pay a minimal fee, which will help cover system maintenance costs.The RPIS is designed to be interoperable with the electronic data required to be shared by the Registers of Deeds, BIR, notaries public, officials issuing building permits and geodetic engineers conducting surveys within a locality. The Department of Information and Communications Technology (DICT) is tasked with providing the necessary infrastructure, equipment, and training, prioritizing lower-income LGUs to ensure nationwide compliance. RPVARA has laid out safeguards against misuse, which include penalties for non-compliance, unauthorized data access, and improper valuation practices. Another innovation under RPVARA is the grant of a real property tax amnesty within two years from the law’s effectivity or until 5 July 2026. The amnesty covers penalties, surcharges, and interest on all unpaid real property taxes — including the Special Education Fund, Idle Land Tax, and other special levies — incurred prior to 5 July 2024.By waiving penalties and surcharges, the amnesty gives property owners a “fresh start,” encourages voluntary compliance, and more quickly boosts local government revenues. For property owners, the amnesty provision is expected to improve real property liquidity while providing LGUs with additional resources for development projects and public services.Accelerating infrastructure and economic developmentRPVARA’s reforms directly address long-standing barriers to infrastructure development. By establishing uniform, regularly updated benchmarks for property valuation, the law streamlines land acquisition for public projects, ensuring fair compensation and reducing disputes. The digitalization of property records and the adoption of international standards accelerate project timelines, allowing government agencies to implement real property acquisition for critical infrastructure. RPVARA represents a pivotal shift in the valuation of real property in the Philippines. By prioritizing transparency and digitalization, RPVARA not only enhances the accuracy of property valuations, but also fosters a more equitable system for property owners and local governments. As the law moves toward full implementation, it is expected to create a more robust framework to enhance LGU’s capacity to generate revenues from real property, ensure transparency of valuation standards and promote the use of innovative digital technology in real property tax administration. The proactive engagement of stakeholders throughout this process will be crucial in ensuring that the benefits of RPVARA are realized across all levels of society, paving the way for a more sustainable and prosperous future for the Philippines.Juan Paulo C. Santos is a Tax Senior Manager 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.

24 November 2025

Jao Renzo L. Mercado, Teresa Rose D. Parcia, and Mikhaella Martina H. Puno

Transforming tax with INFA-Net

In brief:Thirty-eight government agencies signed a Joint Memorandum Circular to establish INFA-Net, a unified network aimed at simplifying investment processes and creating a more agile and transparent investment climate under the Bagong Pilipinas vision.The SGV’s 4th Tax Symposium highlighted INFA-Net as a strategic initiative to streamline investment processes, enhance transparency, and ensure integrityINFA-Net is supported by ARTA, BOI, and BIR’s digital reforms aimed at streamlining bureaucracy, strengthening trust, and creating a competitive environment for investors.“INFA-Net and the digital initiatives led by ARTA, BOI, and BIR represent more than regulatory reform — they signal a real shift toward a modern, investor-friendly Philippines.”When Department of Finance (DOF) Undersecretary Charlito “Charlie” R. Mendoza — now the newly appointed Bureau of Internal Revenue (BIR) Commissioner — took the stage at SGV’s 4th Tax Symposium, his keynote message expressed a clear call to action. Framed around the event theme “From Compliance to Confidence: Trust, Transformation, and Transparency,” his message captured the urgency of reform and the promise of a new era for Philippine tax administration.At the forefront of these efforts is INFA-Net, an investment facilitation network launched in 2024 and chaired by the Department of Trade and Industry – Board of Investments (DTI-BOI). This initiative brings together 38 government agencies to simplify investment processes, dismantle bureaucratic bottlenecks, and accelerate digital reforms under the Bagong Pilipinas vision. Backed by the Anti-Red Tape Authority’s (ARTA) reforms, the Board of Investments’ (BOI) programs, and the BIR’s digitalization efforts, it aims to make doing business in the Philippines faster, fairer, and more predictable. These reforms are expected to boost investor confidence and position the Philippines as a more competitive destination for strategic investments. ARTA drives digital reforms to streamline business processesAccording to ARTA Director General Ernesto V. Perez, for many years, doing business in the Philippines felt like navigating a maze. “The problem was not just inefficiency — it was the absence of visibility and interoperability. When people cannot see the rules, they cannot follow them. When government cannot see itself, it cannot improve.” Guided by this principle, ARTA aims to build a transparent and intelligent regulatory system to help citizens understand, assist businesses in compliance, and enhance government performance. ARTA intends to take a proactive approach to addressing tax-related concerns that affect the ease of doing business. The agency works closely with the DTI-BOI, DOF, BIR, and other government agencies to resolve stakeholder issues and promote a tax environment defined by predictability and fairness. ARTA showcased key digital initiatives, including the Philippine Business Regulation Information System for easy access to government-issued regulations, the Anti-Red Tape Electronic Management Information System for real-time database of government services and Citizen’s Charters detailing requirements, fees, and processing times, and the Electronic Business One-Stop Shop for business registration and licensing permits to cut processing time. Secretary Perez also cited major reforms such as Executive Order No. 32, which streamlined permit approvals for telecommunications and internet infrastructure, and mining process improvements that helped the Philippines rise from 72nd to 16th in the Fraser Institute’s 2024 Investment Attractiveness Index.While some concerns remain, such as some local government units (LGUs) imposing challenging requirements, Secretary Perez assured strict enforcement and penalties for non-compliance. To strengthen accountability, ARTA launched “Talk to TALA,” an AI-powered complaint management system operating 24/7 to address public concerns in real time — underscoring ARTA’s push for transparency and responsiveness.In the panel discussion, Better Regulations Office Director Marbida L. Marbida explained that ARTA’s success in turning “red tape into red carpet” stems from its 3-7-20 rule, which sets clear timelines for government transactions — three days for simple, seven days for complex, and twenty days for highly technical processes. By embedding these standards into the Citizen’s Charter, ARTA ensures transparency and predictability, two factors that reduce operational uncertainty and improve investor confidence. These reforms reflect a broader push to digitalize government services, fostering a more efficient and competitive business environment aligned with global best practices. BOI strengthens investor confidence through digital integration and INFA-NetBOI Executive Director, Atty. Bobby G. Fondevilla, emphasized the BOI's commitment to enhancing the investment environment in the Philippines through the BOI Business One Stop Shop, an online investment assistance platform. OWN streamlines investor interactions and significantly improves transparency, making it easier for businesses to navigate the investment landscape. This digital transformation aligns with global best practices, making the Philippines as a more competitive destination for foreign direct investment by reducing bureaucratic delays and improving ease of doing business. Atty. Fondevilla also highlighted the crucial role of the Operations Support and Advisory Committee for Strategic Investments (OSAC-SI) in facilitating compliance and monitoring across LGUs, which is essential for creating a seamless investment experience. By collaborating closely with LGUs, the BOI ensures that projects are endorsed efficiently, allowing for a smoother path for investors.The importance of engaging the private sector and incorporating investor feedback into BOI strategies was further emphasized. “We are committed to creating programs for direct engagement, enabling stakeholders to voice their concerns,” he stated. By fostering a transparent and responsive investment ecosystem, the BOI aims to strengthen investor confidence and ultimately support sustainable economic growth in the Philippines.BIR accelerates digital reforms to support strategic investments under INFA-NetBIR Deputy Commissioner Atty. Larry Barcelo noted that the BIR prioritizes streamlining processes to deliver excellent taxpayer services and attract more investments. As part of its commitment to the INFA-Net, the BIR, through then Commissioner Atty. Romeo D. Lumagui Jr., has directed all its offices to fast-track business registration and permit issuance for strategic investments endorsed by the BOI’s OSAC-SI. This includes continuously simplifying procedures and documentary requirements for registration. These initiatives are expected to accelerate under new Commissioner Charlie Mendoza.The BIR recently issued Revenue Memorandum Circular No. 74-2025 to update its Checklist of Documentary Requirements for applications and registrations, reinforcing its commitment to efficiency, transparency, and accountability under the Ease of Doing Business Act. The circular reduces documentary requirements and allows the submission of certified true copies and digital copies of original documents for online transactions via platforms such as the New Business Registration Portal, Taxpayer Registration-Related Application Portal, and the Online Registration and Update System. These reforms aim to expedite processes and create a more investor-friendly environment, complemented by generous incentives for qualified projects under the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy Act, also known as CREATE More Act.To ensure effective coordination under INFA-Net, the BIR is implementing mechanisms to monitor and address investor-related issues. Beyond regular communication with government agencies, the Bureau, according to Atty. Barcelo, engages the private sector through multi-sectoral consultations and memoranda of understanding that provide real-time feedback on business concerns. Issues raised are addressed promptly, and when necessary, new regulations are issued to resolve bottlenecks. By combining digitalization, streamlined processes, and proactive stakeholder engagement, the BIR is reinforcing investor confidence and supporting the Philippines’ broader economic agenda under the Bagong Pilipinas vision. These measures not only reduce bureaucratic delays but also position the country as a competitive destination for strategic investments, driving sustainable growth and job creation.Making the shift toward a modern, investor-friendly PhilippinesINFA-Net and the digital initiatives led by ARTA, BOI, and BIR represent more than regulatory reform — they signal a real shift toward a modern, investor-friendly Philippines. This transformation resonates with the theme of SGV’s 4th Tax Symposium, which emphasized the importance of trust, transformation, and transparency in driving economic progress. Central to this discussion is SGV’s Tax Vision — a framework for building a tax ecosystem where compliance is encouraged, collaboration with regulators is prioritized, and integrity among tax practitioners is upheld. Together, these efforts streamline bureaucracy, embrace technology, and engage stakeholders to create an environment that inspires confidence and accelerates growth — reinforcing the Philippines’ commitment to global competitiveness and sustainable development.Jao Renzo L. Mercado, Teresa Rose D. Parcia, and Mikhaella Martina H. Puno are Tax Senior Managers 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 authors and do not necessarily represent the views of SGV & Co.

17 November 2025

Jules E. Riego

Trust, transformation, and transparency in tax

In brief:The SGV 4th Tax Symposium highlighted the urgent need for trust and transparency in the Philippine economy, emphasizing that these elements are foundational for sustainable governance and economic progress. Leaders from both public and private sectors gathered to discuss strategies for transforming compliance into confidence, highlighting the significant losses due to corruption, and promoting initiatives that streamline processes and enhance accountability. The symposium showcased various reforms, including the Real Property Information System and the Investment Facilitation Network, which aim to create a more efficient and transparent tax ecosystem, ultimately positioning the Philippines as a premier investment destination.“As leaders from both the public and private sectors convened to address the pressing need for transformation, the discussions at the 4th Tax Symposium underscored the critical nature of trust in fostering a robust economic environment.”In today’s world stage, trust is not just a virtue — it’s the foundation of progress, and transparency is essential for sustainable governance. As businesses navigate uncertainties and governments confront the realities of corruption, the need for transformation has never been more urgent. In SGV’s 4th Tax Symposium, which had the theme “From Compliance to Confidence: Trust, Transformation, and Transparency”, leaders came together with a clear purpose: to turn compliance into a driver of confidence and to shape a future guided by integrity in every economic decision. The symposium called on leaders from both public and private sectors to reduce inefficiencies and embrace digitalization.The importance of accountability: Insights from current corruption issuesThe symposium discussed the impact of corruption, with an estimated ₱1.7 trillion or around US $27.5 billion lost (based on various news reports) over the last decade, that could have built thousands of classrooms, modernized healthcare systems, and uplifted millions of lives. True transformation starts with action. It is essential to move beyond mere observation and actively foster cultural and behavioral change. As I mentioned in my opening message, “No matter how small our effort may seem, we will not sit on the sidelines. We will help change culture. We will help shift behavior. We will pursue transparency so that trust and confidence — both domestic and foreign — can be earned and maintained. Because transformation is not passive. It demands courage!”Embracing this challenge is vital for building a foundation of trust that can withstand the complexities of today's interconnected world.Government commitment: Fiscal responsibility and digital transformationIn his keynote message, Undersecretary Charlito “Charlie” Martin R. Mendoza of the Department of Finance (DOF), who was recently appointed as the new Bureau of Internal Revenue (BIR) Commissioner, reaffirmed the government’s commitment to maintaining fiscal integrity and modernizing tax administration. He acknowledged recent corruption scandals and assured the private sector of the administration’s sweeping reforms to restore trust in public institutions.Emphasizing the commitment to fostering a business environment characterized by trust and transparency, he articulated a vision for a tax ecosystem that goes beyond mere compliance and is globally competitive, fundamentally fair, and perpetually stable. He highlights key initiatives that include a refined Medium-Term Fiscal Program aimed at reducing deficits while ensuring funding for essential services, the full implementation of the Electronic Invoicing System (EIS) designed to capture transactions in real time and help minimize audit delays, and an enhanced National Single Window System streamlining trade facilitation and reducing human intervention.These initiatives aim to cut through bureaucratic obstacles, reduce compliance costs, and make compliance feel like a natural part of doing business. The Anti-Red Tape Authority and the Investment Facilitation Network The Anti-Red Tape Authority (ARTA), a government agency tasked with streamlining government processes to promote the ease of doing business and deliver efficient government services, recognizes that visibility is fundamental to building trust. To this end, ARTA has developed digital platforms such as the Philippine Business Regulations Information System and the Electronic Business One-Stop Shop, which are designed to empower stakeholders and streamline processes. This initiative signifies a clear transition from bureaucratic red tape to a more welcoming “red carpet” for investors.Success stories in regulatory reform were highlighted, notably the significant reduction in the time it takes to grant permits for telecom towers, which decreased from approximately 300 days to just 59 days, representing an 80.33% drop attributed to Executive Order 32.To reinforce the agency’s commitment to transparency and accountability, ARTA Director General Ernesto V. Perez introduced Transparency, Accountability, and Law in Action (TALA), an AI-powered complaint system and upcoming task force aimed at combating corruption. In his presentation, he emphasized the importance of collaboration, urging all stakeholders to remain proactive in ensuring integrity, transparency, and accountability in public service. Similarly, the symposium showcased the Investment Facilitation Network (INFA-Net), a comprehensive government initiative launched in 2024 aimed at streamlining investment processes across 38 agencies and local government units (LGUs). The initiative aims to create a more agile and transparent investment climate aligned with the Bagong Pilipinas Vision. This is accomplished by establishing green lanes and implementing the 3-7-20 rule, which prescribes that simple transactions must be completed within three calendar days, complex transactions within seven days, and highly-technical transactions within 20 days.Driving growth through technological innovations and tax reformsAs part of their efforts to modernize local fiscal management and enhance property valuation transparency, Executive Director (ED) Consolacion Q. Agcaoili of the Bureau of Local Government Finance (BLGF) discussed the Real Property Valuation and Assessment Reform Act (RPVARA) and the rollout of the Real Property Information System (RPIS). Maintained by BLGF, the RPIS will serve as a comprehensive database for all real property transactions, enabling local government unit (LGU) assessors to develop more accurate and updated schedules of market values. This system is expected to enhance the efficiency and reliability of property assessments. National government agencies will have free access to the RPIS, while private sector users will pay a fee to cover maintenance costs, reducing the need for ongoing budget support. ED Agcaoili shared that the RPIS is currently 90% complete, with development still ongoing. However, by 2026, the RPIS will be fully rolled out to local assessors, who will undergo training to effectively use both the RPIS and the Computer-Assisted Mass Appraisal (CAMA) system, which uses statistical models to value large numbers of properties for tax purposes.By the same token, PEZA Director General Tereso O. Panga emphasized PEZA’s commitment to positioning the Philippines as a premier investment destination, extending to beyond merely providing incentives. He highlighted the CREATE MORE Act as a landmark tax reform that gives investors confidence through competitive incentives, making the country more attractive compared to its ASEAN peers.PEZA has automated most of its processes, introducing innovations such as the PEZA One-Stop Portal System and the EcoZone Transfer System. These initiatives are designed to simplify transactions, cut red tape, reduce transaction costs, and provide real-time visibility and accountability for both government and investors. This strategic focus on enhancing the investment environment is intended to foster a climate where compliance translates into confidence, ultimately fueling sustainable progress for the country.SGV Tax Vision: Pioneering the future of taxation with purposeAs leaders from both the public and private sectors convened to address the pressing need for transformation, the discussions at the 4th Tax Symposium underscored the critical nature of trust in fostering a robust economic environment. This was reiterated with a reintroduction of the SGV Tax Vision, which aims to develop a tax ecosystem where compliance is encouraged, collaboration with regulators is prioritized, and integrity among tax practitioners is upheld. This vision serves as a guiding principle for achieving these goals. By fostering an investment climate that not only attracts businesses but also nurtures them, the Philippines can emerge as a leading destination for investment in the region. This holistic approach to governance and fiscal management is essential for building a foundation of trust, facilitating the transformative changes needed to establish a sustainable and effective tax ecosystem that will support the nation’s growth and prosperity.Jules E. Riego is the Tax 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.

10 November 2025

Bonar Laureto and Melisa Turingan

Collateral damage: How climate impacts financing

In brief:Central Philippines has again experienced extreme flooding, this time from Typhoon Kalmaegi ('Tino'), marking a significant escalation from historical patterns.Major floods can significantly increase the losses banks face from unpaid loans—especially when the property securing that loan, like a car, is damaged.As climate impacts worsen, Loss Given Default (LGD) estimates must be reviewed and/or adjusted to also reflect the increasing severity and frequency of future scenarios, such as extreme and recurring flooding events, on top of existing information.“It is therefore critical that banks adopt a more systematic approach, recognizing these climate-related physical risks not as isolated operational events, but as fundamental credit-risk drivers that materially affect ECL assumptions under IFRS 9.”Another Super typhoon “Uwan” is upon us even as communities still try to recover the extreme flooding in central Philippines from Typhoon Kalmaegi ('Tino'). These events are a significant escalation from historical patterns. Streets and communities that were previously considered safe were inundated, highlighting a new and expanded risk profile for these areas.Internationally, extreme flood events have produced striking images of vehicles piled on streets or even lodged in trees, as well as significant river debris after flood surges. Such scenes have been reported following extreme floods in parts of Italy and Spain.When a disaster strikes, damage to people and property is obvious. This article explains how major floods can significantly increase the losses banks face from unpaid loans — especially when the property securing that loan, like a car, is damaged. We'll also discuss how banks must adapt their financial planning to prepare for this new reality. This article intends to provide applications to Expected Credit Loss (ECL) modelling under IFRS 9 focusing on the Loss-Given-Default (LGD) dimension, and outlines practical adjustment approaches for banking risk management and modelling teams.How flooded cars increase financial risk for banksMotor-vehicle loans form a material slice of the Philippine consumer-loan market; according to the Bangko Sentral ng Pilipinas (BSP), motor-vehicle loans are a significant component of consumer lending (i.e., 29% of consumer loans in May 2025). When flooding inundates parking lots, highways or neighborhoods, vehicles become immediate loss-magnets: damage to engines, electronic systems, interiors and structural components ensues. In major floods, vehicles may float away, collide or become piled up, turning them into “urban flood drifters.”Consequently, collateral that underpins vehicle-loan exposures can suffer abrupt impairment, potentially prolonging time to recover or causing a potential reduction in recoverability amount of loan collateral in the event of default. For banks subject to IFRS 9, this means LGD assumptions may need urgent review.Mechanics: How flooding may elevate LGDUnder IFRS 9, LGD represents the proportion of a loan’s exposure at the time of default that a lender expects to lose, and this is usually expressed as a percentage of the total exposure at the date default occurs. While LGD is influenced by the recoverable value of pledged collateral, it also reflects potential losses on any unsecured portion of the loan. In consideration of climate risk events such as frequent super typhoons in a particular geography, here’s how a bank's potential loss worsens:• The collateral becomes worthless: A flood-damaged car, especially up to the engine or dashboard, is often declared a "total loss" worth almost nothing on the resale market.• Repo costs go up: It costs more to tow, clean, and legally process a damaged vehicle, especially when recovery services are overwhelmed after a disaster.• It takes longer to get any money back: The whole process of getting the car, processing insurance, and selling it at auction gets bottlenecked. The longer it takes, the less that "future money" is worth to the bank today.• Everyone is selling at once: When thousands of cars are flooded in the same area, insurance gaps are exposed and the local market for used cars and salvaged parts is saturated. This drives prices down, making it even harder for the bank to recover financially.This results in conventional LGD considerations, built on historical default data, no longer being reflective of current and prospective market conditions. As climate impacts worsen, these parameters must be reviewed and adjusted to reflect the increasing severity and frequency of future climate scenarios, not just past events.Illustrative calculationTo illustrate the magnitude of potential LGD shifts following a severe flood event, consider a typical financed vehicle loan of about PHP 700,000. The vehicle might have an initial market value of PHP 1 million, and the lender could expect to incur around PHP 50,000 in costs related to repossession and sale if the borrower were to default. Pre-flooding considerationsLet us assume:• We are 2 years on a 5-year loan when the borrower defaults• For purposes of simplicity, that the FMV follows a straight-line depreciation rendering the vehicle pledged as collateral to have a FMV of Php 600,000 as of that time• The collateral net recoverable value would be Php 550,000 after deducting costs to sell from FMV• The outstanding loan balance at the end of year 2 is Php 450,000Under normal circumstances, this would imply an LGD of 0%, as the recoverable amount, Php 550,000 is greater than the outstanding loan amount at default or Exposure at Default (EAD) of Php 450,000.Post-severe chronic flooding considerationsWhen a severe flood event submerges the vehicle and causes substantial engine or interior damage, the collateral value can plummet. If the resale value falls by about 60% — a stylized but conservative assumption drawn from studies indicating that flood-damaged or “salvage-title” cars typically lose 60-70% of their value. This can potentially alter our assumptions to:• Vehicle pledged as collateral to have a FMV of Php 240,000 (Php 600,000 reduced by 60% flood induced damage) • The collateral net recoverable value would be Php 190,000 after deducting costs to sell from FMV (which currently conservatively assumes costs to sell remain the same)Under severe chronic flooding circumstances, this would now imply a much higher LGD of 42%; as the recoverable amount, Php 190,000, is now much less than the outstanding loan amount at default or EAD of Php 450,000.This simplified example underscores how quickly loss severity can escalate when collateral is physically destroyed or when markets for recovery and resale are impaired. While the exact figures will vary depending on insurance coverage, vehicle type, and the availability of salvage buyers, the directional effect is clear: catastrophic flooding can transform a once moderately secured exposure into one with very limited recoverable value.Recommended actions for risk teamsOrganizations can update risk models and governance in response to these events by taking practical actions:• Triage impacted accounts: Isolate vehicle-loan exposures within the affected zones. This can be achieved by overlaying geospatial flood data and insurance claim registries with the bank's own portfolio data (e.g., branch geography). This assessment must account for both the borrower's registered home address and their place of work, as vehicles may be located at either location during a flood event.• Segmentation by risk factors: Impacted accounts should be stratified based on key risk parameters. This includes differentiating exposures by vehicle age, loan-to-value (LTV) ratio, insurance coverage status, and the location's specific flood-zone designation (e.g., high-risk vs. moderate-risk zone). High-risk sub-segments should be flagged for enhanced LGD adjustments.• Collateral haircut calibration: The core of the adjustment involves recalibrating collateral values. Using empirical damage-curve studies and industry data on salvage or "total-loss" values, teams should apply conservative, evidence-based "haircuts" to the collateral value for the impacted segments.• Scenario analysis and stress testing: Beyond immediate adjustments, banks must use this event as a basis for forward-looking scenario analysis. Teams should run simulations for moderate and severe future flood scenarios to quantify the incremental impact on IFRS 9 lifetime ECL provisions and overall capital adequacy.• Enhanced disclosures: In line with IFRS 7 Financial Instruments: Disclosures and IFRS 9 Financial Instruments, banks must disclose the key judgments, model changes, and sensitivities related to natural disaster risk. This transparency is critical for explaining how these risks are integrated into LGD and ECL calculations and, ultimately, into capital and provisioning plans.Key considerations for banksWith global greenhouse gas emissions remaining unabated, the increase in average temperatures means that climate change-induced extremes in the Philippines will continue to rise in frequency and severity. It is therefore critical that banks adopt a more systematic approach, recognizing these climate-related physical risks not as isolated operational events, but as fundamental credit-risk drivers that materially affect ECL assumptions under IFRS 9.This evidence-based assessment cannot be limited to collateral-driven impacts on LGD, such as in the auto-sector. It must also address how these events affect the Probability of Default (PD) of their clients. Crucially, banks can no longer rely only on historical climate events; they must look forward, integrating future climate projections that model events with a magnitude and frequency far exceeding previous experiences. By doing so, banks can better align their models with the emerging reality of climate-driven losses, resulting in more robust provisioning, deeper risk insight, and greater stakeholder confidence in their resilience.Bonar A. Laureto is a Sustainability Principal and Melisa Turingan is a Sustainability Senior Manager, both 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 authors and do not necessarily represent the views of SGV & Co.

03 November 2025

Randolph C. Camaclang, Kevin C. Henson, and Christopher S. Villar

Enhancing resilience in the face of natural hazards

In brief:Recent seismic activities in Cebu and Davao highlight the Philippines' vulnerability to natural disasters, emphasizing the need for improved disaster preparedness and response strategies. interdependent sustainability protocols that address various challenges.The effectiveness of building codes is often compromised by non-compliance, leading to significant risks for businesses and communities during extreme events, particularly as climate change exacerbates these vulnerabilities.Integrated approaches, including Business Continuity Management Systems and Public Service Continuity Plans, are essential for ensuring operational resilience and continuity of essential services, ultimately contributing to a more resilient future for the Philippines.“The earthquakes in Cebu and Davao Oriental highlight the need for integrated disaster risk reduction. This includes updating building codes, conducting regular asset assessments, and strengthening preparedness systems.”The recent seismic activities in Cebu and Davao region underscore the Philippines’ vulnerability to natural hazards. While initial reports focused on immediate structural damage, a closer look reveals critical intersections between seismic activity, climate change, and disaster preparedness strategies. For businesses and communities, understanding these dynamics is essential for survival and long-term growth.Cebu and Davao: A comparative snapshotThe Cebu earthquake, though slightly lower in magnitude at 6.9, resulted in extensive asset losses, including about 72,000 homes damaged and 74 fatalities. In contrast, the Davao Oriental quake on 10 October 2025, registered a magnitude of 7.4, causing 2 confirmed deaths and over 50 injuries. The earthquake prompted tsunami warnings, mass evacuations, and power outages across parts of the province.Local officials responded promptly. Davao Oriental Governor Nelson Dayanghirang coordinated evacuations in Manay, the quake’s epicenter. Mayor Joel Mayo Almario of Mati City suspended classes and work, urging residents to follow evacuation protocols and cooperate with authorities.Building codes and their limitationsThe National Structural Code of the Philippines (NSCP) serves as the primary reference for the design and construction of safe and reliable structures within the country. Its primary aim is to ensure that all buildings and other forms of infrastructure can withstand expected loads, including gravity and lateral forces (earthquake and wind forces), throughout its service life.However, the effectiveness of the code’s provisions can be compromised by non-compliance during construction activities, which is often the case in the Philippine construction environment. The use of substandard materials, deficient workmanship, and unauthorized alterations or deviations from approved plans can all undermine the intended performance of a structure. Such practices not only weaken the building’s resistance to external loads but also heighten the risk of severe damage or collapse during extreme events.The consequences of these deficiencies can be particularly significant for businesses. Structural failures or damages may lead to extended operational downtime, loss of productivity, and substantial repair or reconstruction costs. In some cases, they may also pose serious threats to human safety and negatively impact the reputation and financial stability of the organization.Compounding impacts: Earthquakes and climate hazardsClimate change introduces variables that affect structural safety. A warmer atmosphere increases the amount of water vapor in the air, resulting in heavier rainfall. Heavier rainfall can saturate the soil and increase pore water pressure (pressure exerted by the water held within the pore spaces of soil), which directly affects soil bearing capacity. As the pore water pressure increases, effective stress decreases, which weakens the soil’s ability to support load, reducing the foundation’s bearing capacity. The design of a building might have not anticipated this reduced foundation capacity thus, making it more vulnerable to damages even during moderate earthquake events.Conversely, structures already weakened by seismic activity are at higher risk during typhoons or storm surges. The proportion of intense typhoons and accompanying storm surges are expected to increase in warmer world. This overlap and two-way interaction of hazards underscores the need for integrated, multi-risk resilience strategies that balance economic feasibility and long-term durability.The crux of the resilience planning process lies in this balancing exercise, as a structure that is frail or extremely expensive is undesirable. Finding the right middle ground boils down to data-driven and detailed assessments of potential impacts and costs of building resilience to come up with the most accurate financial estimates that can properly inform decision making.Continuous asset assessmentIt is insufficient to rely solely on original design and construction as-built documents. Regular structural evaluations are necessary to determine a building’s current condition and resilience to extreme events. These assessments should account for regular building wear and tear, prior damage and retrofitting interventions, and environmental changes such as land subsidence or rising groundwater levels.To be better prepared, businesses should invest in climate and geophysical vulnerability assessments, structural retrofitting and architectural upgrades such as earthquake dampers and impact-resistant glass panels, and hazard protection improvements, such as robust drainage and coastal and riverbank erosion controls.Evolving standards and policy recommendationsRecent government initiatives reflect a growing commitment to national resilience. For example: The National Disaster Risk Reduction and Management Plan (NDRRMP) emphasizes coordinated response and long-term climate adaptation.The Department of Public Works and Highways (DPWH) is promoting 186 climate-responsive infrastructure projects under the Build Better More program.The Asian Development Bank (ADB) approved a $200 million loan to support climate-resilient infrastructure planning and implementation.These measures aim to integrate climate projections into infrastructure design, improve early warning systems, and foster stronger public-private collaboration.Business continuity management systems (BCMS) and Public service continuity plans (PSCP)Preparedness extends beyond physical infrastructure. Although calamities cannot be predicted, both Business Continuity Management Systems (BCMS) and Public Service Continuity Plans (PSCP) ensure that private organizations and government institutions can continue essential functions before, during, and after disasters.BCMS is guided by ISO 22301:2019, the international standard for business continuity. It focuses on identifying critical operations, assessing potential threats, and ensuring recovery measures are in place to sustain delivery of products and services during disruption.PSCP, on the other hand, is mandated for public institutions under the NDRRMC Memorandum No. 33, s. 2018, which requires all government agencies and local government units to maintain continuity of essential public services in times of crisis.Both systems share a common structure: risk assessment, preparedness, continuity response, and recovery. However, they differ in scope: BCMS prioritizes revenue and operational resilience, while PSCP prioritizes uninterrupted public service delivery. Both have the ultimate goal of saving human lives.The core phases of BCMS and PSCP encompass three key stages: before, during, and after an incident. Before an event, organizations should implement drills, evacuation plans, emergency kits, and communication protocols to prepare for potential crises. During an incident, safety procedures must be enacted, assembly points established, and initial damage assessments conducted. After the event, the focus shifts to continuing operations based on minimum objectives, initiating recovery efforts, ensuring data protection, stabilizing the supply chain, and supporting employee welfare programs.Integration and benefitsA BCMS enables private enterprises to protect employees and assets, minimize downtime, and maintain stakeholder trust during crises. A PSCP ensures continuity of essential government services (healthcare, utilities, law enforcement, and emergency response) even under extreme conditions.When implemented jointly, continuity across public and private sectors reduces systemic risk and accelerates recovery. Data sharing between LGUs and critical businesses (energy, telecom, healthcare, logistics) also strengthens coordinated action. Finally, business continuity training embedded in LGU Disaster Risk Reduction and Management (DRRM) offices supports community-wide resilience.Maintaining both BCMS and PSCP frameworks can save lives, reduce financial and reputational losses, and sustain public confidence during prolonged disruption.Building a more resilient futureThe earthquakes in Cebu and Davao Oriental highlight the need for integrated disaster risk reduction. This includes updating building codes, conducting regular asset assessments, and strengthening preparedness systems. By doing so, the Philippines can better protect lives, safeguard livelihoods, and build a more resilient future.Randolph C. Camaclang, Kevin C. Henson, and Christopher S. Villar are Sustainability Senior Managers 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 authors and do not necessarily represent the views of SGV & Co.

27 October 2025

Katrina F. Francisco

Leading with sustainability in the Philippine mining industry

In brief:The Towards Sustainable Mining (TSM) initiative is a crucial framework for the Philippine mining sector, linking operational resilience to eight interdependent sustainability protocols that address various challenges.Recent evaluations show mixed performance among the TSM protocols, with high ratings in Safety and Health but low ratings in Climate Change and Water Stewardship, highlighting the need for improved implementation and collaboration.The initiative encourages mining companies to engage with stakeholders and share leading practices, driving change and fostering a more sustainable mining ecosystem in the Philippines. “While there is still much work to be done as the Philippine mining industry continues to adopt the TSM Protocols, the initiative is clearly facilitating transformation within the sector.”As the mining and metals industry grapples with operational complexities, the need for sustainable practices has never been more pressing. The Towards Sustainable Mining (TSM) initiative emerges as a vital framework for the Philippine mining sector, emphasizing that the operational resilience of mining companies is closely linked to the eight protocols it encompasses. This article delves into the TSM initiative, examining its impact on sustainability commitments and the challenges that lie ahead.Operational resilience and TSM protocolsThe TSM initiative is designed to guide mining companies in their sustainability efforts, focusing on critical areas such as Safety and Health, Community Outreach and Social Development Management, Climate Change, Water Stewardship, Biodiversity Conservation Management, Tailings Management, Preventing Child and Forced Labor and Crisis Management and Communications Planning. Each protocol addresses specific issues, yet they are interdependent, highlighting the need for a holistic approach to sustainability.The interconnection between operational resilience and the eight TSM protocols is crucial for the long-term sustainability of the mining industry. They collectively form a comprehensive framework that enhances a company's ability to adapt and thrive in a complex environment. For instance, effective Water Stewardship not only ensures the responsible use of water resources but also mitigates risks associated with climate change, which can impact water availability and quality, both of which are crucial for mining operations. Similarly, strong Safety and Health practices contribute to a more engaged and productive workforce, directly influencing operational efficiency. When companies recognize that these protocols are not standalone issues but rather interconnected elements of a larger system, they can develop strategies that address multiple challenges simultaneously. This holistic approach fosters greater resilience, enabling mining operations to navigate uncertainties while meeting stakeholder expectations and regulatory requirements. Ultimately, embracing this interconnectedness is essential for building a sustainable future in the mining sector.Recent evaluations of the TSM protocols, as I presented in the session on "Benchmarking Mining Sustainability: Validated TSM Results and Potential ESG Policy Implications" at Mining Philippines 2025, reveal a mixed performance landscape. The verification of the various mining companies were conducted by their respective TSM verifiers, the reports of which are posted in the Chamber of Mines of the Philippines website.Notably, the protocols on Safety and Health and Community Outreach and Social Development Management received the highest verifier ratings. This success can be attributed to stringent regulations and recognition through various awards, which have incentivized companies to prioritize these areas. However, the same cannot be said for Climate Change and Water Stewardship, which have consistently ranked as the lowest-rated protocols for two consecutive years. The Climate Change protocol, in particular, has seen minimal progress, with many companies only recently beginning to embrace both concepts of climate change mitigation and adaptation. The upcoming adoption of the IFRS Sustainability Reporting Standards for publicly-listed companies and large companies (of a certain revenue threshold) may prove to be a significant driver for the changes that can be seen in the future for this protocol. Similarly, the Water Stewardship protocol suffers from low ratings, primarily due to insufficient information on watershed management for some mining companies, as the Philippines adopts a ridge-to-reef approach to sustainably manage its natural resources. Another area of concern is the Tailings Management Protocol, where companies that align with international standards, such as the Global Industry Standard on Tailings Management (GISTM), tend to perform better. The GISTM not only provides guidance on managing tailings facilities but also addresses critical stakeholder issues, including human rights, environmental protection, governance and public disclosure and transparency aimed at building trust with local communities and regulators. As such, the adoption of standards, such as the GISTM, becomes more critical as it would help to address previous failures that have hounded the industry. Opportunity for enhanced collaborationIt should be noted that there remains a significant variability in the scores among mining companies. While some excel in the TSM protocols, others find some protocols to be a continued struggle. This disparity presents a valuable opportunity for enhanced collaboration within the Chamber of Mines of the Philippines (Chamber), where companies can thrive by sharing leading practices and supporting one another in their pursuit of higher ratings. Unfortunately, external stakeholders often generalize the industry's practices based on the shortcomings of a few, undermining the efforts of those committed to sustainable mining. As such, collaboration is even more crucial for the Chamber and its member mining companies.Understanding the critical role of stakeholders, value chains, and transparency is essential for fostering a sustainable mining ecosystem. The TSM initiative serves as a guiding light, encouraging companies to engage with their communities and stakeholders openly.Driving change in the mining industryIn conclusion, while there is still much work to be done as the Philippine mining industry continues to adopt the TSM Protocols, the initiative is clearly facilitating transformation within the sector. Adapting the TSM Initiative's tagline, the Philippine Mining Industry is changing, and TSM is helping to drive change. By embracing this transformative journey, the industry can enhance its sustainability commitments and secure a more resilient future.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.