2026 Articles - Suits the C-Suite - Page 3

04 March 2026

Aris C. Malantic and Dwayne Justin G. Ignacio

PFRS 18 in focus: Confidently navigating changes in financial reporting

In brief:PFRS 18 emphasizes Management-Defined Performance Measures (MPMs), which are specific subtotals reflecting management's view of financial performance, and requires detailed disclosures to enhance transparency and accountability.The standard enhances the guidance on aggregating and disaggregating financial information, which is expected to reinforce more disciplined financial reporting.Companies must prepare for the implementation of PFRS 18 by aligning their financial reporting processes, assessing data management systems, and engaging with stakeholders to ensure a smooth transition and capitalize on the opportunity for modernization in financial reporting.“PFRS 18 represents a significant shift in financial reporting standards that will enhance the clarity, comparability, and transparency of financial statements."Entities often provide certain information about their financial performance beyond typical PFRS totals, such as certain additional performance metrics to guide decision-making and communicate results. These data and metrics are generally communicated outside the financial statements and included in management’s press releases, strategic reports, management discussion and analysis. Users of financial statements find these to be useful; however, there are concerns about the lack of transparency on how these measures or metrics are calculated.In the first part of this article, we discussed the upcoming IFRS 18 standard, its significant changes to financial statement presentations, and the implications for clarity, comparability, and compliance in financial reporting starting from January 2027. In this second part, we discuss how under PFRS 18, certain performance measures, known as Management-Defined Performance Measures (MPMs), will move to the financial statements, along with the enhanced guidance on disclosures of financial information and implications for companies as they prepare for its implementation.Spotlight on MPMsPFRS 18 places a significant emphasis on MPMs, which are specific subtotals of income and expenses that reflect management's view of the entity’s financial performance as a whole and are used in public communications outside of financial statements. The introduction of MPMs is a strategically significant change that directly impacts how an entity communicates its performance. However, the narrow definition of MPMs means that not all performance measures used in an entity’s communications will qualify as MPMs. An adjusted profit figure, which modifies a total or subtotal required by PFRS Accounting Standards, can qualify as an MPM. However, non-financial performance measures such as market share, store surface and customer satisfaction score will not meet the definition of an MPM. In addition, certain financial performance measures, such as free cash flows, net debt and adjusted revenues will also not qualify as MPMs since they do not represent subtotals of income and expenses. PFRS 18 also provides that certain subtotals of income and expense, such as those already required or specified by a PFRS Accounting Standard (like operating profit) or are specifically excluded (like gross profit or loss), are not MPMs. Lastly, while financial ratios such as return on equity are not MPMs, a subtotal that is a numerator or a denominator in a financial ratio could qualify as an MPM.Disclosure requirements for MPMsPFRS 18 requires entities to include all necessary information about MPMs in a single note to the financial statements, which includes how the measure is calculated, why it is useful, and a reconciliation to the most comparable PFRS subtotal.This requirement ensures that users have access to relevant information about MPMs, enhancing transparency and accountability.Implications for financial reporting processesMany entities currently use alternative performance measures (APMs) when explaining financial performance, but information about these measures is generally communicated outside the financial statements, which has led to some concerns about the quality of such information. As a result of PFRS 18’s guidance on MPMs, companies must ensure that their current financial reporting process can capture all the required information about MPMs. Entities that use APMs will also need to assess whether any of such APMs meets the definition of an MPM, which will then require additional disclosures that they may not be preparing currently, such as the reconciliation to the most comparable PFRS subtotal. The financial reporting process should also be able to monitor any changes to public communications, as these can affect which measures qualify, or cease to qualify, as MPMs. Additionally, since MPMs are required to be disclosed in a single note to the financial statements, they will face increased scrutiny from regulators and investors.Aggregation and disaggregation guidancePFRS 18 improves the general requirements for aggregating and disaggregating information in financial statements. It provides guidance on how entities should aggregate items based on shared characteristics and disaggregate them based on dissimilar characteristics.Importance of clearer line item presentationIn financial reporting, clarity is paramount. Users should not be left guessing about the nature of line items. PFRS 18 emphasizes that entities must avoid using vague labels like "other" unless absolutely necessary. If an entity cannot find a more informative label, it may use "other," but this should be the exception rather than the rule.Planning for PFRS 18 implementationPFRS 18 will be effective for periods beginning on or after 1 January 2027. Entities are required to apply the standard retrospectively for comparative periods in both interim and annual financial statements. PFRS 18 also introduces consequential amendments to other PFRS Accounting Standards that entities must apply when adopting PFRS 18.Given the requirement to retrospectively restate comparative periods and disclose certain reconciliations, companies need to plan ahead and start determining the impact of PFRS 18 as early as possible. For example, the annual financial statements in the year of adoption for an entity that adopts PFRS 18 beginning 1 January 2027 will require information from 2025 onwards if the entity presents more than one comparative period in its statement of profit or loss. For companies that prepare quarterly financial statements in accordance with PAS 34 Interim Financial Reporting, the impact of adopting PFRS 18 will already be reflected in their first quarterly report during the year of adoption by presenting the headings and subtotals and disclosing the reconciliations required by PFRS 18. Key considerations for companiesCompanies preparing for the implementation of PFRS 18 should consider the following key areas:Compliance: Ensure that financial reporting processes align with the new requirements and that the impacts on contracts and debt covenants which currently use subtotals from the statement of profit or loss as inputs have been considered.Processes: Evaluate existing processes and identify areas that may require modification.Data and Systems: Assess whether current data management systems can accommodate the changes introduced by PFRS 18.Internal reporting: Assess any potential changes to the current structure and contents of internal management reports and explore any opportunities for alignment with the new categories and subtotals required by PFRS 18.Performance measurement: Revisit how management incentive structures are currently designed and how key performance indicators are measured, particularly those that are tied to certain subtotals in the statement of profit or loss.Investor Relations: Communicate with investors, analysts, regulators and creditors about the changes and how they will impact financial reporting.Strategy and People: Engage relevant stakeholders across the organization to ensure a smooth transition.Driving modernization in financial reporting processesThe countdown to PFRS 18 has begun, and as companies inch closer to the initial application of the new standard, it is essential that management understands the potential impact on their reporting. While the changes may seem daunting, they also present an opportunity for organizations to modernize their financial reporting processes.PFRS 18 can serve as a catalyst for improving transparency and encouraging stronger cross-department collaboration in financial reporting. By redefining conversations about financial performance and performance measures, companies can rethink how they tell their story and shape how they are understood by stakeholders.PFRS 18 represents a significant shift in financial reporting standards that will enhance the clarity, comparability, and transparency of financial statements. As companies prepare for the implementation of this new standard, they must embrace the opportunity to improve their reporting processes and engage with stakeholders effectively. By doing so, they can navigate the changes with confidence and position themselves for success in a rapidly evolving financial landscape.Aris C. Malantic is the Assurance Growth Areas Leader and Financial Accounting Advisory Services (FAAS) Leader of SGV & Co, and Dwayne G. Ignacio is a FAAS Senior Manager from 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.

02 March 2026

Aris C. Malantic and Dwayne Justin G. Ignacio

PFRS 18 in focus: Confidently navigating changes in financial reporting

In brief:The new IFRS 18 standard, effective 1 January 2027, will transform financial statement presentations by mandating a structured approach to income and expenses, enhancing clarity and comparability for users.Key changes include defined categories for income and expenses, the introduction of new subtotals like operating profit or loss, and stricter presentation and disclosure requirements to improve transparency in financial reporting.Companies will need to adapt their reporting systems and engage with stakeholders to ensure compliance and effectively communicate their financial performance under the new standard.“These changes mean companies must ensure that existing policies, processes and governance structures can accommodate the new requirements and deliver the enhanced transparency that the new standard requires."In 2027, users of financial statements will encounter a transformative shift in how companies present their financial performance. The new standard, IFRS 18 Presentation and Disclosure in Financial Statements, issued by the International Accounting Standards Board (IASB) in April 2024, is set to replace the existing IAS 1 Presentation of Financial Statements. In the Philippines, this standard was adopted as PFRS 18, which will be effective for periods beginning on or after 1 January 2027. This change is not merely a compliance exercise; it represents a fundamental rethinking of how financial performance is communicated to stakeholders.Financial reporting standards provide a framework that helps organizations present their financial performance in a manner that is understandable to users, including investors, regulators, and analysts. The introduction of PFRS 18 aims to enhance these qualities, addressing existing challenges and improving the overall quality of financial reporting.Key changes under PFRS 18PFRS 18 introduces several significant changes that will reshape the structure of the statement of profit or loss. These changes are designed to enhance clarity and comparability across entities, making it easier for users to assess financial performance.New structure for statement of profit or loss and defined categories: At its core, the statement of profit or loss provides a window into how an entity has translated its strategy into financial results. However, the existing practice for preparing the statement of profit or loss allows for significant variability in how amounts are reported. To improve the structure of the statement of profit or loss, PFRS 18 requires companies to classify income and expenses into one of five distinct categories: operating, investing, financing, income taxes, and discontinued operations. This classification aims to provide users with a clearer understanding of the sources of income and expenses.Introduction of new subtotals: The standard introduces two new subtotals — operating profit or loss and profit or loss before financing and income taxes — which means that certain subtotals will soon become more visible and comparable across companies. Together with the new categories, these new subtotals will create a more structured narrative, allowing users to better understand operating results, evaluate investment impacts and see the cost of financing.Management-defined performance measures (MPMs): PFRS 18 requires entities to disclose MPMs within their financial statements, providing insight into how management views the financial performance of the entity.Enhanced disclosure requirements: The standard imposes stricter disclosure requirements, ensuring that descriptions and labels used in financial statements faithfully represent the characteristics of items presented and disclosed. This ensures that users have access to relevant information about the measures used to assess performance.Addressing current gaps in financial reportingThe existing standard, PAS 1, requires the presentation of profit or loss but does not require any specific subtotals, leading to inconsistencies and a lack of comparability. For instance, the commonly used term operating profit lacks a standardized definition across different entities. This results in varying interpretations and calculations, making it challenging for users to compare financial information between companies, even those operating within the same industry.To address these issues, PFRS 18 mandates that companies classify income and expenses into one of five categories:Operating: Includes income and expenses arising from the entity’s main business activities, such as the revenue from the sale of products and services, and all items not required to be classified in any of the other categories.Investing: Typically includes income and expenses from cash and cash equivalents and income from rental properties and dividends from financial instrument investments that are not part of the entity’s main business activities. It also includes the share of earnings and losses from equity-accounted investments.Financing: Covers income and expenses related to liabilities arising from transactions involving only the raising of finance, such as bank loans, and interest expenses like interest expense on lease liabilities.Income Taxes: Includes all income tax-related expenses and income recognized in profit or loss.Discontinued Operations: Includes income and expenses from operations that have been discontinued.Together, these five defined categories do not just reorganize line items on the statement of profit or loss. Instead, they also introduce greater discipline into how financial performance is framed and presented by sharpening the distinction between the main business activities of the entity and its ancillary activities.Clarifying specified main business activitiesThere have been concerns that when applying the general requirements for classifying income and expenses, certain entities need to classify the income and expenses from their main business activities in categories other than the operating category. In response, PFRS 18 introduces the concept of specified main business activities. Under PFRS 18, entities need to assess if they have a specified main business activity of investing in assets (e.g., investment property companies) and/or providing financing to customers (e.g., banks). Consider a bank, XYZ Bank, which invests in financial assets like bonds and shares. Under PFRS 18, if XYZ Bank determines that investing in such financial assets is a main business activity, it can classify the interest and dividend income that they generate in the operating category, providing a clearer picture of its financial performance. Similarly, consider a real estate entity, ABC Company, which invests in non-financial assets like land and buildings that are classified as investment properties. Under the new standard, ABC Company can classify rental income from those properties and certain expenses like depreciation expense in the operating category if it assesses that investing in such assets is a specified main business activity. This classification helps users easily identify the core business activities of the entity. With PFRS 18 now anchoring the classification requirements to an entity’s specified main business activities, what will qualify as “operating” will no longer simply be a matter of preference, but of whether an item of income or expense arises from what an entity is really doing at its core. Improving comparability through defined subtotalsIn order to improve comparability across financial statements, PFRS 18 introduces two new defined subtotals:Operating Profit or Loss: This comprises all income and expenses classified in the operating category, providing a clear view of the profitability of the core business operations.Profit or Loss Before Financing and Income Taxes: This includes operating profit or loss along with all income and expenses classified in the investing category. It offers insight into the overall profitability, allowing users to analyze and compare performance before considering financing costs and tax implications. It will also provide an opportunity for analysts and investors to compare the results of operations of entities independent of how they finance their operations.The introduction of these defined subtotals enhances the ability of users to compare financial performance across different entities. For instance, investors can more easily assess the operating performance of companies within the same industry, leading to more informed investment decisions. Given the potential changes to how subtotals are calculated under PFRS 18 compared to their legacy definitions, entities also need to consider the impact on how key performance indicators are currently measured and evaluated. There may also be potential impact on the terms and provisions of contracts, management incentive structures and covenants that are currently tied to those subtotals.Compliance beyond numbersWhile the changes introduced by PFRS 18 focus on improving the presentation of financial statements, they also require companies to evaluate their reporting systems. This may involve redesigning charts of accounts, recategorizing certain items, and modifying existing controls. The shake-up in financial reporting that PFRS 18 brings may also change the way entities currently tell their story. This means that companies should consider engaging early with analysts, investors, creditors, regulators and other stakeholders to discuss how the new standard will affect their financial reporting. These changes mean companies must ensure that existing policies, processes and governance structures can accommodate the new requirements and deliver the enhanced transparency that the new standard requires. In the second part of this article, we will discuss how, under PFRS 18, Management-Defined Performance Measures (MPMs) will soon move to the financial statements, along with the enhanced guidance on disclosures of financial information and the implications for companies as they prepare for its implementation.Aris C. Malantic is the Financial Accounting Advisory Services (FAAS) Leader of SGV & Co, and Dwayne G. Ignacio is a FAAS Senior Manager from 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.

20 February 2026

Noel Andro D. Bico

A pivotal point: Reflections on the tax audit suspension and its resumption

In brief:The Bureau of Internal Revenue (BIR) suspended tax audits to address systemic weaknesses and improve the integrity of audit operations.The suspension was lifted with new guidelines that emphasize a single-instance audit framework, consolidation of pending audits, and a more objective selection process to enhance transparency and accountability.Taxpayers now must adapt to a more structured audit environment that prioritizes compliance, documentation, and preparedness, fostering a fairer tax landscape that benefits both the government and taxpayers.“As the BIR implements these reforms, the emphasis on transparency, accountability, and fairness in the audit process is expected to foster a more equitable tax environment."The suspension of tax audits by the Bureauof Internal Revenue (BIR) was not simply an operational interruption. It was aninstitutional acknowledgment that something deeper needed attention. For taxpayers and practitioners alike, itvalidated the long‑held view that tax enforcement is only effective whengrounded in a fair, consistent and well‑controlled audit process. As the BIRseeks to modernize and enhance the integrity of its audit operations, bothtaxpayers and practitioners are left to navigate the implications of thesechanges.This article explores the basis for thesuspension, the resumption of audit activities, and the new framework that willgovern tax audits moving forward.The basis for the suspensionThe suspension was first imposed through RevenueMemorandum Circular (RMC) No. 107-2025 on 24 November 2025, following numerousconcerns raised by taxpayers, stakeholders and internal units about irregularaudit practices and inconsistencies across audit execution.Through RMC No. 109‑2025, issued on 12 December2025, the BIR clarified that the purpose of the suspension was to addresssystemic weaknesses in the audit process, protect taxpayer rights, and improvethe integrity of audit operations. The BIR acknowledged the need to correctoperational issues and develop a more transparent, standardized and modernizedaudit system. Resumption of audit activitiesThe suspension was formally lifted throughRMC No. 8‑2026 dated 27 January 2026, restoring all tax audit and fieldoperations previously suspended under RMC Nos. 107‑2025 and 109‑2025. This included the resumption of: Issuance of Electronic Letters of Authority (eLAs), Mission Orders (MOs), and Tax Verification Notices (TVNs)Continuation of previously suspended audit casesEnforcement, verification, assessment, and collection activities requiring field auditsAll other actions which are necessary to protect revenue or enforce compliance.All tax audit and related field operations aremandated to comply with the new guidelines provided under Revenue MemorandumOrder (RMO) No. 1-2026, also dated 27 January 2026.The new audit environmentRMO No. 1‑2026 introduced a refreshed auditframework centered on consistency, control, and accountability. Among its keyreforms are:Single‑instance audit framework. Taxpayers will now be subject to only one eLA per taxable yearcovering all internal revenue tax types, including value-added tax (VAT),subject to limited exceptions such as fraud cases, one‑time transactions, taxclearance requests and business closure cases. This framework addresses thelong-standing issue of overlapping or redundant audits. Consolidation of pending eLAs. Beginning 4 March 2026, all pending eLAs for the same taxpayer andtaxable year will be automatically consolidated into a single eLA unless thetaxpayer opts out through a written request.System-assisted and anonymized selectionand assignment process. New eLAs will now be issuedthrough a system‑assisted, anonymized selection and assignment process thatrelies on automated risk parameters. This reduces discretion, minimizespotential manipulation, and supports a more objective audit selection process.Removal of VAT audit sections and audittask forces. The BIR abolished the VAT AuditSections and other audit task forces, confining audit authority to the LargeTaxpayers Service and regional offices to ensure clearer oversight.Proper audit and assessment procedures. The RMO mandates the use of standardized audit checklists,complete documentation of audit activities, and signed minutes of discussionsby both the taxpayer and the Revenue Officer. It also prohibits the issuance ofunreasonable assessments. Assessment notices must address only the issues thatremain unresolved after the discrepancy discussion and must clearly presenttheir factual and legal bases, in compliance with due process requirements.What this means for taxpayersThe resumption of audits under this revisedframework marks a shift not only in policy but in tax audit culture. What beganas a temporary stop has become a pivotal point, reshaping expectations for boththe BIR and the taxpayers it oversees.Moving forward, taxpayers can expect:More structured and transparent auditsCloser scrutiny of both factual findings and legal basesGreater emphasis on documentation and record-keepingStronger accountability and oversight from revenue officersWith RMC No. 8‑2026 lifting the audit suspensionand RMO No. 1‑2026 reshaping the audit system into one that is more data‑driven,risk‑based, and accountable, taxpayers now operate in a more rigorouslandscape. Working towards a more efficient and fair tax landscapeIn this environment, preparedness is morethan a defensive measure. It is a strategic practice that safeguards businesscontinuity, supports compliance, and strengthens trust in the tax system. A taxaudit may begin with the BIR, but the advantage always belongs to the taxpayerwho is ready.As the BIR implements these reforms, theemphasis on transparency, accountability, and fairness in the audit process isexpected to foster a more equitable tax environment. Taxpayers must adapt tothis new framework by enhancing their compliance practices and ensuring thatthey are well-prepared for audits. The changes signal a commitment to a morerobust and trustworthy tax system that benefits both the government and thetaxpayers it serves. By embracing these developments, stakeholders can workcollaboratively towards a more efficient and fair tax landscape in thePhilippines.Noel Andro D. Bico is a Senior Director from the GlobalCompliance & Reporting Sub-Service Line 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.

16 February 2026

Smith C. Lim and Chip A. Maalihan

Driving sustainable energy solutions in the Philippines: From vision to action

In brief:Energy providers must evolve from traditional utility roles to offer customized, flexible solutions that meet the specific needs of businesses, particularly in the context of sustainability and digital transformation.The Philippine energy market is seeing increased competition and innovation, with companies seeking energy-as-a-service contracts and advanced digital tools to enhance efficiency and support sustainability goals.Strategic partnerships and a deep understanding of diverse business energy needs are essential for energy providers to create value, drive economic prosperity, and support the transition to renewable energy sources in the Philippines.“Fostering collaboration with other organizations will be key to creating innovative solutions that meet the diverse needs of business customers, ultimately enhancing the energy experience and supporting businesses in achieving their energy ambitions."Businesses are increasingly recognizing the critical role that energy plays in their operations, prompting a shift away from traditional utility services towards more flexible and customized solutions. As sectors such as technology and automotive innovate within the energy market, energy providers must adapt to meet the diverse and complex needs of their business clients. With the government and private sector committed to a greener future, energy providers have a unique opportunity to redefine their services, enhance their offerings, and support businesses in achieving their energy objectives while navigating the challenges of a changing energy climate.In the first part of this article, we discussed the significant transformation of the energy landscape driven by rising electricity demand from businesses, highlighting the need for local energy providers to adapt their strategies to meet complex client needs and capitalize on opportunities for sustainable and reliable energy solutions. In this second part, we discuss the evolving role of energy providers as they seek to enhance their offerings and better serve business clients by focusing on customized solutions, digital innovation, and strategic partnerships that align with the growing demand for clean energy and operational flexibility.The evolving role of energy providersAs businesses recognize the importance of energy in their operations, they are seeking more than just traditional utility services that could provide flexibility and customization based on their specific needs. Energy providers must adapt to this changing landscape by broadening their definitions of service. Companies from various sectors, including technology and automotive, are entering the energy market with innovative solutions. For instance, a Swedish EV manufacturer has implemented an app that streamlines EV charging management for customers across Europe. In the Philippines, developers will need to develop cutting-edge solutions that fit the current advancements of the country. Addressing the need for automation and streamlining of energy-related processes would give businesses the ability to modify their chosen solutions not only to fit their unique energy needs but also to the energy climate of the country. Aside from revamping and adding offerings, the upskilling of the workforce will also be required. Many organizations plan to upskill existing employees, hire new specialists, and partner with external experts to navigate the complexities of energy management. This shift presents a significant opportunity for energy providers to demonstrate their value and support businesses in achieving their energy objectives.Findings from the EY Navigating the Energy Transition research program, which surveyed economies at different stages of energy transition, underscores the need for energy providers to focus on consumer-centric strategies such as customized energy solutions, energy efficiency consulting, and digital tools and analytics. For the Philippines, a consumer-centric energy provider fulfills the following roles: Choice provider: Some of the conglomerates or prominent energy producers are already in the retail market. The country’s Retail Competition and Open Access (RCOA) mandate provides competition and options for the contestable customers. They have the power to choose a tariff that aligns with their preferences whether on cost, risk, or sustainability objectives. Efficiency partner: Aside from conglomerates and energy producers venturing into a retail electricity supplier, some of them are also in energy efficiency space. Usually, they provide consultancy to businesses for energy savings, but to fully embody the evolving landscape, they can offer Energy-as-a-Service contracts that bundle lighting, HVAC optimization, high‑efficiency motors, and ISO 50001-compliant energy management systems. Digital optimizer: Advanced metering infrastructure and other digital tools could be part of the consumer-centric initiatives that the energy providers may offer. It will support the retail aggregation program of the Department of Energy (DOE).More than the savings and digitization, sustainability is also a top priority for businesses, with nearly all surveyed organizations setting goals to increase their use of carbon-free energy. However, companies may be unwilling to compromise growth in pursuit of sustainability. They expect customized energy solutions that align with their specific needs and are willing to invest in on-site power generation and battery storage.Philippine companies are no longer treating sustainability as a “nice‑to‑have.” It now sits alongside cost efficiency and digital transformation as a board‑level priority. The Philippine government, together with private companies, is making significant strides in the sustainability space through renewable energy generation, with projections indicating that over 11,000 megawatts (MW) of clean energy capacity will be operational by 2030. According to the DOE, solar photovoltaics are expected to contribute the largest share, with approximately 8,431 MW planned, and around 7,399 MW anticipated to be operational by 2026. Moreover, distributed solar and storage are moving from pilots to portfolio strategies. The DOE reports cumulative net‑metered solar at approximately 141 MW from the past 10 years and at least 252 MW of own‑use projects, which clearly signals a steady shift behind the meter. On the storage side, policy and market design are catching up: DOE Circular 2023‑04‑0008 established Battery Energy Storage System (BESS) policy for the power industry, commitments of about 1,850 MW by 2030, and major integrated solar‑plus‑BESS or integrated renewable energy storage system (IRESS) deals by leading developers. With these continued efforts from both public and private sectors, energy providers must recognize the growing demand from businesses in the Philippines for sustainable solutions and collaborate with them to create innovative offerings that harmonizes growth and sustainability.Strategic actions for energy providersEY’s latest research on business energy demand reinforces the urgency: commercial and industrial loads will drive the next wave of electricity growth, so winning providers will be those that reimagine the business energy experience end‑to‑end.Enhancing digital offerings is essential for meeting the evolving expectations of business customers. Providers should focus on developing advanced digital tools that deliver proactive insights and facilitate AI-enabled interactions, allowing customers to self-serve and analyze their energy consumption patterns. Even though the Philippines differs in terms of level of advancement in digital infrastructure to other countries, developers could learn from the experience of others in integrating technology into their energy processes and services and tailor them to the country’s own landscape. To drive energy prosperity, energy providers should deepen their understanding of business customers by moving beyond traditional categorizations and grasping the diverse drivers of energy needs. This tailored approach will enable providers to align their services more effectively with the specific requirements of different organizations. Empowering account managers to become energy success managers through internal upskilling is also crucial, as this transformation will yield strategic partnership, equipping them to offer personalized and data-driven recommendations and insights that help businesses navigate their energy challenges.Additionally, energy providers must prioritize support for mid-sized businesses, which often face barriers in achieving their energy goals. Offering scalable solutions and flexible financing options could create significant value for this segment and contribute to broader economic prosperity.Finally, clarifying their roles within the energy ecosystem will be vital for providers. They should define a clear strategy that aligns with the needs of businesses and captures new value opportunities. Fostering collaboration with other organizations will be key to creating innovative solutions that meet the diverse needs of business customers, ultimately enhancing the energy experience and supporting businesses in achieving their energy ambitions.From a global perspective to a localized lensThe path to sustainable energy in the Philippines goes beyond by just adding renewables — it envisions recasting the way energy solutions are conceived, commercialized, and experienced. The drive for sustainability is about moving from transactional supply to strategic partnerships that align with business requirements, using digital platforms suitable for local infrastructure, and creating financing frameworks that bring adoption to the whole range of businesses. It is also about defining clear roles in the energy system and fostering partnerships to accelerate grid modernization and innovation.By embracing customer-centric design, leveraging advisory knowledge, and implementing frontline digitalization, energy providers can transition from being commodity traders to enablers of resilience and growth, acting as accelerators of the green energy transition. This approach will not only facilitate cost savings for enterprises and help achieve environmental, social, and governance (ESG) targets, but also contribute to national targets of 35% renewable energy share in 2030 and 50% in 2040, making sustainability not just an environmental objective but also an economic advantage.Smith C. Lim is the Energy Sector Leader and a Strategy and Transactions Partner, and Chip A. Maalihan is a Strategy and Transactions Associate Director, 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.

06 February 2026

Smith C. Lim and Chip A. Maalihan

Driving sustainable energy solutions in the Philippines: From vision to action

In brief:The global energy landscape is transforming due to rising electricity demand driven by factors such as data center proliferation, electrification, and increased manufacturing, with businesses expected to account for a significant portion of this growth in the Philippines.Local energy providers must rethink their strategies to meet the complex needs of business clients, focusing on diverse energy sources and customer-centric solutions to capitalize on the growing demand for clean and reliable electricity.The Philippines faces challenges such as high electricity costs and grid constraints, but opportunities exist for energy providers to deliver innovative, adaptive solutions that prioritize sustainability, operational flexibility, and customer satisfaction.“With facilitating policies, favorable economics, and an engaged innovation environment, energy providers have the opportunity to develop sophisticated, adaptive, and data‑replete solutions to address the diverse requirements of businesses."Globally, the energy landscape is undergoing a profound transformation, with businesses at the forefront of rising electricity demand. Factors such as the proliferation of data centers, increased electrification, and heightened manufacturing activities have led to unprecedented growth in electricity consumption. As companies navigate uncertainties and shifting trade dynamics, they are prioritizing energy strategies to secure their operational futures.This surge in demand presents a unique opportunity for energy providers and the broader energy ecosystem. However, many providers focus primarily on residential consumers, leaving the complex needs of business clients untapped. While it is happening in the global stage, the Philippines is at a strategic position to capitalize on this opportunity. During the Philippine Energy Transition Dialogue on 02 September 2025, Secretary Sharon S. Garin reaffirmed the government’s commitment to energy transition and stated, “We are serious, not just the government but also the private sector, in making this country greener and more secure as far as energy is concerned.” To seize this opportunity, local energy providers and other stakeholders in the whole value chain must be willing to rethink their approach, exploring diverse energy sources and redefining their roles in the energy landscape.The important question now is, “How will the Philippines drive sustainable energy solutions?”Understanding the Philippine business energy landscape from a global perspectiveThe demand for industrial electricity is expected to escalate significantly, with businesses driving much of this growth. Research by the EY Navigating the Energy Transition research program, which has surveyed nearly 100,000 residential energy consumers and more than 2,400 energy leaders and decision-makers across eight countries (Australia, Germany, Canada, Ireland, UK, US, Sweden, and Malaysia), indicates that three-quarters of the projected increase in electricity demand will come from business customers. Factors such as the adoption of electric vehicles (EVs), advancements in technology, reshoring of manufacturing, policy mandates, and the need for new equipment are contributing to this trend. In fact, 80% of businesses anticipate an increase in their electricity consumption within the next three years. In the Philippines, these global trends are playing out against a backdrop of rising electrification and an ambitious green energy transition. With the recent Power Development Plan (PDP) 2023-2050, the Department of Energy (DOE) projects peak demand to grow from 16,596 megawatts (MW) in 2022 to 68,483 MW by 2050, an annual average increase of 5.2%. The following are some of green reasons that drive the enterprise load in the Philippines:Electrification of the transport sector: Since the passing of the Electric Vehicle Industry Development Act (EVIDA), the EV adoption has seen increasing numbers and is expected to move from niche to scale. EVs will be complemented with 7,300 charging stations targeted to be implemented by 2028. Growing digital economy: The Philippines has been beefing up its data infrastructure with 300 MW in the pipeline. Currently, data centers are housed in Cavite, Laguna, Rizal, Tarlac, and Metro Manila. Data center market is projected to approach USD 2Bn by 2030 driven by surging digital demand and hyperscaler interest.Industry-led growth: Simultaneously, businesses are increasingly sourcing renewable energy through programs like the Green Energy Option Program (GEOP) which allows firms to cut costs and significantly reduce emissions while ongoing industrial modernization is on the way.These are a few of the several reasons why the industrial electricity demand in the country is expected to spike in the next few years. Albeit a good marker for the green transition agenda, persistent grid constraints and limited digital customer solutions remain as pain points, creating both urgency and opportunity for energy providers to deliver smarter, more resilient, and customer-centric offerings.This means that businesses will not merely consume more electricity; they will call for more dependable, more predictable, clean electricity, delivered with new and better services front-lined both by the public and private sectors.Meeting the challenge of evolving energy needsThe Philippines has among the region's most expensive electricity costs, largely because the grid is powered by imported fossil fuels that exposes the companies to global price volatility and recurrent rate spikes. That cost pressure comes in addition to increasing climate risks and grid resilience challenges, especially in high-density metro hubs like Metro Manila, where outages and summer peak cooling demand affect productivity and margins. In this regard, additional businesses are in search of affordable decarbonization options that minimize costs, emissions, and increase resilience.Global utility trends project that suppliers must return to focusing on customer needs and framing sustainable solutions in terms of language that speaks to fundamental values and cost-effectiveness. Filipino consumers, for example, prioritize integrity, customization, and compassion throughout the service journey — expectations increasingly prioritized with energy partners.In the Philippines, the winning players that will secure and hold onto business customers will not be those who simply sell kilowatt‑hours. They will be the ones who provide guaranteed savings, operational flexibility, and quantifiable emissions reductions — all wrapped in a modern, customer‑centered experience. With facilitating policies, favorable economics, and an engaged innovation environment, energy providers have the opportunity to develop sophisticated, adaptive, and data‑replete solutions to address the diverse requirements of businesses. They will need to adapt and evolve in order to transition with credible, customer‑centric offerings.In the second part of this article, we will discuss the evolving role of energy providers as they seek to enhance their offerings and better serve business clients by focusing on customized solutions, digital innovation, and strategic partnerships that align with the growing demand for clean energy and operational flexibility.Smith C. Lim is the Energy Sector Leader and a Strategy and Transactions Partner, and Chip A. Maalihan is a Strategy and Transactions Associate Director, 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.

02 February 2026

Ryan Gilbert K. Chua and Warren R. Bituin

Why boards must rethink risk and resilience

In brief:Boards face an increasingly interconnected risk environment requiring closer integration of governance, risk, and compliance functions.Technology, cybersecurity, sustainability and workforce changes must be aligned with clear business objectives and supported by measurable risk assessment.Effective enterprise resilience depends on strong governance culture, qualified decision-making, and open collaboration between boards and management.“Ultimately, the future of effective governance lies in the ability to adapt, innovate, and work synergistically across functions, ensuring that enterprises not only survive but thrive in a rapidly changing business landscape."Risk has become a constant presence in boardroom discussions. That was evident at the 2025 SGV Knowledge Institute and SGV Consulting forum held in November, titled “Harmony in Action: Navigating Enterprise Resilience through Governance, Risk, and Compliance Synergy.” The discussions reflected how governance, risk, and compliance (GRC), while viewed as separate functions, are also seen as interconnected mechanisms for enterprise resilience.Changing risk environmentBoards today are operating in a risk environment that is increasingly non-linear, accelerated, volatile and interconnected. The nature of risk has shifted since the pandemic, when companies and organizations focused mainly on reporting financial risks. Today, boards face multiple, overlapping crises rather than isolated incidents. These crises have implications across supply chains, energy prices, regulatory compliance and geopolitical exposure. As a result, risk, compliance, and internal audit functions are expected to manage several issues simultaneously, often with limited resources.During the session, a reference was made to a recent study by the EY Center for Board Matters, which identified five agenda items currently top of mind for boards in the Asia-Pacific region: geopolitical volatility and resilience; shaping tomorrow’s workforce; artificial intelligence, cyber security, and digital transformation; sustainability integration into business models; and rethinking the board of the future. The panelists said these themes also strongly resonate with Philippine boards.Geopolitical volatility was highlighted as a significant concern. Although the Philippines is generally described as a consumption-driven economy, companies operating locally are often deeply connected to global markets. Mr. Medel Nera, who is a Director of various Publicly Listed Entities and also either Chairman or a Member of various Audit Committees, cited the example of a Philippine manufacturing-exporting company that sources materials from nearly 60 countries and serves customers in 120 countries. Such companies are directly affected by developments in other parts of the world, including geopolitical tensions, sanctions, and trade disruptions. Boards, therefore, need to recognize geopolitical risk as material and prepare for its potential impact.Workforce-related risks were also discussed, where fewer professionals and more alternative work arrangements have made the workforce more selective. New generations of employees are more likely to ask for remote work and a better work-life balance. Practices that were effective in the past may no longer be suitable. Organizations need to rethink how they attract, retain, and manage talent as a resilience strategy.Technology, particularly artificial intelligence (AI) and big data, was featured prominently in panel. There is high interest in AI tools, but daily adoption in operations and production is still low. One reason cited was concern over potential job losses resulting from automation. There are also risks in cybersecurity, data protection and privacy, and technology misuse.The panelists emphasized that technology initiatives should be aligned with business objectives. Boards and management should first clarify organizational goals, such as revenue growth, brand strength, profitability, or operational efficiency. Then, determine which technology strategies support those goals. Security controls should be designed around these business-driven technology requirements, rather than implemented as isolated initiatives.Cybersecurity was described using an analogy: attackers tend to avoid difficult targets and focus on easier ones. Organizations need balanced security measures. Controls cannot be so restrictive or costly else they hinder operations, but at the same time, they must be strong enough to deter intrusion. The aim is to establish security measures appropriate to the organization’s risk exposure and operational needs.Responsible adoption of AI was also stressed. Panelists noted that employees have to use AI productively, while stopping misuse like plagiarism or security gaps. Clear policies on acceptable use and approved platforms were cited as necessary measures to manage these risks while maximizing potential benefits.From the public sector perspective, Solicitor General Darlene Berberabe shared that the Department of Information and Communications Technology has implemented reforms focused on digitalization. These include developing digital infrastructure, with a push to explore blockchain technology, and online portals for government procurement to promote transparency.Sustainability and ESG integrationSustainability was discussed as an integral component of enterprise resilience. Many companies are implementing sustainability programs in response to requirements set by global parent organizations. These initiatives contribute to environmental stewardship, corporate reputation and long-term economic viability.Executive Director and Chief Finance, Risk, and Sustainability Officer of Metro Pacific Investments Corporation (MPIC) and President and CEO of mWell Ms. Chaye Cabal-Revilla mentioned that, at MPIC, sustainability is embedded across operations. Performance indicators and incentives now include not only financial targets but also environmental, social, and governance (ESG) outcomes. Major investments are mapped against the United Nations Sustainable Development Goals. Responsibility for sustainability initiatives has expanded beyond a dedicated team to include finance, risk officers, and internal auditors, supporting a more integrated approach.The board of the futureThe future role of the board was another topic covered. Though board effectiveness needs improvement, urgent priorities like profitability, compliance, and operations often push long-term development aside. Some organizations have included younger board members and provided board-level training on sustainability, AI, and technology. According to the panelists, a mix of experiences creates balance and supports organizational resilience.Achieving synergized risk management remains a challenge. Collaboration among governance, risk, compliance and internal audit is widely supported but at times difficult to implement. Organizational culture plays a significant role. In some companies, compliance and internal audit are seen as obligations rather than value-adding functions. Sometimes, board directives are diluted as they pass through management layers, or communication between the board and management is limited.Ms. Cabal-Revilla noted that one way to enable GRC initiatives is to quantify risks. By assigning financial value to potential risks and losses, organizations can offer clearer business cases to senior management and boards. Tangible, data-driven proposals are more likely to gain approval and support.From Solicitor General Berberabe’s experience in the private sector, governance was described as essential to achieving long-term profitability. Organizations that view GRC as strategic assets, rather than regulatory requirements, are better positioned for sustained performance.In closing, all panelists stressed the importance of communication and collaboration between boards and management. Mr. Nera encouraged management not to be intimidated by board members and highlighted the value of upfront communication in areas for improvement. Clear roles, open dialogue and a strong tone from the top were identified as critical factors in building resilient organizations.Thriving in a rapidly changing business landscapeAs organizations navigate overlapping crises and shifting workforce dynamics, the integration of sustainability and technology into strategic planning becomes essential for long-term resilience. The emphasis on clear communication and collaboration between boards and management is also crucial for fostering a culture that views GRC as a strategic asset instead of just an obligation for compliance. By quantifying risks and aligning technology initiatives with business objectives, organizations can better prepare for any challenges ahead. Ultimately, the future of effective governance lies in the ability to adapt, innovate, and work synergistically across functions, ensuring that enterprises not only survive but thrive in a rapidly changing business landscape.Ryan Gilbert K. Chua is the Consulting Leader and Warren R. Bituin is the Technology Consulting 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 authors and do not necessarily represent the views of SGV & Co.

24 January 2026

Lee Carlo B. Abadia and Carlo Kristle G. Dimarucut

Harnessing responsible AI for organizational resilience

In brief:Responsible AI enables organizations to anticipate and manage complex, interconnected risks by shifting from reactive compliance to predictive, data-driven decision-making.Integrating governance, risk, and compliance teams early in AI initiatives ensures transparency, ethical use, and alignment with organizational risk appetite.When adopted strategically with clear frameworks and leadership buy-in, AI strengthens organizational resilience, trust, and long-term value creation.“By fostering collaboration, embracing predictive capabilities, and leveraging available tools and frameworks, organizations can navigate the complexities of AI adoption responsibly and effectively."Artificial intelligence (AI) is a powerful accelerator that many industries recognize for its ability to predict, analyze, and detect anomalies. In risk and compliance, it uses data to identify patterns and anticipate issues before they happen. As organizations increasingly integrate AI into their operations, the concept of responsible AI has emerged as a crucial framework.In November 2025, members of board of directors, senior executives, chief audit executives, compliance officers, chief risk officers, and advisers gathered at the SGV Knowledge Institute and SGV Consulting forum titled, “Navigating Enterprise Resilience through the Synergy of Governance, Risk, and Compliance.” In the first session, the nature of risk today was best described as NAVI: nonlinear, accelerated, volatile and interconnected. A single disruption can rapidly propagate across functions, geographies and stakeholders. Traditional compliance risks are now part of a broader spectrum that includes operational, strategic, and reputational risks. A single incident, such as a data breach, can trigger a cascade of operational and regulatory challenges, ultimately impacting stakeholder trust and organizational value.The second panel discussion, titled “Leveraging Responsible AI in Risk, Compliance, and Internal Audit,” centered on how organizations can effectively harness AI technologies to enhance their governance, risk, and compliance (GRC) frameworks and drive strategic value without compromising trust. Emerging AI trends in the risk and compliance landscapeAI in the context of risk and compliance is not confined to automation; it also enables smarter decisions, using data to identify patterns, predict outcomes, and optimize processes. This means anticipating issues before they happen, rather than reacting after the fact. Explainable AI, defined as a set of processes and methods used to describe an AI model, its expected impact, and potential biases, allows boards and regulators to determine the reasons behind decisions made by machine learning (ML) algorithms. It is no longer enough for a model to simply provide answers, and explainable AI lets human users comprehend and trust those answers. On the other hand, generative AI, which creates content by learning patterns from massive datasets, is starting to reshape internal audit by summarizing findings, drafting reports, and simulating risk scenarios. Similarly, predictive AI, which uses statistical analysis and ML to identify patterns, anticipate behaviors, and forecast upcoming events, are moving organizations from static risk registers to dynamic, real-time risk monitoring.These advancements come with responsibilities, and data quality, governance, and ethical use are all non-negotiable. As a framework, responsible AI provides guardrails in the form of clear policies, transparency, and accountability, ensuring that innovation does not compromise trust.For AI to guide organizations effectively, Chee Kong Wong, APAC Risk Leader and GRC Technology Leader of EY Oceania, expressed that companies need a holistic framework. “Set a clear vision for AI, understand its use cases, establish governance models, integrate risk frameworks, define policies and controls, and ensure continuous monitoring.” Michelle Alarcon, President and Co-Founder of the Analytics and AI Association of the Philippines, emphasized that GRC teams should be involved from the ideation stage, not after prototypes are built, to avoid risks such as exposing confidential data. “Early collaboration helps identify potential risks upfront, making Responsible AI part of the development process.” AI in actionThe panelists also gave practical examples of AI in action. Alarcon noted that while GRC teams may not initiate AI use cases, they should adopt a data-driven approach. As an example, credit risk scoring exemplifies how GRC can intersect with AI. Jose Roy Hipolito, Risk and Compliance Head of MediCard Philippines, Inc., shared that MediCard uses AI to analyze biomarkers and predict anomalies or elevated health risks for more efficient and effective customer health management. “Previously, this was manual across multiple providers; now AI captures, synthesizes, and analyzes data, improving efficiency and accuracy,” he said.In addition, the discussion underscored the shift from reactive to predictive AI in risk management. Organizations usually begin with reactive AI, responding to issues as they arise, but predictive AI presents an advantage through a preventative approach. Wong stated that proactive risk management can turn potential threats into opportunities, explaining that “Predictive AI enables organizations to scan millions of data points for early warning signals, allowing proactive action before issues escalate.”Organizations that manage to fully and effectively integrate AI into their operations will be faster to adapt, harder to disrupt, and more resilient in the face of uncertainty. However, early adopters in particular face challenges that lead to limited use cases for AI. As revealed by Alarcon, “Early adoption often stems from the fear of missing out, leading to superficial use cases like writing better emails. The real challenge isn’t skills – it’s leveraging AI’s full potential.” She further added that organizations will have to move beyond experimentation and focus on strategic applications that deliver exponential value.Navigating AI adoption responsibly and effectivelyAs organizations navigate the complexities of AI adoption, it is crucial for leadership to recognize that using AI responsibly strengthens resilience while supporting long-term objectives. Hipolito further stated, “The success of AI adoption depends on user mindset and alignment with the organization’s risk appetite. Risk practitioners should emphasize that AI is not just a tool – it’s a strategic enabler.”According to Alarcon, AI must be recognized as a structural change in operations. “Boards should plan for governance, training, and ethical frameworks to manage this new dynamic.”Transparent communication regarding the associated risks, benefits, and governance structures is vital for securing leadership buy-in and ensuring responsible scaling. “The message to boards should be clear: AI adoption is not optional for competitive resilience,” said Wong. Responsible AI shouldn’t be considered a brake. It helps organizations accelerate safely, allowing innovation with guardrails, strategy with ethics, and speed with trust. By fostering collaboration, embracing predictive capabilities, and leveraging available tools and frameworks, organizations can navigate the complexities of AI adoption responsibly and effectively.Lee Carlo B. Abadia and Carlo Kristle G. Dimarucut are Technology Consulting Principals 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.

19 January 2026

Joseph Ian M. Canlas and Christiane Joymiel C. Say-Mendoza

Back office to boardroom: governance, risk, and compliance as a strategic advantage

In brief:Governance, risk, and compliance (GRC) is shifting from back-office control to a strategic function that anticipates risks, protects value, and guides executive decisions in a volatile world.Mature GRC programs feature strong leadership, fast and reliable information, clear ownership by the first line, and GRC leaders who challenge board and management decisions.While AI and new technologies improve risk detection, the real advantage comes from integrating risk insights across the organization to enable timely, practical governance for boards and management. “If you have a mature GRC, information flow is faster, reaching stakeholders on time to make smarter choices."In November 2025, board of directors, senior executives, chief audit executives, compliance officers, chief risk officers, and other professionals gathered at the SGV Knowledge Institute and SGV Consulting forum titled, “Navigating Enterprise Resilience through the Synergy of Governance, Risk, and Compliance.” It examined how governance, risk, and compliance (GRC) is being reshaped by business realities that are faster, more volatile and less forgiving than ever.The first panel session, “GRC Integration: Aligning Governance, Risk, and Compliance with Business Strategy,” centered on how GRC can evolve from a defensive control function into a source of strategic clarity.Redefining risk One theme dominated the discussion: the traditional definition of risk has become inadequate. Compliance risk, once the focal point of GRC programs, is now only one part of a broader risk universe that includes liquidity, market and operational exposures. Above these sit strategic and reputational risks, which panelists describe as one of the most consequential threats to long-term value.Risk today, they argued, is best described as NAVI: nonlinear, accelerated, volatile and interconnected. A single disruption can rapidly propagate across functions, geographies and stakeholders. A cyber breach becomes an operational and a regulatory issue; an operational or regulatory issue becomes a reputational crisis; a reputational crisis erodes shareholder confidence.“Mature GRCs ensure collaboration and are capable of addressing events that trigger multiple risks,” said Vicky Lee Salas, Senior Vice President for Special Projects and Chief Risk and Compliance Officer of SM Investments Corporation. The implication for executives is clear: managing risks in silos is not merely inefficient, it is also dangerous.Speed as a strategic assetIn a NAVI risk environment, speed of information is important. The panel repeatedly returned to the idea that effective GRC programs are those that move relevant insights to decision-makers before choices are constrained.Atty. Narlette Manacap, Compliance Risk Country Officer of Citibank Philippines, framed the shift succinctly: “If you have a mature GRC, information flow is faster, reaching stakeholders on time to make smarter choices,” she said. “GRC has shifted from defensive to proactive: we identify pain points early and appropriately plan for situations. In some cases, controls are there to prevent, not mitigate, crises. A healthy GRC helps manage crises and control disruptions.”Defining “maturity” Despite the abundance of frameworks, the panelists converged on a simple view of what constitutes GRC maturity, which rests on three identified pillars. First, leadership must be strong, visible and unambiguous. GRC cannot operate effectively when its mandate is unclear or inconsistently supported at the top. Second, information must flow quickly and credibly to those empowered to act. Risk insights that arrive late, or are filtered to avoid discomfort, serve little purpose. Third, the organization must be proactive, that is, able to identify emerging risks early enough to prevent a crisis rather than merely respond to one. Without all three, even well-designed GRC structures struggle to deliver value.Leadership and accountabilityBeyond structure, the panel emphasized mindset. Effective risk leaders must operate with a “positive intent mindset,” defined as an ability to appreciate differing perspectives, remain open during debate, and engage constructively with business leaders whose intentions may not always align with risk considerations.Clear accountability is equally critical. A well-defined RACI grid — clarifying who is responsible, accountable, consulted and informed — becomes indispensable during moments of stress, when ambiguity can paralyze response. Indeed, human behavior remains the persistent roadblock. Differing interpretations of risk appetite, uneven risk awareness and organizational politics can undermine even the most sophisticated systems. In such moments, risk leaders must be willing to stand their ground. Knowing when to say “no,” and articulating why, is a defining leadership skill in modern GRC.From defense to value creationThe panel described the evolution from three lines of defense to the three lines model, a subtle but significant shift in language. The new emphasis is not solely on prevention and control, but on value creation. For the three lines to function effectively, they must share objectives, operate within a common framework and be supported by effective enablers: leadership, culture and technology.Manacap underscored the importance of empowering the first line. When business units own risks, the organization becomes more agile and less dependent on second-line intervention. Risk, in this model, is shared responsibility rather than a centralized policing function.That shift also has implications for how risk leaders are positioned. Salas stated that credibility starts with recognition. Chief risk officers and senior risk leaders, she said, need to be “paid well, credible enough to mean business.” Too often, risk is viewed as a cost center. In reality, strong GRC functions act as “revenue protectors,” safeguarding value that might otherwise be lost to disruption, fines, or reputational damage.The expanding role and limits of technologyArtificial intelligence and emerging technologies featured prominently in the discussion. Sing Hwee Neo, EY Global Client Service Partner for Government and Public Sector, reflected on the transformation he has witnessed throughout his career. “GRC has gone a long way since I started,” he said. “When I look back at when I started internal audit, the tools were very rudimentary. Experienced practitioners can now use AI to detect control failures in real time.”He pointed to autonomous risk management agents that monitor multiple data sources, dynamically adjust risk scoring and help organizations prioritize and respond to potential incidents more effectively. However, the panel was careful to temper enthusiasm with caution. Integration is more important than any individual tool, as technology that reinforces silos merely accelerates confusion. Aligning risk categories, consolidating assurance activities, and enabling senior management to see a comprehensive, timely picture of enterprise risk remain the real differentiators. Insights for boardsAudience questions reflected common executive concerns, including the availability of combined assurance tools and how organizations can preserve the independence and strength of second and third-line functions. The responses returned to familiar themes: empowerment of the first line, clarity of roles and visible support from the top.One clear message was directed at boards. The panelists urged that governance should be implemented consistently across the group, but in a proportional and practical manner. Over-engineering governance can be damaging as under-governance, particularly in complex organizations.Synergy in GRCThe session closed with a set of succinct reflections that captured the panel’s shared philosophy. Governance sets direction, risk provides foresight and compliance ensures alignment, said Neo. Manacap described GRC as “one in action, moving in sync.” Salas offered a phrase likely to resonate with executives: “risk in rhythm.”What ultimately distinguishes effective GRC is not sophistication for its own sake, but synergy. It is about open dialogue, shared accountability and leadership willing to treat risk not as a constraint but as a strategic instrument.Joseph Ian M. Canlas and Christiane Joymiel C. Say-Mendoza are Risk Consulting Partners 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.

11 January 2026

Crystal Aleli Cornell, Joyce Anne Soriano and Zoe Aurora Romero

With PFRS on Sustainability Disclosures, compliance can become a competitive edge

In brief:The SEC's new guidelines require companies to report sustainability and climate-related financial information starting FY 2026, specifically disclosures on governance, strategy, risk management and metrics and targets.Effective reporting and sustainability practices can enhance corporate governance, attract investors, and improve long-term business resilience by integrating sustainability into core business strategies.“Adopting PFRS on Sustainability Disclosures allow companies to shift sustainability from a mere compliance requirement to a fundamental part of their corporate strategy, ultimately driving long-term value and resilience in an increasingly unpredictable environment.”In today's fast-changing business environment, the demand for consistent, comparable and transparent sustainability reporting is crucial for investment decisions. The International Sustainability Standards Board (ISSB) has introduced IFRS S1 General Requirements for Sustainability-related Financial Information and S2 Climate-related Disclosures, which provide crucial sustainability-related information alongside financial statements, catering to investor demands for transparency. These standards offer businesses a chance to enhance corporate governance and investor protection through globally aligned regulations.New SEC guidelines: Embracing Philippine financial reporting standards on sustainability disclosures Following the adoption of IFRS S1 and S2, on 22 December 2025, the Securities and Exchange Commission (SEC) issued Memorandum Circular No. 16, Series of 2025 mandating publicly-listed companies (PLCs) and large non-listed companies (LNLs) to adopt Philippine Financial Reporting Standards (PFRS) on Sustainability Disclosures starting in FY2026 with limited extensions of transition reliefs under a tiered approach. Mandatory external limited assurance of Scope 1 and Scope 2 Greenhouse Gas (GHG) emissions by an independent assurance practitioner will also be required two years after the initial implementation of these standards for each tier. The standards focus on four core areas: • Governance: governance processes, controls and procedures a reporting entity uses to monitor, manage and oversee sustainability- and climate-related risks and opportunities• Strategy: approach the entity uses to manage sustainability- and climate-related risks and opportunities• Risk Management: processes the entity uses to identify, assess, prioritize and monitor sustainability- and climate-related risks and opportunities• Metrics and Targets: information used to manage and monitor the entity’s performance in relation to sustainability- and climate-related risks and opportunities over timeAdopting the Standards allows companies to shift sustainability from a mere compliance requirement to a fundamental part of their corporate strategy, driving long-term value and resilience. These reporting obligations can serve as a catalyst for organizational improvement and bolster investor trust. Transforming governance and strategy with effective reportingOrganizations often struggle to integrate sustainability across all levels. According to EY’s 2023 Sustainable Value Study, only half of Chief Sustainability Officers (CSOs) feel empowered to hold C-suite peers accountable for sustainability initiatives. Furthermore, 41% of organizations aim to strengthen collaboration between the C-suite and the board to effectively implement climate strategies. With the new reporting obligations, effective sustainability disclosures can influence corporate governance structures and strategic decision-making processes. In their disclosures following the PFRS on Sustainability Disclosures, companies need to set out their governance processes, controls and procedures that they use to monitor, manage and oversee sustainability-related and climate-related risks and opportunities. This includes considering trade-offs associated with sustainability risks and linking remuneration policies to performance metrics. In addition, companies need to identify responsible governance bodies and ensure they have the necessary competencies. In addition, the Standards ask the board to disclose how sustainability-related and climate-related risks and opportunities are considered when overseeing overall strategy, the company’s decisions on major transactions and its risk management processes and related policies. With these obligations, organizations that have not yet integrated environmental, social, and governance (ESG) factors into their strategies will need to reassess their approaches to meet these new expectations. By doing so, they can enhance governance, meet stakeholder expectations, and leverage sustainability for revenue growth. Transparency under the PFRS on Sustainability Disclosures to further investor trustLocal adoption of the IFRS Sustainability Disclosure Standards paves the way for a consistent sustainability reporting framework applicable across companies, making it easier for companies to communicate their sustainability efforts. Standardized disclosures on climate-related risks can also enable investors to assess how well companies are managing these risks. Between companies who disclose their exposure to extreme weather events in a similar manner, investors can better evaluate which company has a more robust risk management strategy. Mandatory and standardized disclosures help ensure comparability of company data, improving understanding of performance and potentially financial information that translates towards better capital access. When companies disclose the financial implications of their sustainability initiatives, stakeholders can better understand how these initiatives contribute to overall financial performance, improving investor confidence and potentially lowering capital costs. Transparent sustainability practices would attract a broader range of investors, including those focused on ESG criteria. Companies that can outline sustainability goals, progress, and metrics consistently can foster trust and attract investors who prioritize ESG criteria. Reporting under the standards, in compliance with the SEC Memorandum Circular, provides covered entities the opportunity to inform senior-level decision-making while enabling them to hold themselves accountable over their sustainability targets – and be held accountable by others. Get aligned: Integrating sustainability for lasting business successTo truly realize the value of sustainability, boards must adopt a long-term perspective. Sustainability should not be treated as an isolated initiative; it needs to be seen as an essential pathway for successful businesses. By effectively integrating sustainability strategies into their operations, companies and boards can enhance performance. Sustainability and business must work hand in hand and should not treated as a separate endeavor.Adopting PFRS on Sustainability Disclosures allow companies to shift sustainability from a mere compliance requirement to a fundamental part of their corporate strategy, ultimately driving long-term value and resilience in an increasingly unpredictable environment.To prepare for the adoption of the new sustainability standards and related reporting developments, companies can consider the following actions:Integrate sustainability into governance frameworks. Ensure a shared vision at the leadership level for integrating sustainability into business practices. Governance roles should oversee strategy, major transactions, and risk management, setting the tone for the organization.Build capacity. Develop capabilities across different functions to meet the new standards. Every department should understand the importance of sustainability and its business benefits. Adopt a mindset of continuous improvement. Embrace a culture of continuous improvement in sustainability practices and reporting. The company’s initial report does not need to be perfect; however, as capabilities, skills, and resources improve over time, so too should the quality of the report. Regularly monitor and assess the evolving risk landscape through tailored board insights and discussion sessions. In addition, be prepared to revisit sustainability targets based on the latest scientific data, and leverage insights from peers to drive innovation. This proactive approach enables leadership teams to make informed decisions and implement strategies effectively.Crystal Aleli Cornell, Joyce Anne Soriano and Zoe Aurora Romero are Managers from the Sustainability Team 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.

05 January 2026

Rossana A. Fajardo

A legacy of purposeful service

In brief:Purpose-driven leadership creates a foundation for long-term organizational resilience and credibility.A strong legacy is built by aligning values, relationships, and systems so culture remains consistent even as leaders change.Leaders who focus on developing people and shaping future generations create impact that extends far beyond their own tenure.“A legacy is not merely a record of accomplishments; it is the sum of an organization’s values, actions, and the people who carry them forward."When they founded SGV in 1946, Mr. Washington SyCip and Mr. Alfredo M. Velayo established a deeply rooted culture that values meritocracy, inclusiveness, and stewardship, cultivating a mindset of integrity, excellence, and quality work. However, they did more than establish the Firm. Inspired by a vision of a future where Filipino accountants and professionals could shine on the global stage and sustain national development, they shaped a philosophy of leadership anchored on service, one that continues to guide SGV almost eight decades later. A legacy is not merely a record of accomplishments; it is the sum of an organization’s values, actions, and the vision of the people who carry them forward. With a clear and compelling vision of the ambitious future they wish to realize, trailblazers can build the foundations that serve as signposts for future leaders. When leaders live and act with purpose in line with that vision, they model resilience and a commitment to positive change. In doing so, they kindle the same commitment in those who follow. Purpose-driven leadership provides long-term stability and credibility, ensuring that the values an organization stands for become its strongest foundation.As SGV approaches its 80th anniversary, we are reminded that organizations do not endure through technical excellence alone. Excellence is essential, but it is Purpose that provides direction. SGV’s Purpose Statement, to nurture leaders and enable businesses for a better Philippines, aligns effort with impact and guides us through an ever-changing business environment. True to Mr. SyCip’s vision of contributing positively to national development, our Purpose keeps us grounded in values that must remain constant even as our context, and our world, evolves.Preserving values and nurturing relationships At the heart of any enduring legacy is the consistent preservation of core values. These values shape decisions, define culture, and guide behavior even in moments of uncertainty. For leaders, embodying these principles is essential. A legacy loses its power when values are stated but not lived.Legacy also serves as a bridge that connects generations. It weaves continuity into an organization’s story, reminding us that we contribute to something greater than ourselves. In SGV, this continuity is expressed in the relationships we build with our teams, our clients, and the communities we serve. Insights may be appreciated, but integrity is remembered. Achievements may be celebrated, but the mentors who challenge, support, and elevate others leave a deeper imprint.A strong and consistent legacy emerges when relationships, values, and organizational systems reinforce one another, allowing culture to remain intact even as leadership evolves.Translating purpose into practicePurpose is most powerful when it is translated into practice. Principled leadership anchors an organization in values while enabling it to adapt to new realities. This form of leadership goes beyond delegation and accountability – it creates an environment where individuals are empowered to act according to shared beliefs.To do this effectively, leaders must clearly articulate the cultural norms that define an organization. This is because culture outlives any individual leader. It is reflected in the decisions people make when no one is watching. When leaders model the behaviors they expect from others, they communicate those values far more effectively than any policy or manual can.However, values only become real when systems reinforce them. Practices, incentives, and structures must align with what the organization claims to stand for. Policies that contradict stated values do more than create confusion; they weaken trust and threaten the continuity of legacy. By ensuring consistency between belief and behavior, leaders cultivate an environment of integrity and accountability.From the very beginning, Mr. SyCip articulated SGV’s overarching purpose: to contribute to the country’s development. His discipline, insistence on quality work, and unwavering integrity formed the foundation of a culture built on stewardship and meritocracy. These principles continue to influence how we elevate our profession and fulfill our Purpose today. His timeless words serve as a rallying cry for every SGVean “The ultimate legacy of SGV to the country is the quality of its people.”The human side of leadershipBehind every enduring legacy are people whose stories reflect perseverance, humility, and resilience. Legacy is built not only through significant milestones but through the small, intentional actions repeated day after day. Leaders who demonstrate humility, integrity, and empathy inspire trust, and trust is the currency that sustains organizations through disruption and transition.True legacy builders think beyond short-term metrics. They understand that every decision affects the future of employees, clients, and society. At SGV, continuing our founders’ legacy means championing transparency, good governance, and economic confidence — all essential in contributing towards a stronger Philippines.While Mr. Velayo valued hard work, he believed even more deeply in the importance of caring for people. He viewed leadership as stewardship — the responsibility to bring out the best in others. As an educator, he helped shape generations of accounting and business professionals, many of whom would later contribute significantly to national development. His example reminds us that leadership is measured not by individual accomplishment but by the opportunities we create for others.Leaders who invest in developing future generations create an impact that endures well beyond their own tenure, shaping a legacy that expands over time.Building for the next generationCreating an inspiring legacy is a lifelong pursuit. It requires commitment to Purpose, respect for people, and fidelity to values, even when circumstances challenge them. As leaders, we must stay mindful of the legacy we inherit, the vision of our founders, and how we will maintain or improve on it for those who will follow.The coming years will bring new challenges and transformative shifts in business, technology, and society. However, the principles that have guided SGV for nearly 80 years remain relevant: integrity, excellence, stewardship, inclusiveness, and service to the nation. By living these values consistently and purposefully, we strengthen not only our Firm but also the broader business community and the country we serve.In the end, a true legacy is not written in accolades or financial success. It lives in the culture we sustain, the people we empower, and the values we choose to uphold, especially when it is hardest to do so. Congratulations on 80 remarkable years, SGV!Rossana A. Fajardo is the Country Managing 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.