May 2024

SGV thought leadership on pressing issues faced by chief executives in today’s economic landscape. Articles are published every Monday in the Economy section of the BusinessWorld newspaper.
27 May 2024 Randall C. Antonio

How GenAI can accelerate business transformations

Given the fast-paced nature of digital evolution, businesses are increasingly turning to innovative technologies to stay ahead of the curve. Generative Artificial Intelligence (GenAI), which refers to AI algorithms that generate outputs based on existing data, has emerged as a transformative force that can revolutionize operations like product development, customer engagement, and software programming. However, integrating this technology into business processes requires strategic planning and careful execution. The EY 2023 Work Reimagined Survey shows that 84% of employers are expecting to implement GenAI within a year. Additionally, 33% of employees and employers see potential benefits for productivity and new ways of working. GenAI’s transformative capabilities are expected to augment human work and increase efficiency, which will have long-term effects on the global business landscape.The technology can transform business processes and unlock new levels of creativity and efficiency. To help ensure the success of GenAI implementation, this article will share five key strategies to effectively harness the power of GenAI in business transformation.Anchor everything to the enterprise strategyBegin by clearly defining business objectives and assessing how GenAI fits into the organization’s broader strategy. Identify specific areas where implementing an AI solution can drive value, such as streamlining operations, enhancing creativity, or personalizing customer experiences. By aligning AI initiatives with strategic goals, businesses can ensure that resources are allocated efficiently and that AI investments deliver measurable, tangible returns. Prepare quality data The success of GenAI will depend on the quality and diversity of data used to train models. It encompasses algorithms that leverage upon neural networks to generate new data that resembles the patterns found in the inputs it has been trained on. Access to relevant and high-quality data is therefore crucial for training and validation. Organizations must invest in data collection, cleansing, and augmentation processes to ensure that AI systems are trained with accurate and representative datasets. Additionally, diverse training data will be imperative to capture a wide range of scenarios and edge cases. This can improve the robustness of AI models, help mitigate biases, and ensure fair outcomes. Collaborate with the right teams The effective implementation of GenAI requires collaboration among multidisciplinary teams, highlighting the need for partnerships between AI specialists, data scientists, domain experts, and business stakeholders. Involve a cross-functional team in the decision-making process, blending technical expertise with business acumen and ethical considerations, to create a balanced and forward-thinking AI strategy.By fostering a collaborative ecosystem, organizations can leverage diverse perspectives and domain knowledge to develop AI solutions that address real-world challenges. Cross-functional teams should work together iteratively, from ideation to deployment, to ensure that AI solutions are aligned with business needs and user requirements. Apply responsible AI Ethical and responsible AI practices are paramount in today's data-driven world. Prioritize transparency, fairness, and accountability throughout the AI lifecycle. Implement measures to mitigate biases, ensure data privacy, and establish mechanisms for explaining AI-generated outputs. Bias in particular often manifests in ways that harm certain parts of the population. When the data that is used to train a model does not accurately reflect the group it is intended to serve, it can create imbalances in the model's outcomes. For example, imbalances could stem from a lack of diversity in the types of data collected. However, there are other types of imbalances that may compromise the precision of the GenAI model without negatively affecting a particular group. Although preventing such imbalances entirely is challenging, the development team must investigate potential sources of imbalance and seek ways to reduce it. By embedding ethical considerations into AI development processes, businesses can build trust with stakeholders and mitigate potential AI-deployment risks. Learn, adapt, and improve continuously AI implementation is a journey, not a destination. Embrace a culture of continuous learning and adaptation, where feedback loops drive incremental improvements. Monitor the performance of AI systems in real-world environments and gather insights from user interactions. Furthermore, use this feedback to refine AI models, optimize algorithms, and adapt strategies according to evolving business dynamics. Learning and growing from the project should be treated as an essential component of an AI endeavor, instead of a last-minute consideration. Foster an environment of ongoing education, prompting those involved to thoughtfully evaluate all triumphs and challenges. By staying agile and responsive, organizations can harness the full potential of GenAI to drive innovation and secure a competitive advantage. Transforming in the long-termWhile previous technological advancements mostly focused on automation, GenAI can also assist with complex cognitive functions like predictive analytics, machine learning, and natural language processing. Also, its use-cases encompass a diverse range of industries, occupations, and tasks. For example, the case study Generative AI at Work showed that customer service agents could resolve 13.8% more customer inquiries per hour with the help of GenAI tools.The successful implementation of GenAI requires a holistic approach that encompasses strategic alignment, data excellence, collaborative engagement, ethical considerations, and continuous learning. By adopting these key strategies, businesses can unlock new opportunities, drive operational efficiencies, and stay ahead in today's digital economy. Through concrete, actionable steps, GenAI can boost efficiency and innovation, reshaping today’s ways of working.  Randall C. Antonio is an AI Technology Consulting Principal of SGV & Co.This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinion expressed above are those of the author and do not necessarily represent the views of SGV & Co.

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20 May 2024 Aaron C. Escartin

The evolving role of financial controllers

The financial controller role has transformed dramatically, with emerging technologies and advanced data analytics, along with the growing importance of environmental, social, and governance (ESG) considerations, introducing a fresh perspective to company planning. The traditional duties of financial controllers, which used to focus on historical financial reporting and regulatory compliance, now demand a broader range of skills and responsibilities.Their responsibilities have broadened beyond basic bookkeeping – they are now expected to adopt a proactive and visionary mindset, taking on the role of strategic business overseers. Modern controllers must be well-versed in a variety of competencies; they must excel in accounting and be capable of managing data, participating in strategic corporate conversations, and acting as reliable counselors. Their role has progressed into one that focuses on directing and ensuring the achievement of value, positioning them at the core of financial strategy.The increasing need for real-time and predictive financial reporting has been a major catalyst for this shift, with the role now including elements of financial planning and analysis (FP&A). Though controllers used to focus on internal transactional duties, technological advancements and evolving business expectations are pushing the role to become more extroverted.Incorporating ESG factors into fiscal planningAs ESG factors gain prominence in corporate planning and risk evaluation, it is essential for controllers to weave them into the fabric of financial forecasting and disclosure practices. This integration should be in harmony with the company's sustainability objectives and effectively communicated to all stakeholders.Some organizations are now appointing ESG-specific controllers, positioning the controllership role at the vanguard of this pivotal strategic initiative. With the growing need for verified ESG reporting, controllers are well-placed to spearhead this domain within their companies. This marks a considerable shift from previous times when compliance with statutory or similar regulatory reporting might not have been at the forefront of many corporate controller agendas.Familiarity with non-financial reporting standards, such as those set by the Global Reporting Initiative (GRI) and the Sustainability Accounting Standards Board (SASB), is becoming indispensable. These standards provide a blueprint for evaluating and disclosing sustainability efforts, tasks that now fall under the purview of financial controllers.In a globally intertwined business environment, the challenge lies in ensuring adherence to a variety of regulations across different markets while keeping financial management practices consistent with both international benchmarks and local mandates. Controllers are expected to perform thorough due diligence and maintain a comprehensive international outlook to protect the company's cross-border activities.The controllership should embrace a "glocal" (globally local) operational framework, capitalizing on centralization to enhance value while also ensuring that compliance, resilience, and risk management are supported at the local level. This new model for controllers aims to strike a balance between shared services and business partnership roles, with compliance functions remaining centralized. To adapt effectively, controllers must integrate strategies that utilize technology and data to streamline and standardize processes, all while upholding a local presence that supports compliance and risk oversight.In the era of digital finance, the sheer amount and velocity of financial data add unprecedented complexity to the task of ensuring precision in financial reporting. Controllers have the critical responsibility of guaranteeing that financial statements are free of material misstatements and reflect a true and just representation of the company's financial status. The rapid evolution of technology and regulatory frameworks demand financial controllers to dedicate themselves to continuous learning, enabling them to anticipate trends and challenges by adapting their knowledge and practices to stay relevant and efficient.Expanding the financial controller roleThe expanding role of the financial controller now encompasses a more prominent role in strategic decision-making processes, including steering investment approaches, navigating risks, and pinpointing growth opportunities. They are emerging as pivotal figures in formulating business strategies, charged with navigating their companies through market volatility with a decisive grip on fiscal instruments.Moreover, they must master sophisticated financial software platforms that not only simplify financial processes but also unlock the potential for detailed data analysis. Controllers must become fluent in the language of technology, providing a nuanced perspective on the financial well-being of the company, and facilitating predictive insights. They should approach their role with an open mind and curiosity, ready to embrace new tools, functionalities, and technologies. At the same time, they must exercise discernment to choose technologies that are appropriate for their organization and specific circumstances.Controllers must cultivate a dual expertise: a deep grasp of financial principles coupled with skills in data analytics. With these capabilities, they can translate intricate data into clear insights, formulate corporate strategies, spur innovation, and promote ethical leadership. By nurturing sustainable business operations and maintaining the integrity of financial disclosures, controllers establish themselves as vital consultants within their organizations, equipped to manage the intricacies of today's business landscape.From traditional bookkeepers, financial controllers can become "value articulators" – guardians of value delivery who evaluate the financial outcomes of investments. Today's controllers transcend transactional duties, embracing data and technology with a forward-looking mindset crucial for steering sound decisions, ensuring regulatory adherence, and propelling the organization towards resilience and expansion. Preparing for the future of controllershipTo navigate the evolving landscape of controllership and prepare for its future, financial controllers must proactively refine their expertise and adapt to new challenges. A commitment to continuous professional development is essential, with a focus on acquiring knowledge in data analytics and mastering advanced financial software platforms. Controllers should immerse themselves in the latest fintech innovations, selecting tools that align with their company's specific needs. This discernment will ensure they remain competitive, leveraging automation and predictive analytics to drive business success.Additionally, understanding and integrating ESG principles into financial strategies is becoming increasingly important. Controllers should become well-versed in non-financial reporting frameworks, enabling them to align financial strategies with sustainability goals and communicate these efforts effectively to stakeholders.In our interconnected global economy, maintaining awareness of international regulations is paramount as well. Controllers must develop strategies that ensure compliance across various markets while harmonizing financial management practices, safeguarding company operations across borders. Cybersecurity vigilance is another critical area. Financial controllers must prioritize financial data security, implementing robust data governance measures and staying informed about the latest cybersecurity best practices to protect the company's financial information and reputation.Finally, controllers should actively engage in strategic business discussions and investment decisions. By doing so, they position themselves as chief value officers and vital business partners, contributing significantly to the company's strategic direction and value creation. This strategic business involvement ensures that controllers are not just number crunchers – but key players in shaping the future of their organizations. Aaron C. Escartin is a Global Compliance and Reporting (GCR) Tax 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.

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13 May 2024 Bonar A. Laureto

Climate resilience: Innovations in Philippine businesses

Due to escalating climate challenges, Philippine businesses must redefine resilience by navigating risks and capitalizing on emerging opportunities. The previous article explored the foundational principles of climate resilience, emphasizing the imperative for Philippine businesses to adapt and thrive amid climate threats. The discussion highlighted how understanding and managing both physical and transition risks are crucial, alongside strategic shifts towards sustainability that bolster growth and help secure a competitive advantage. This article explores how leading companies are leveraging their proactive strategies to improve their market position and drive long-term value, as shared by these companies at the recently held SGV Knowledge Institute event entitled Climate Convergence: Actions Toward a Resilient Future. Energy Development Corporation (EDC): Proactive risk managementEDC's risk management strategies, born from firsthand experiences with climate-related disasters, illustrate the importance of preparedness and adaptive operations. Their structured approach not only safeguards against immediate risks but also builds a foundation for resilience, showcasing how businesses can thrive amid environmental uncertainties.When Super Typhoon Yolanda hit EDC's geothermal power plants in Leyte, it took them four months to restore generation capacity. In response, the company invested over ₱350 million in resilience measures to typhoon-proof its Leyte plants. Concurrently, EDC reinforced its dedication to climate change mitigation by committing never to build, develop, or invest in coal-fired power plants. In addition, EDC launched the Net Zero Carbon Alliance framework that aims to help its partners achieve carbon neutrality. JG Summit Holdings, Inc.: Systematic climate hazard mitigationJG Summit Holdings, Inc.’s strategy to assess and enhance resilience against projected climate hazards showcases their approach to safeguarding assets. Specifically, they initiated a pragmatic strategy to progressively enhance resilience across its portfolio. The conglomerate has also launched initiatives to integrate climate risk intelligence into its strategic businesses processes. Using a data-driven approach, it leverages the latest climate science and granular Philippine-specific data to thoroughly assess its facilities' exposure to climate hazards. Concurrently, the conglomerate conducts vulnerability assessments on select business-critical facilities to evaluate their ability to withstand extreme weather events, shaping retrofitting strategies, refining maintenance protocols and emergency response plans, and establishing necessary backups and redundancies applicable across their portfolio. Central to these efforts is capability building, with significant investments in training risk managers to interpret and utilize climate data at scale. SteelAsia Manufacturing Corp. (SteelAsia): Pioneering green steel productionSteelAsia’s journey toward a net-zero future by 2050 demonstrates a transformative approach to decarbonization and managing transition risks. By integrating advanced technologies and prioritizing the use of recycled materials, SteelAsia is reducing its carbon footprint and aligning itself with global demands for sustainable building materials. These solutions include using recycled scrap steel and electric arc furnace (EAF) technology powered by renewable energy, allowing SteelAsia to reduce its emissions intensity (ton of CO2 produced per ton of steel) by 87% compared to the industry-standard Blast Furnace-Basic Oxygen Furnace method. By adopting the cleanest technologies and learning from global advancements, SteelAsia has emerged as a global leader in green steel production, achieving one of the lowest emission rates in a traditionally hard-to-abate sector. In addition to direct emissions reductions, avoiding the cycle of exporting scrap only to import finished products enables SteelAsia to significantly cut emissions along the entire supply chain and deliver steel to its customers more quickly and efficiently. Compared to global competitors, SteelAsia offers dual benefits: their locally produced green steel reduces customers’ embodied emissions and ensures shorter wait times.Nickel Asia Corporation (NAC): Reimagining mining with sustainabilityNAC is actively enhancing its environmental protocols by adopting sustainable mining practices, such as obtaining Science Based Targets initiative (SBTi) certification and implementing comprehensive emission management strategies. These initiatives demonstrate NAC’s commitment to reducing its ecological footprint while maintaining profitability, setting a benchmark for sustainable practices in the mining sector.They tackled one of mining’s main emissions source — fuel used in operations and mineral transport — by investing in low-emission technologies like hybrid excavators that improve fuel efficiency and cut fuel costs. These efforts will have reduced an estimated 35,000 tCO2e in Scope 1 and 2 emissions by 2025, merging sustainability with operational efficiency.BDO Unibank, Inc.: Leading with sustainable financeThrough its Sustainable Finance Framework, BDO supports projects that offer environmental and social benefits, aligning investment with sustainable growth. This proactive approach addresses the financial aspects of climate resilience and emphasizes the financial sector’s role in fostering a sustainable future. Since 2010, its Sustainable Finance Desk under the Institutional Banking Group has financed projects that pursue energy efficiency, pollution prevention and control, and sustainable management of natural resources and land use.In particular, BDO has directed a significant portion of its business lending — 34% — toward environmental and social projects. Its ASEAN sustainability bond program, the largest of its kind in the Philippines, raised PHP52.7 billion for 39 projects encompassing renewable energy, roads & basic infrastructure, affordable housing, food security, and other green and social initiatives. Additionally, BDO has issued USD150 million worth of green bonds that finance seven renewable energy projects across wind, biomass, and hydro. More recently, BDO introduced a USD100 million blue bond program, the first of its kind in the country, dedicated to financing projects that enhance bulk water supply and improve wastewater management.SGV & Co. (SGV): Walking the talkSGV is at the forefront of managing its climate risks and spearheading solutions that empower its clients to enhance their management of climate risks and opportunities. The firm has taken decisive action to reduce its emissions, with a particular focus on power consumption, the primary source of its emissions. By transitioning to renewable energy sources under the Department of Energy’s Green Energy Option Program (GEOP), the firm has made significant strides in cutting down emissions related to electricity. This program enables consumers to switch from conventional energy supplies to renewable sources within the country. Part of the Firm’s portfolio of initiatives includes producing thought leadership reports and articles on sustainability and relevant regulations surrounding it, as well as crafting the annual SGV Sustainability Report and Beyond the Bottom Line publications.SGV has further strengthened its capabilities to confront climate-related challenges by establishing a robust climate risk advisory team composed of climate science, geology, and engineering professionals. This strategic development equips the firm to analyze projected climate hazards, develop localized climate hazard information, and perform in-depth vulnerability assessments across assets and portfolios — overcoming a major hurdle in crafting effective climate resilience strategies for its clientele.Advancing the country’s sustainability journeyToday, Philippine companies are not only safeguarding their future – they are actively shaping the narrative of sustainable development within the country. As we can see from the above examples, businesses, in close cooperation with Government, are pivotal in steering the country toward a resilient, sustainable trajectory.In a rapidly evolving business landscape, further shaped by the pressing imperatives of climate dynamics, trailblazing entities can offer blueprints for action. Through innovative approaches to the intertwined risks and opportunities of climate change, companies can find new ways to gain a competitive edge in an economy increasingly defined by sustainability.  Bonar A. Laureto is a Sustainability Services Principal 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.

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