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HARI’s 10-month sales fall by 6%

HYUNDAI Asia Resources, Inc. (HARI), the official distributor of Hyundai vehicles in the Philippines, reported a six percent drop in sales in the first ten months of 2019.

In a statement, HARI said it sold 27,618 units in the January to October period compared to 29,407 sold in the same period a year ago.

In October alone, HARI saw sales rise 17% to 2,856 units from the previous month.

HARI said that it remains optimistic despite the year-to-date drop, as it expects a lift in the last two months from seasonal consumer spending, benign inflation, and lower interest rates.

“While we don’t compete in some segments of the market (e.g. pick-ups), our volumes remain strong, underpinned by the quality of our vehicles and our focus on excellent after-sales services. Our models per segment remain competitive and this bodes well for the Hyundai brand in the Philippines,” HARI President and CEO Ma. Fe Perez-Agudo said.

Year-to-date sales of light commercial vehicles (LCV) in October rose 1.5% to 12,331 units compared to the same period last year. Led by sales of the compact SUV Hyundai Kona and light truck Hyundai H-100, monthly LCV sales grew by 22.7% to 1,359 units from the previous year.

For passenger cars (PC), year-to-date sales fell to 14,560 units, which HARI attributed to consumer preferences for larger vehicles. Month-on-month, PC sales grew by 13.7% to 1,457 units due to Hyundai Reina and Hyundai Accent sales.

Sales of commercial vehicles (CV) grew 86.6% to 727 units sold in the first ten months compared to the same period last year, while month-on-month sales dropped by nearly seven percent.

While sales of commercial vehicles are mostly led by Hyundai buses such as Hyundai County, the company said that it expects higher sales after the recent rollout of its Class 2 Modern Jeepney.

“With the transport department’s support and high demand from transport cooperatives, our modern jeepneys will contribute to our growth over the medium-term. We are excited to give Filipino commuters the new King of the Road,” Ms. Agudo said.

“Combined with the acceleration of the government’s infrastructure projects, our CV business is poised to expand and provide fresh avenues of growth.” — J. P. Ibañez

Money supply growth picks up in October on RRR cuts

MONEY SUPPLY expanded at a faster pace in October as the policy easing moves by the Bangko Sentral ng Pilipinas (BSP) were finally felt in the financial market.

Domestic liquidity or M3, the broadest measure of money supply in an economy, grew 8.5% year-on-year to P12.1 trillion, a faster pace compared to the 7.7% growth logged in September, according to preliminary central bank data released on Friday.

Month-on-month, M3 inched up by 0.9%.

The central bank said credit demand mainly fueled money supply growth.

BSP data showed net claims on the central government climbed 6.5%, picking up from the six percent growth in September.

Meanwhile, domestic claims, which were mainly supported by the private sector, rose 6.7%, slower than the upward-revised 7.8% seen in September.

The BSP noted that loans for production activities remained to be buoyed by lending to key sectors such as real estate activities; financial and insurance activities; construction; electricity, gas, steam and air conditioning supply; and wholesale and retail trade, as well as repair of motor vehicles and motorcycles.

Meanwhile, net foreign assets (NFA) in peso terms picked up by 9.6% in October, a wider expansion from the 8.3% print logged in September. The BSP said the NFA position in the month was backed by foreign exchange inflows coming mainly from overseas Filipinos’ remittances, business process outsourcing receipts, and foreign portfolio investments.

NFA held by banks likewise grew by 12.2%, rebounding from its 3.2% contraction in September. This growth was attributed to the banks seeing bigger foreign assets “as a result of higher loans and investments in marketable debt securities”, according to the central bank.

Analysts attributed the pickup in liquidity growth to the BSP’s easing actions.

“The uptick in liquidity is a long time coming. With the expansionary stance of the central bank this 2019, the rise in M3 is in line with market expectations,” UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said in an emailed response.

The faster expansion rate was on the back of the series of reserve requirement ratio reductions this year, according to Rizal Commercial Banking Corp. chief economist Michael L. Ricafort.

“The faster M3 growth as of October may largely have to do with the RRRs…to infuse a total of more than P400 billion of additional peso funds into the financial system (more than P300 billion infused as of October 2019),” he said in an email.

LENDING GROWTH SLOWS
Despite the boost in liquidity, bank lending expanded at a slower pace in October.

Outstanding loans of universal and commercial banks grew by 9.3% in October, slower compared to the 10.5% growth in September. Inclusive of reverse repurchase agreements, bank lending rose 9.1% in October, also a slower pickup compared to the 10.1% seen in the previous month.

BSP data showed production loans comprised 87.2% or the bulk of banks’ total lending, expanding at a rate of 7.5% in September which is lower than the 9% growth seen in September.

Construction loans remained to see the highest expansion at 28.9%, followed by credit for real estate activities at 18.4%; finance and insurance activities at 11.6%; electricity, gas, steam and air conditioning supply at 5.2%; and wholesale and retail trade, repair of motor vehicles and motorcycles at 3%.

Lending to other sectors also picked up in October, except credit for other community, social and personal activities which plummeted 34.4%, and the professional, scientific and technical activities, which fell 28%.

Meanwhile, loans for household consumption expanded by 26.7% in October, picking up from 26.2% growth in September, thanks to the faster growth in motor vehicle, credit card, and salary-based general purpose consumption loans.

The slower loan growth may suggest that the financial system is still feeling the rate hikes imposed last year, according to Security Bank Corp. chief economist Robert Dan J. Roces.

“We are still reeling from the hikes of 2018, and loan growth will still take some time to turnaround as the financial system absorbs the cuts on lags. This absorptive capacity is churning — it is alive and well on the back of positive loan growth data,” he said in an email.

For UnionBank’s Mr. Asuncion, the credit growth lag is “expected”.

“Financial institutions and stakeholders usually takes time to adjust rates and may need some time to unwind. Although, the likelihood of lending activities rising in the next coming months is higher now compared to the previous months when liquidity in the market was low,” he explained.

Meanwhile, RCBC’s Mr. Ricafort noted that some firms opted to raise money through the capital markets which may have dented credit growth.

“Some of the biggest companies also borrowed recently through the bond/capital markets as alternative to bank loans, as part of capital market development, thereby partly resulting to the slower growth in bank loans,” he said.

Noting that players may still be in a wait-and-see attitude amid the series of cuts in policy rates and RRR, Mr. Ricafort is positive loan growth could pick up in the coming months due to the low interest rates.

The reserve requirement ratio of universal and commercial banks now stands at 15% following the effectivity of the 100-basis-point (bp) cut in RRR announced in September. Likewise, the RRR of thrift banks is now at five percent, while that for rural banks stands at three percent.

The BSP announced last month that the reserve ratio of universal, commercial and thrift banks will be slashed by another 100 bps effective December, bringing total reductions to their reserve ratios for this year to 400 bps. This cut will also apply to the reserve ratio of nonbank financial institutions with quasi-banking functions (NBQBs).

This will bring the reserve ratio of universal and commercial lenders to 14% by December, while the RRR of thrift banks will stand at four percent. On the other hand, the reserve ratio of NBQBs will be cut to 14% next month.

Meanwhile, the BSP’s Monetary Board this month kept its benchmark interest rates for the overnight reverse repurchase, overnight deposit and lending facilities at four percent, 3.5% and 4.5%, respectively.

The BSP has cut rates by a total of 75 bps this year, partially dialling back the 175 bps in hikes it fired off last year in the face of multi-year high inflation. — Luz Wendy T. Noble

PVB books higher Q3 earnings

PHILIPPINE Veterans Bank (PVB) saw “strong” net earnings in the third quarter at P505.6 million, driven by higher loan growth.

In a statement on Thursday, the bank said its net income in the period was a reversal from the P735 million net loss it logged in the third quarter last year and also from the net loss of P574 million in 2018.

Last quarter’s record already surpassed its P500-million target for 2019, translating to a 28.44% return on equity (RoE), it said.

The bank said its current RoE is considered as “one of the highest in the banking industry.”

“The robust net income results were driven mostly by the bank’s lending business from both corporate and retail loans,” it said.

The lender reported a net loan growth of 13.54% to P21.29 billion in the third quarter from the P18.75 billion it posted a year earlier.

“Now that many of these reforms are in place, the bank has directed its efforts on business development, enhancing and developing new products and services. The third quarter results show not only a significant rise in net income but the highest levels in deposits and loans ever for the bank,” PVB Chairman Roberto F. de Ocampo said in the statement.

Meanwhile, its deposits grew 11% year-on-year to P50.78 billion from P45.4 billion.

The bank also posted a 12.3% growth in assets to P57.03 billion last quarter from P50.78 billion in the third quarter last year.

Currently, its capital adequacy ratio stands at 10.63%

“This year’s unprecedented growth levels show that all the hard work and sacrifice were worth it. Our primary mission is to give value to our shareholders — the families of Filipino WWII veterans. And the best way to give value is to deliver above market RoE,” Renato A. Claravall, the bank’s president, was quoted as saying. — B.M. Laforga

Peso weakens as China warns US of action on Hong Kong bill

THE PESO depreciated anew on Friday as China threatened to impose countermeasures after the US passed a bill in support of Hong Kong.

The local unit closed at P50.81 versus the greenback on Friday, weakening by 10.5 centavos from the P50.705-a-dollar finish on Thursday, according to data from the Bankers Association of the Philippines.

Week-on-week, the peso also dropped by a centavo from its P50.80 close on Nov. 22.

The peso opened at P50.70 against the dollar. Its weakest point for the day was at P50.89, while its intraday best was at P50.69 versus the greenback.

Dollars traded grew to $1.108 billion from the $1.045 billion seen on Thursday.

Traders attributed the local unit’s weakness to the market’s worries on developments in the US-China trade conflict as well as local economic data.

“There’s this risk-off deadline involving Huawei,” a trader said in a phone call, referring to the government’s outstanding debt.

Meanwhile, another trader said woes arose from the passage of the US law supportive of Hong Kong’s autonomy.

“The peso weakened significantly amid fears of further delay in the US-China trade discussions following US President [Donald J.] Trump’s signing of the Hong Kong Democracy Act,” the trader said in an email.

Reuters cited a Wall Street Journal report that Huawei Technologies Co., Ltd. challenged a US Federal Communications Commission (FCC) decision that did not allow US rural carrier customers from utilising an $8.5 billion government fund to buy equipment from the Chinese firm.

Citing people familiar with the matter, the Wall Street Journal reported that Huawei is expected to file a suit to challenge the said FCC decision next week.

“We don’t comment on speculation,” Huawei spokesman in Shenzhen told Reuters.

Meanwhile, China has denounced the signing of the legislation that backed protesters and threaten China with possible sanctions on human rights. China’s Foreign Ministry warned of “firm counter measures” on Thursday.

The “Hong Kong Human Rights and Democracy Act” that Trump signed requires the State Department to certify at least once a year that Hong Kong retains enough autonomy to justify the favorable US trading terms that have helped it maintain its position as a world financial center. — L.W.T. Noble with Reuters

Shares slide as US-China tensions remain

By Denise A. Valdez, Reporter

LOCAL shares were down for the second straight day as investors continue to worry on the Sino-US trade talks following US President Donald Trump’s signing of a pro-Hong Kong legislation.

The 30-member Philippine Stock Exchange index (PSEi) dropped 29.70 points or 0.38% to close at 7,738.96, as the broader all shares index fell 18.11 points or 0.39% to 4,632.84.

“It turned out to be a sour end for November as the market was still on a risk-off mode to wait on how US markets perform tonight on account of Trump’s recent support for Hong Kong (which could then lead to China’s ire once again and affect the Trade Deal),” Papa Securities Corp. Sales Associate Gabriel Jose F. Perez said in an email Friday.

Mr. Trump signed two bills on Thursday to legislate Hong Kong Human Rights and Democracy Act of 2019—a move that China opposed.

“The move can potentially add strain to the US’s current trade relationship with China,” Regina Capital Development Corp. Head of Sales Luis A. Limlingan said in a mobile message.

Investors chose to stay on the sidelines on Friday to wait for how the development will impact Wall Street, which was closed on Thursday due to the Thanksgiving holiday.

Asian markets declined in reaction to the cotinued tensions between China and the US. Japan’s Nikkei 225 and Topix indices shed 0.49% and 0.51%, respectively, as Hong Kong’s Hang Seng index lost 2.03%, South Korea’s KOSPI index dropped 1.45% and China’s Shanghai SE Composite index erased 0.61%.

Back home, four sectoral indices went down on Friday: mining and oil by 155.31 points or 1.89% to 8,054.07, holding firms by 31.63 points or 0.41% to 7,630.43, financials by 29.74 points or 1.59% to 1,841.80, and industrial by 4.11 points or 0.04% to 9,781.29.

Meanwhile, property gained 17.39 points or 0.43% to 4,043.60 and services added 1.24 points or 0.08% to 1,546.48.

Friday ended with 1.45 billion issues changing hands worth P6.37 billion, an improvement from Thursday’s 668.52 million issues valued at P5.44 billion.

Declining stocks outnumbered those that gained, 125 against 63, while 48 closed unchanged.

Foreign investors remained bearish, but net buying was trimmed to P425.21 million from P744.16 million on Thursday.

“All eyes (are) on how US markets perform tonight… Dow and S&P futures are currently in the red, albeit by only a minimal 0.3%. Support for the index is at its Oct. 3 low of 7,514,” Papa Securities’ Mr. Perez said.

Insurtech is key to fintech’s evolutionary timeline

Tech categories are timelines, not maps. Every visualisation that maps out a particular tech category in Asia does so in the common cluster style. That is, it’ll list the main category on top, such as fin-tech. Then it’ll list all the various sub-categories, such as digital finance, crypto, mobile money, and so on, and include the logos of the relevant companies within each grouping.

While these infographics are an interesting starting point in discussing how a tech category is growing (or not growing!), it is a bit misrepresentative. Visually, it seems to suggest that all the categories are equal, but that is not true. For many tech fields, some sub-categories will need to come before others as a kind of precursor. There is, in short, very much a tech category life cycle just as much as there is a product life cycle.

This thesis can perhaps be most clearly seen in fin-tech. Arguably the most important category is mobile money. You need to give people a means to transact with money before they can participate in other fin-tech applications. Most people erroneously assume that mobile money is the only necessary precursor, which opens all other categories – Pandora-box style – for the taking of founders and startups.

In truth, there is another major category that comes next—or at least should—on the evolutionary timeline of fin-tech: Insurtech. After giving people a means to store money digitally, they also need to be given means to protect their finances, property, and livelihood as they go about their day-to-day. Digital can similarly allow people to obtain this insurance easily, instantly, urgently.

Insurtech as an evolutionary milestone

The significance of insurtech as the second major milestone in fintech is most clearly seen when you analyze a major player in the space. In the Philippines, one need to look no further than the recently relaunched InsureShop, which is backed by leading insurance firm Pioneer, to see just how crucial insurtech is.

Led by Pioneer Chief Executive Officer Lorenzo Chan Jr., InsureShop offers three key products, including medical insurance (MediCash), travel insurance (SafeTrip), and motorcycle insurance (RideSure). Each of these products is essential to protecting value for upwardly mobile and digitally-savvy Filipino people. Let’s take the case of MediCash for example.

In the Philippine context, medical emergencies can bankrupt people, or worse, leave them stuck with years and years of debt. Because of the tropical climate, two common issues are Dengue or Leptospirosis. Dengue is a mosquito-borne affliction that can often be fatal, while Leptospirosis is a disease transmitted by rodents, often brought on by exposure to contaminated floodwaters during excessive rains or typhoons.

In the event that a person gets either of these, MediCash disburses P10,000 in cash to help with medical bills or other expenses as the person chooses. Such protection prevents the occurrence of Dengue or Leptospirosis from not only being a life-threatening affliction, but one that ruins a person financially.

Through InsureShop, Filipinos can enroll, buy, and receive instant policy delivery for MediCash as well as SafeTrip and RideSure. The advent of InsureShop is actually not surprising given the rise of ecommerce in the Philippines led by online shopping and ride-hailing — evidence of the new Filipinos predilection for turning to digital for many of their needs. If Filipinos are already buying their clothes and gadgets online, the thesis goes, why not add insurance to the mix?

Innovative insurtech products like Pioneer’s InsureShop, in short, protect the value that the new digital economy offers Filipinos and that they store in and transact with via mobile money apps. Once the double layer of bedrock is established in mobile money and insurtech, the fintech space can move onto more advanced use cases, such as everything from alternative finance and reg-tech to robo advisories and comparison sites.

As a founder, it’s tempting to ignore the idea that there may be necessary precursors to the space you want to operate in. Many founders, after all, may think that having vision is enough and everything else can follow. But the truth is that most tech categories have a natural evolution that may not necessarily be linear, but still has dependencies and co-dependencies.

Founders would be wise to break-down their respective spaces into a timeline, not a map. What types of businesses must come before theirs in order for their own startup to succeed? If there are quite a few sub-categories that you determine should precede yours—but those are still not built or have reached maturity—it may clue you in to the fact that your company is too early. It would be smart to move further back into your industry’s evolutionary timeline toward what people need now.

————————————————————————————

Javi Medina is a chartered market technician and the current Managing Director and Chief Investment Officer at Deeptech Investment Management.

Majority of SEA Games events now open to the public

By Michael Angelo S. Murillo, Senior Reporter

Calls to make the events in the about-to-start 30th Southeast Asian Games accessible to more people did not fall on deaf ears as organizers have decided to make majority of the games available for free.

In an announcement made on Friday, a day before the formal start of the biennial regional sporting free, Philippine Southeast Asian Games Organizing Committee (PHISGOC) chairman Alan Peter Cayetano said they will give free tickets to all sporting events save for three events, namely basketball, volleyball and football.

Mr. Cayetano said free tickets could not be given to the three aforementioned events as “these were already sold out.”

The PHISGOC official went on to say that 10,000 tickets for the closing ceremony on Dec. 11 will be released for free as well.

In the lead-up to the sporting meet, which the country is hosting for the fourth time in history, Samahang Weightlifting ng Pilipinas president Monico Puentevella called on President Rodrigo Duterte and the organizers to make the games open to the public.

He said that doing so would allow more people to cheer for the Filipino athletes as they try to win for the country anew the overall championship in the SEA Games, which the Philippines last achieved in 2005, incidentally the last time the country hosted the event.

In a media briefing on Friday, PHISGOC chief operating officer Ramon Suzara said it was no less than Mr. Duterte who gave the instruction to open the games for free.

He said it will be the local government units who will be in charge of the tickets and that spectators will still go through to inspection in the venues and are expected to behave accordingly.

Mr. Suzara, however, said no refunds will be given to those who already bought tickets online but that they will try to find ways to give them “perks” for having availed of tickets.

In this year’s SEA Games, happening from Nov. 30 to Dec. 11, participants of as much as 9,000 from the 11 member nations will pit their skills in 56 sports involving 530 events.

Ten new sports are making their Games debut, namely E-sports, skateboarding, kurash, sambo, modern pentathlon, kickboxing, surfing, underwater hockey, jiu-jitsu and obstacle course.

The events will take place in four designated clusters — Clark, Subic, Metro Manila and “Other Areas,” which include Batangas, Cavite, La Union and Laguna.

SEA Games organizers say contingency plans in place in the face of incoming typhoon

By Michael Angelo S. Murillo, Senior Reporter

With the entry in the country of typhoon “Tisoy” coinciding with the early goings of the 30th Southeast Asian Games, organizers have said contingency plans are already in place to assure that the staging of the biennial regional sporting meet will have as little disruption as possible.

Tisoy, which has an international name of “Kammuyri,” is set to enter the Philippine area of responsibility on Saturday just in time for the opening ceremonies of the SEA Games at the Philippine Arena in Bocaue, Bulacan.

The typhoon is expected to hit the Bicol Region, Metro Manila, Central Luzon, Calabarzon, Mindoro, Marinduque, Romblon and Samar from Tuesday to Wednesday. Dec. 3 to 4.

Metro Manila, Central Luzon and Calabarzon are hosting a number of the 56 sports involving 530 events slated for the 2019 SEA Games.

In a media briefing on Friday, Philippine Southeast Asian Games Organizing Committee (PHISGOC) chief operating officer Ramon Suzara shared that competition managers have already put up contingency plans in preparation for the incoming typhoon.

“All competition managers for all sports have prepared contingency plans even without a typhoon. So everything is in place especially for the outdoor sports,” assured Mr. Suzara.

“We have been monitoring the typhoon and hopefully the Games would not be affected hard. But we are ready for this storm,” he added.

Among the moves being readied is the possible transfer of events indoors of outdoor events and changing the format of the events but in accordance with the guidelines of international federations of the concerned sports.

Isko Moreno, MultiSys and Bayad Center Gears Up to Make Manila a Smart City

Manila City Mayor Francisco “Isko Moreno” Domagoso seals a tripartite agreement with Multisys Technologies Corporation (MultiSys) and CIS Bayad Center, Inc. (Bayad Center) to provide payment automation for its residents.

Part of Isko Moreno’s ongoing efforts to implement the Ease Of Doing Business in the City of Manila are to expedite its processes via online portals with e-payment services such as real property taxes and business permits and soon: motorized operator’s permit, civil registry, public market, public hospitals, and disbursement of senior citizen benefits.

Through MultiSys’ Smart City and Smart Government platform including Bayad Center’s bills payment, the City of Manila will be launching projects to simplify transactions for various bills payments and other local government services.

“Using technology in governance gives ease in doing business , convenience to our constituents and will limit human discretion and naturally will eradicate corruption”, Mayor Isko Moreno explains.

In addition to this, the PLDT-backed leading software solutions company, MultiSys, will be behind the development of Go Manila! App, a one-stop mobile application to provide more means to ease the lifestyle of every Manilenos.

The CEO and founder of MultiSys, David Almirol Jr. said, “With our Smart City and Smart Government platforms, MultiSys is committed to contribute technology advancements to local government units, expedite their processes, centralize their collections, and automate their systems”. Pointing out one of many ways how the Go Manila! App can lift the burdens off of its current residents.

KPMG R.G. Manabat & Co.: A reliable partner in adapting to digitization

By Adrian Paul B. Conoza, Special Features Writer

Digital innovation has been changing a lot of processes, from how people perform daily routines to how businesses execute tasks. Just like other industries, the audit profession is following the fast pace of digitization as Sharon G. Dayoan, chairman and chief executive officer of KPMG R.G. Manabat & Co., observed.

For Ms. Dayoan, auditors have started taking advantage of the latest technological advances such as data & analytics (D&A), blockchain, artificial intelligence (AI), cognitive technologies, and robotics to expand the capacities of auditing firms and so improve the services they offer.

“For instance, the adoption of smart automation and AI in the field of accounting led to overall improvement in the accounting process which allowed accountants and audit professionals to simplify and lighten their workload by automating time-consuming tasks while ensuring accurate results,” Ms. Dayoan told BusinessWorld in an e-mail.

Audit professionals, she added, are also utilizing the capabilities of data analytics software to help with their audit processes by identifying outliers and analyzing these for audit risk factors.

With such advancements digitization has provided to make auditing faster, easier, and more reliable, KPMG has followed suit by making investments in both technology and workforce development to ensure that they have the right makeup and skills, thus equipped to provide its clients with the best services.

A very important investment the professional services firm has undertaken is the KPMG Clara, an integrated smart audit platform that brings out its Audit D&A capabilities, new technologies, client collaboration functionality, and audit workflow.

Poised to be “the beginning of a new era for audit,” Ms. Dayoan said that this new offering by KPMG provides a new and richer experience to both clients and audit professionals.

“KPMG Clara allows our people to work smarter, driving enhanced audit quality through expanded analytics capabilities,” she explained. “For clients, KPMG Clara becomes their digital connection to KPMG, providing one coherent, interconnected ecosystem. It provides a collaborative and interactive environment in which two-way and interactive communication between clients and KPMG audit teams is extremely enhanced.”

This smart audit platform, the senior officer added, gives clients greater visibility into KPMG’s audit as well as access to deeper levels of information.

Moreover, KPMG Clara is set to be placed on Microsoft Azure, a comprehensive cloud-based platform, as announced by KPMG and Microsoft. This makes the firm the first among the Big Four professional services firms to conduct external financial statement audits using Microsoft’s computing platform.

“KPMG Clara brings more automation to the audit, and reduces the burden on clients around data delivery,” Ms. Dayoan continued. “Through KPMG Clara, the judgment and professional skepticism of KPMG’s audit professionals are now further empowered by intelligent automation and innovative analytics capabilities. Along with higher audit quality, clients will receive greater and more actionable insights as the audit progresses. We are able to have more focused and targeted conversations with clients about specific issues or exceptions — deepening the value of the audit you receive.”

While shifting to digitization brings great benefits, issues and challenges may still be encountered during the process. Adapting to changes in the business process is in itself a challenge, while the threat of technological risks might catch firms off guard.

KPMG, nonetheless, does not overlook these imminent conflicts and so are prepared to assist clients. “We help our clients embrace a culture of change by helping them to better understand and manage technology, cyber and information risks,” Ms. Dayoan said. “We also help align our clients’ capabilities with their strategic and tactical objectives to give them the means to meet their current and future needs relating to governance, risk, and control over IT resources.”

As it recognizes digitization as a driving force in the transformation of businesses, KPMG is geared up to better help its clients make the most out of it.

“Our industry solutions in financial services, consumer markets, technology, media and telecommunications, among others, can help our clients achieve the optimal value from their digital transformation process,” Ms. Dayoan said.

She added, “KPMG is gearing towards innovation in the audit process by applying digital technology in our businesses and audit processes which include audit of new technologies like robots and artificial machines. Through this, we are able to keep up the quality of the audit and the requirement of clients to receive value for money.”

Ramon F. Garcia & Company, CPAs: Offering unmatched expertise and integrity

By Mark Louis F. Ferrolino, Special Features Writer

Ramon F. Garcia & Company, CPAs (RFGCO) has come a long way since its establishment in 1981. From a firm founded by Ramon F. Garcia as a solo practice, RFGCO flourished into one of the country’s most prominent accountancy and consultancy firms of today. Although it already enjoys high credibility and reputation, it continues to challenge itself to be better, providing the best results for its clients across the business community.

As a member of distinguished global accounting network Crowe Global, RFGCO holds a worldwide reputation in quality and service. It has an unmatched expertise in various areas of accounting and finance services, namely audit, tax, advisory, risk, and outsource.

“Our firm’s mission is to help and assist our clients’ business growth by applying Christian values and principles. We firmly believe that since God is an all-knowing God, the principles He laid down for the businesses to adopt will always work and will eventually result in sustainable growth. As such, we try to influence our clients by suggesting or recommending management principles that are biblically based without directly saying that such principles came from the bible,” RFGCO’s Managing Partner Ramon F. Garcia told BusinessWorld in an e-mail.

For almost four decades now, RFGCO has become instrumental to the success of many of its clients by contributing to the attainment of their business goals, maintaining the good relationship with their partners, and widening their market reach.

“In general, entities are concerned about their financial status and whether they are religiously complying with the various tax and other governmental compliances. Top management relies heavily on financial reports in their decision-making process. Thus, financial statements certified by an independent accountant becomes more credible and reliable and gives them more assurance that their basis of decision is accurate,” Mr. Garcia said.

“The higher the accuracy of the basis (facts and figures), the higher the probability that certain decisions are correct. Correct decisions result in consistent and sustainable growth,” he added, noting that this could not only avoid the high cost of non-compliance but also the penalties associated with erroneous payments as well as the costs of overpayments.

In many of its non-statutory engagements, RFGCO assists management in reviewing the results of clients’ operations and financial position. With the help of its skilled professional staff, it was able to pinpoint areas of improvements for its clients, such as what expenses can be reduced in relation to their operations and which products to be promoted given the product characteristics and contribution margin.

In most cases, RFGCO’s clients who listen to its suggestions showed tremendous improvements in their bottom line and product profitability. These clients were also able to save on unnecessary taxes and tax exposures through careful tax planning and proper review of this operations in relation to the applicable tax laws.

In terms of corporate rehabilitation, RFGCO also boasts a proven track record, wherein companies are able to turn around and be rehabilitated.

“Guided by the principle of integrity, professionalism, and excellence, we make the ordinary extraordinary in meeting clients’ expectations and in the submission of our deliverables,” Mr. Garcia said.

Meanwhile, RFGCO ensures that its professional staff remains updated in most — if not all — of the latest trends in accounting, audit, taxation, information technology, and digital economy, among others. Through various technical trainings and annual development programs, the knowledge, skills, and camaraderie of RFGCO’s staff are always being enhanced.

“In this way, we are able to share with our clients the various current developments which makes aware of those developments provided in order to develop competent and excellent professional staff and this gives them options to apply or consider these. This makes them dynamic and flexible in adjusting to the political, economic, business, and technological environment,” Mr. Garcia explained.

To further enhance the delivery of its services to its clients, RFGCO continues to fuel innovation within its operations. The company combines its industry specialization with data science, software developers, research, and marketing expertise to develop innovative technology that help clients streamline and effectively address complex processes.

“With the digital economy at hand, it is imperative that professional organization like ours be at the forefront to better deliver quality service to our clients,” Mr. Garcia said.

On top of these, RFGCO also conducts surveys among its clients to find out what needs to improve in its services. It has been actively attending to the needs of its clients not only locally but also internationally.

Japan Desk Relaunch

The firm has just relaunched its Japan Desk with a new Japanese Accounting Consultancy Firm partner, AGS Consulting Co., Ltd., to facilitate cross-border investments and deals making between Japanese and local companies.

How technological disruption is changing the field of auditing

By Bjorn Biel M. Beltran, Special Features Writer

For many businesses, technology in the digital age is the great leveler. Across all industries, disruptors from digital natives and tech-savvy entrepreneurs are changing the landscape of how business is done. Many companies have found incredible growth seizing opportunities that have come up in the commotion, and the auditing industry in the Philippines is no different.

As the Philippine development story continues to unfold, the rising tide brought in by investments has created a dynamic environment for local auditors. Sharon G. Dayoan, chairman and chief executive officer of KPMG R.G. Manabat & Co., told BusinessWorld in an e-mail that with digital innovation speeding ahead, the prospects of the entire industry looks bright.

“Technology plays a vital role in today’s audit profession. Like other countries in Asia, the auditing industry in the Philippines is constantly innovating to stay competitive and better serve the capital markets and the society,” Ms. Dayoan said.

She added, “Technology has constantly been transforming the way we do business. Any successful transformation starts with a clear strategy grounded in an understanding of emerging trends. At KPMG, we track these changes and analyze their potential impact — both to help our clients and guide our own innovation investment strategy. Among the trends that shape the industry are digital transformation, talent and work force development, customer experience, Data and Analytics (D&A), Robotics Process Automation (RPA), Artificial Intelligence (AI) and the productivity landscape, Blockchain, Fifth Generation (5G) and Quantum computing.”

The potentials of data

Technology has expanded the frontiers of what is possible. Cognitive technology, otherwise known as AI, for instance, can scan through vast stores of data and perform digital analysis of this data in a way that is humanly impossible. AI uses algorithms that enable software to absorb relevant information, reason, and come up with conclusion that is useable by humans.

Data, as they say, is the new gold, and with the proper implementation of cognitive technology and the process known as machine learning, computers can course correct and try new strategies as they encounter obstacles or changes in variables in their work.

In the field of auditing, where data is abundant, computers can expedite processes and find the best courses of action more effectively and more efficiently than any human can. This would allow auditors to use technology to conduct analyses of structured and unstructured data from non-traditional sources such as social media or the Internet in ways not possible just a few years ago.

“Auditors can then use this analysis to deliver high-quality audits that dig deeper into the data and reveal more about a company, its risks, its financial reporting controls and its operating environment,” Brian Foster, KPMG’s U.S. Emerging Audit Solutions Leader, said in a Forbes Insights/KPMG report “Audit 2025” published in 2018.

“The bottom line is that cognitive technology will empower and enable our professionals to make key judgments and deliver high-quality audits in a world of exploding data and ubiquitous information, and provide our auditors with access to richer, more detailed audit evidence and valuable insight that we can use to differentiate our service proposition,” Mr. Foster said.

In addition to streamlining and restructuring financial data, technology is also providing new ways to make informed predictions about the future. Predictive analytics involves using advanced data analysis techniques to make predictions — based on probabilities — about the future and may involve advanced technologies such as artificial intelligence and machine learning to refine those predictions.

According to the report, in the context of high-quality audit, auditors can employ digital tools to extract information from an organization’s systems, and then use predictive analytics for the purpose of identifying patterns that either align or don’t align with anticipated outcomes and trends. Such a strategy is especially useful in gaining deeper insight into a client’s business and the financial risks it takes during the course of a year.

More specifically, client data in combination with locally-gathered industry or market data can provide auditors a deeper and more robust understanding of the state of the business and any risks. For instance, external auditors working with a client can use predictive analytics to assess whether the client’s financial or other data conform to the expected norms for comparable historical data from both within the company as well as from companies in comparable circumstances. As this capability comes into wider use, auditors will have a powerful tool to grasp the accuracy of reported information and promote audit quality — with comparative data as a benchmark.

“Advances in technology and an explosion of data have changed the game. Digital disruption offers the potential to reinvent how we do our audit. With the latest innovations in audit technology, automation and data analysis have been leveraged to make better decisions, provide greater insights, and enhance audit quality through the analysis of greater quantities of data. Auditors, in turn, provide more robust audit opinions and actionable insights delivered seamlessly through an integrated platform,” Ms. Dayoan said.

Opportunities of tomorrow

For the Philippines, this presents both a challenge and an opportunity. Companies at the cutting edge of innovation can leverage on these emerging technologies to improve audit quality. Ms. Dayoan said it aims to do this by staying ahead of the curve on evolving technology, changing regulatory environment, and shaping people to become the Workforce of The Future.

For others, however, the changing landscape is a continuous struggle to catch up with leading trends to maintain relevance in a digital world.

“Accounting firms need to connect with the current theme such as big data, and drive that same elevated interest. Accounting needs to be seen as more forward-looking, futuristic and high-tech to capture the interest and imagination of young people,” Ms. Dayoan said.

She added, “The local market should embrace technology as a driver of growth and ensure that their people are equipped with the skills needed to deal with this new technological reality. Most organizations are still struggling to deploy AI at scale. But over time, AI could reshape the productivity landscape, which has been characterized by slow growth across many developed economies.”

A paradigm shift is in the process, and many businesses stand to lose everything should they fail to adapt and overcome the myriad challenges brought about by technology. At a time when the Philippines is slowly making its mark on the world stage in terms of economic development, there has never been a more critical time.

“We have entered a new era where we talk about digital and data, an era where collective thinking, technology-based function and fast-paced learning are prevalent. We need to be agile enough to keep up with the changes to increase efficiency and continue to deliver excellent service to our clients,” Ms. Dayoan said.

She added, “We see the industry embracing data science and investing in emerging technologies like D&A and AI but above all, investing in the workforce to build and enhance the professionals’ capabilities. These changes stand to reason that our audit technology and our capabilities need to continuously evolve.”

 

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