Home Blog Page 12914

China’s financial regulators competing to look tough as political pressure mounts

BEIJING — China’s financial watchdogs are pushing for harsher rules and stepping up action against miscreants, spurred on by official pressure on them to curb risk in the financial system, according to multiple sources with direct knowledge of the situation.

Officials at the central bank, as well as at the banking, insurance and securities regulators, have been stepping up their enforcement activities, which have been under increased scrutiny since late last year, the sources told Reuters.

Regulatory officials worry they may get into trouble for not acting fast enough or being tough enough on financial institutions, the sources said.

But senior industry sources say some of the new regulations, such as the central bank’s new rules restricting asset management, are unnecessarily harsh and can may hurt the development of the financial system and the economy.

President Xi Jinping has made it clear that the Communist Party must strengthen its leadership of the financial industry, which he says is key to national security.

The party is preparing a major overhaul of the country’s financial regulatory structure as it makes prevention of financial risk a top priority for the next three years. On Tuesday, China said it would merge the banking and insurance regulators and transfer some of their current roles to the central bank.

Much of the political pressure is coming from officials from the Central Commission for Discipline Inspection (CCDI) who were installed at the regulators late last year, according to the sources with knowledge of the situation.

Originally tasked with rooting out officials engaged in corrupt practices, the inspectors are now expanding the scope of their activities, the sources said.

The inspectors are now also participating in internal discussions on drafting rules and implementing policy, they said.

Financial regulatory officials are being told to submit work materials unrelated to corruption to graft busters for review, sources with three different regulators said. Some officials have been criticized for lacking “teeth”, one of the sources said.

“They’re looking at almost everything, from regulation to the dining hall,” the source said. “It’s not just corruption-related. It’s everything. Where is the boundary?”

The CCDI, central bank, and the banking, insurance and securities regulators didn’t immediately respond to requests seeking comment.

Xu Jia’ai, who in September was named head of the central bank’s disciplinary inspection unit, wrote in a report in February that collusion between “cats and rats” — referring to regulators and the financial institutions they oversee — had become a major risk in financial regulation.

The sources also said that many of the appointees had little experience in the financial sector.

“These people have no exposure or existing relations with the financial industry,” said Chen Long, China economist at Gavekal Dragonomics, speaking generally on the appointments. “That means they are more free to implement the anti-corruption mandates.”

In the past senior officials were typically drawn from relevant sectors or government bodies.

Xu established his credentials as a Zhejiang official, most recently serving as the head of the province’s Politics and Law Committee.

At the China Banking Regulatory Commission, Zhou Liang, a former official with the discipline commission without finance experience according to his official resume, was appointed vice chairman in November.

AVOID RESPONSIBILITY
At the regulators, there is now a sharper focus on issuing greater volumes of tough financial regulations, the sources with knowledge of the situation said.

“The anti-corruption campaign is binding the hands and feet” of regulators, said one source at a financial regulatory agency.

At the China Securities Regulatory Commission, which said in November that it was stepping up supervision of officials responsible for initial public offering (IPO) approvals, the approval rate of IPO applications had markedly declined, two people working closely with the regulator said, citing applications of similar quality.

“They are trying not to approve IPO applications in order to avoid responsibility,” said one of the people, referring to the officials at the regulator. “But China will lose many good companies to Hong Kong and New York capital markets if they continue to work this way.”

REGULATION, NOT DEVELOPMENT
The anti-corruption drive has been particularly intense at the China Insurance Regulatory Commission, whose former chairman, Xiang Junbo, last April became the highest-ranking finance industry official to be investigated for corruption.

Since then, the commission has launched an internal movement calling for “cleaning up Xiang Junbo’s residual poisonous influence”.

Internally, Xiang was accused of loosening supervision for “financial crocodiles” with whom he was involved and held up as a cautionary tale for officials, two sources with knowledge of the situation said.

Staff were cautioned to avoid any personal interactions with the institutions they supervise, the sources said.

For all the agencies, the paramount task is now regulation, rather than development of their industries, said Chen Xingdong, chief China economist at BNP Paribas.

That assessment was echoed by a senior official at one of the financial regulatory bodies. “My job now is to regulate, not to develop,” the official said.

In the past, a primary focus of regulators was attracting businesses in order to seek rapid expansion of the industries they oversaw, according to sources within the agencies.

The new focus on tough regulation has led to some rare pushbacks by the financial industry. Last year, 10 banks objected to the People’s Bank of China’s move to tighten rules for the asset management sector, saying it could cause a rush of redemptions among other risks.

Analysts say they expect the tough regulatory stance to continue this year.

“2018 is the clean-up year,” said Chen at BNP Paribas. “The real challenge is to balance the clean-up and moving forward.” — Reuters

Koshu: Japan’s proudest varietal wine

YAMANASHI, JAPAN — Admittedly, I never thought much of Japanese wines. I had on quite a few occasions, either it be during my travels to Japan or in Japanese restaurants within Asia, tasted Japanese wines, mostly the ones made from omnipresent varietals of Chardonnay, Merlot, and Cabernet Sauvignon. Unfortunately though, none of the previous wines I tried managed to stick out as really good, and thus I have no single recollection of a brand I thoroughly enjoyed.

I do remember that the wines I tried were all decent, but closer to the New Zealand wine profile, as opposed to European counterparts. The Japanese Merlot in particular was like a juicy Marlborough NZ version. Then came my opportunity to visit Chateau Mercian, arguably Japan’s most awarded winery, and also the most high profile among the growing number of Japanese wineries at present.

HISTORY OF JAPANESE WINE CULTURE
Japan has traces of vineyards as early as the first century, found in Katsunuma, Yamanashi prefecture. But it was the arrival of Jesuit missionaries from Portugal in the 16th century that made wine consumption a more regular tradition. Saint Francis Xavier (a Spanish Catholic missionary, and cofounder of the Society of Jesus) led a Portuguese mission to Asia including Japan, and was the first known guest to bring wines as gifts to the feudal lords of Kyushu, the Daimyos. The Daimyos were the most powerful feudal rulers, controlling Japan from the 10th to the middle of the 19th century.

The wines consumed earlier in Japan were reds that the locals called Chintashu — a portmanteau created from the terms “tinto” (meaning red in Portuguese) and “shu” (Japanese for liquor). As expected, during the early, more primitive stages, wines were mostly imported and on the sweeter side, like ports, or port-like. Because of the unfamiliar taste of astringency and acidity, most imported bulk wines had some sort of sweeteners like honey and sugar added to them to make the finished wines more palatable to the local taste.

Over time, things started to change and this applied too to the wine consumption habits of a more well-traveled populace as well as better adoption of Western culture. The 1970s-1980s were the true start of Japan’s higher quality wine making and vineyard management, and the sprouting of new wineries. And 1970 was also the year Chateau Mercian as a brand was first marketed. Yamanashi remains the prefecture with the largest vineyard holdings in Japan, accounting for over 40% of wine production. Japan is the second largest wine consumer in Asia, second only to Mainland China.

Koshu 2
The horizontal tasting of different Chateau Mercian Koshu wines.

CHATEAU MERCIAN
Yamanashi is just around 120 kilometers, or less than two hours, southwest of Tokyo, and encompasses the northern part of the famous Mount Fuji. The Chateau Mercian winery is located in Koshu-shi, and has a very nice visitor center — the visitor center is very similar to the Australian cellar door, complete with food menu and exclusive wines not found in other retail shops.

The winery actually started in 1877 under the Dainihon Yamanashi Wine Co. The company sent two highly motivated individuals, Masanari Takano, one of the company’s shareholders, and Ryuken Tsuchiya, the eldest son of one of the founders, Katsuemon Tsuchiya, to France to learn wine making techniques and methods. The two gentlemen would bring back their learned skills and techniques and share them with the other employees. But the company encountered disaster when the cuttings and seedlings they brought back from France were infested and would not grow on Japanese soil.

There was also the problem of selling wines in general, as wines were not popular in Japan during those days. The company dissolved in 1886, but Kotaro Miyazaki, one of Dainihon’s shareholders, decided to continue the business and took over its equipment. Miyazaki then teamed up with Ryuken Tsuchiya and his younger brother Yasuyuki to form Kaisan Winery. Miyazaki registered the illustration of “Daikokuten” as a trademark and “Daikoko,” the God of Wealth and Commerce, and one of the Seven Lucky Gods, as a brand for Kaisan Winery in 1891. Daikoku would become the first breakthrough wine brand in Japan.

In 1949, the Mercian brand, a more marketing savvy name was created. The name coined from the words “merci” — French for “thank you” — and “an,” meaning a “person.” “Chateau” was added to the name in 1970, and in 2006, Chateau Mercian became a part of the huge Kirin Group conglomerate. In 2010, the Mercian Katsunuma Winery was rebuilt and became Chateau Mercian which is now a modern state-of-the-art winery.

THE KOSHU EVOLUTION
Koshu is a grape varietal native to Japan, and found primarily in the Yamanashi prefecture. It is a pink-skinned grape varietal most likely imported from the Caucasus through the Silk Road around a thousand years ago. Koshu is actually the former name for Yamanashi, but is now known as the wine varietal.

Koshu 3
Shigueo Masugi, Chateau Mercian Visitor Center senior wine advisor, explains the koshu grape.

The Koshu wines piqued my interest over other varietals made by Chateau Mercian primarily because it is truly and authentically Japanese. I tried Koshu wine many years back when chef Gene Gonzales invited me to taste some of the Japanese wines brought in by visiting Japanese businessmen at Café Ysabel restaurant. I remember the wines to be quite crisp, light and flinty, with nice citrusy aromatics. But that was sadly the last time I encountered Koshu till this present day visit to Chateau Mercian.

According to Chateau Mercian, the winery took a chance on the wine making process by experimenting on the sur lie process in 1983. Sur lie which in French means “on the lees,” is the process of allowing a finished wine to continue to sit on the lees in order to extract more flavors. Lees refer to deposits of dead yeast or residual yeast after fermentation, and is a popular method in Loire, especially for Muscadet Sevre-et-Maine AOC. This Mercian way created a Koshu wine that is crisper, dry, and much fuller in flavors. Chateau Mercian shared the sur lie method on koshu with other wineries in Katsunuma to spearhead the improved quality of Japan’s only true varietal wine.

When I was in Chateau Mercian, I opted to do a horizontal tasting of the four different Koshu wines in order to better understand this less well-known varietal.

Here are my customary tasting notes:

• Chateau Mercian Koshu Kiiroka 2016 — “this is a stainless steel-aged version; very fresh, crisp, slightly herbaceous and leafy, longan fruit, with mineral notes on a dry finish; a very easy and subtle flavored wine”;

• Chateau Mercian Tanzawa Single Vineyard Koshu 2016 — “this is a wine exclusively available in the visitor center only, and extremely limited with [a] tiny [run of] 545 bottles made; the wine is aged half in stainless steel and half in oak cask; vivacious, more acidity, tangy, with nice creamy backbone, butter, grapefruit-citrus, slate, white pepper and a dry minerally finish”;

• Chateau Mercian Barrel Fermented Koshu 2016 — “this barrel-fermented version shows more power, the nose is more savory, meatier, rich but acid, quite crisp on the palate, very clean, and [with a] nice slightly spicy finish”;

• Chateau Mercian Gris de Gris (skin-fermented) 2016 — “Gris de Gris means ‘grey from grey’ in French, but in this case, it means there is skin contact during fermentation with the pinkish-skinned Koshu grape; the skin fermentation stayed on for two weeks to extract not only some color, but also more flavors; the color is more pale salmon rather than rosé, but the nose has more character, and is the most aromatic among the four Koshu wines; cantaloupe, lemon-citrus, more green in terms of presence of bitterness, but round out quite well with [a] dry fresh cut grass finish.”

These Koshu wines are best enjoyed with sushi and sashimi, and it makes a lot of sense! The concept is no different than regional wines in Europe pairing well with their regional cuisines. I hope to see more Koshu wines coming to our side of Asia as we attempt to further demystify this exotic grape from Japan.

 

The author has been a member of the Federation Internationale des Journalists et Ecrivains du Vin et des Spiritueux or FIJEV since 2010. For comments, inquiries, wine event coverage, and other wine-related concerns, e-mail the author at protegeinc@yahoo.com. He is also on Twitter at twitter.com/sherwinlao.

2017 State infrastructure spending biggest in more than 30 years

How PSEi member stocks performed — March 14, 2018

Here’s a quick glance at how PSEi stocks fared on Wednesday, March 14, 2018.

Xiaomi targets big comeback in PHL

CHINESE PHONE manufacturer Xiaomi is optimistic it will regain traction in the Philippine market as it taps local online distribution channels and plans to open flagship stores outside Metro Manila.

“Actually, our main goal for the Philippines this time is to come back. We want to make a comeback so we didn’t really set how much we want to do. We want to, firstly, make the confidence of our movement first because we know we have been away for some time,” Regional Director John Chen told reporters on the sidelines of Xiaomi’s launch of new mobile phones on Monday, March 12. He added that they do not have any specific goals for sales so far.

Xiaomi stopped bring its products to the Philippines in 2015 in order to focus its resources on the Indian market.

“The goal for us is to actually make confidence in the market step by step so we want to make our channel partners, our online partners, our new friends, know that we are good and we are bringing a lot of product,” he added.

Xiaomi has partnered with online shopping companies Shopee and Lazada to market its products. The company is also opening its second flagship store, the Mi Store, in SM Megamall on March 17. It also plans to open three more Mi Stores, one in Metro Manila and two outside the city.

The company will be capitalizing on its status as the fourth largest smartphone vendor, according to the International Data Corporation, and its recent overtaking of Samsung as the number one vendor in India for the fourth quarter of 2017.

Its main smartphone offerings include the Redmi 5A, launched Monday and priced at P4,390 and the Redmi 5 Plus priced at P9,990, to be launched this week.

The entry-level Redmi 5A has a 13-megapixel rear camera, a Qualcomm Snapdragon 425 processor and a 3,000 mAh battery, while the Redmi 5 Plus features 4 Gb RAM and 64 Gb internal storage.

Mr. Chen emphasized the importance of the Philippine market in its expansion strategy for Southeast Asia.

“I think it’s one of the… equally important as other major markets in the region for me,” he said.

Mr. Chen added the company plans to put up more Mi Stores depending on its performance this year.

“We are not afraid of the competition. I think our only competitor is ourselves. We are going to outpace ourselves last year.” — Patrizia Paola C. Marcelo

DBM sees Senate passing national ID bill next week

THE GOVERNMENT expects the national ID to hurdle the Senate next week ahead of its adjournment.

Department of Budget and Management (DBM) Secretary Benjamin E. Diokno said on Wednesday that he was optimistic about the approval after the bill entered the plenary deliberation stage.

“Senate deliberation will continue this week, I’m hopeful that the bill will be passed into law as early as next week,” Mr. Diokno said during a press conference yesterday.

Senator Panfilo M. Lacson sponsored Senate Bill No. 1738 on Monday, saying that the measure would enhance the delivery of government services as it eliminates other forms of identification when transacting business.

Mr. Lacson has said that his target for the bill’s approval is within the first quarter.

In a social media post yesterday, Mr. Lacson said: “The days of multiple ID’s in our wallets are numbered. It’s only a matter of time for Filipinos to have a valid proof of identity as a means to simplify public and private transactions.”

A counterpart bill in the House of Representatives was approved in September.

Mr. Diokno said that the ID will have more advanced security features and includes biometric data. A total of P2 billion has been allotted for the development of the system by a third-party contractor together with the Department of Information and Communications Technology but will be rolled out by the Philippine Statistics Authority.

Mr. Diokno said that he is “confident” that the system will be up and running within the year.

“Some people do not get services because they do not have any ID. This is long overdue many countries have done this… we need this,” he said.

The Legislative-Executive Development Advisory Council identified the measure as “urgent” in August.

The national ID system is a key component of the plan to make unconditional cash transfers to low-income families affected by higher prices from the tax reform program, with reliable ID helping ensure the benefits will go only to those entitled to them.

The P24.5 billion for the cash transfers has been released by DBM to Land Bank of the Philippines for distribution, Mr. Diokno said it will no longer wait for the enactment of the national ID before the funds are mobilized. — Elijah Joseph C. Tubayan

Energy department declares Cebu’s Alegria field commercially viable

THE Department of Energy (DoE) issued a declaration of commercial viability on Wednesday for the Alegria oil and gas field in southern Cebu, with production estimated to last until 2037.

In a statement, the DoE said the area’s commercial viability for the fossil fuel was declared by Energy Secretary Alfonso G. Cusi during the ceremonial signing of the Joint Declaration of Commerciality (JDC) between the DoE and a service contractor.

The DoE identified the contractor as China International Mining Petroleum Co. Ltd. (CIMP). The signing was held on Wednesday at the Grand Hyatt Manila in Taguig City.

The DoE described CIMP as holder of Petroleum Service Contract (SC) No. 49, which covers the Alegria oil field.

Signing the declaration along with Mr. Cusi was CIMP Chairman Lam Nam, while DoE Undersecretary Donato D. Marcos and CIMP Chief Executive Officer Eric Lie served as witnesses, the DoE said.

“Exploration and drilling activities on the oil field by the service contractor started in 2009,” it said.

By 2016, the DoE said it had jointly established with CIMP that the oil field contained commercial quantities of natural gas “upon its discovery of oil accumulation in the adjacent hydrocarbon traps within the Alegria underground area.”

It said the two entities “discovered an estimated 27.93 million barrels of oil (MMBO) with a possible production recovery of 3.35 MMBO or a conservative estimate of 12% of total oil in place/reserves.”

“For natural gas, about 9.42 billion cubic feet (bcf) reserves were found, with the recoverable resource estimated at 6.6 bcf or about 70% of total natural gas in place/reserves,” the DoE said.

“Based on the development plan crafted after the initial testing, the natural gas and oil production of the field may last until 2037,” it added.

The DoE said the joint declaration outlined the roles and responsibilities of CIMP, particularly its compliance with all conditions stated in the approved plan of development dated Dec. 19, 2017. — Victor V. Saulon

Agriculture association pushes back against hybrid rice ‘certification’

AN agricultural industry association has questioned the Department of Agriculture’s plan to draft a list of its preferred hybrid rice seed varieties, saying that farmers need to make their own choices or develop their own seed instead of being steered to products of certain suppliers.

In a text message to BusinessWorld, Samahang Industriya ng Agrikultura (SINAG) noted that “usually, these ‘certified seeds’ come from one company that is being promoted by the DA,” the SINAG said, without identifying the company.

“What is needed is a favorable policy space that will ultimately provide rice farmers the opportunity and incentives to breed their own seeds or freely choose commercial seeds that will suit best the conditions of their farms.”

Agriculture Secretary Emmanuel F. Piñol in a social media post on Tuesday asked President Rodrigo R. Duterte to exempt hybrid rice seed from government procurement rules that award contracts to the lowest bidder.

Mr. Piñol claims that Mr. Duterte has agreed, and instructed the department to list its preferred hybrid seed varieties.

The DA considers hybrid seed, which is more expensive but also higher-yielding, to be key towards achieving rice self-sufficiency. SINAG, however, said certain varieties of proven non-hybrid seeds “are well-suited” for Philippine planting conditions. — Anna Gabriela A. Mogato

Allowances for gov’t workers to rise by P1,000

GOVERNMENT workers will receive an additional P1,000 in allowances this year after the Budget department approves guidelines for its release.

“We increased the uniform allowance of all national government employees from P5,000 to P6,000 per year. P1.12 billion has been allocated under the miscellaneous personnel fund,” Budget Secretary Benjamin E. Diokno said during a news conference yesterday.

Mr. Diokno was referring to Budget Circular No. 1-2018 dated March 8, 2018.

It covers civilian government personnel occupying regular, contractual, or casual positions; appointive or elective; rendering services on full-time or part-time basis.

However it excludes military and uniformed personnel of the Armed Forces of the Philippines and Philippine National Police, Philippine Public Safety College, Bureau of Fire Protection, and Bureau of Jail Management and Penology.

It also excluded foreign service personnel of the Department of Foreign Affairs, barangay officials and employees paid monthly honoraria; and those hired without employer-employee relationships and funded from non-personnel services appropriations.

The allowance is “granted to defray expenses for uniforms or distinctive clothing which are the required appropriate attire for employees in the regular performance of their work,” according to the circular. — Elijah Joseph C. Tubayan

Toyota Motors parts suppliers registered for CARS program

THREE auto parts makers and a manufacturing services provider have successfully registered for the Comprehensive Automotive Resurgence Strategy (CARS) program as suppliers for the new Toyota Vios small car.

In a statement Wednesday, Toyota Motor Philippines Corp. (TMP) said the suppliers were Manly Plastics, Inc. (Manly), Technol Eight Philippines Corp. (TEP), Toyota Boshoku Philippines Corp. (TBPC), and Valerie Products Manufacturing, Inc. (Valerie).

The parts makers — Manly, Valerie and TEP — will make body shell and large plastic parts for the new Vios and are considered major participants in TMP’s localized outsourcing program.

Manly and Valerie signed a technical assistance agreement with Toyoda Gosei Co. Ltd. and Ogihara Co. Ltd in October 2016 to supply parts for the new Vios.

Toyota requires some suppliers to sign technical assistance agreements (TAA) with the automaker’s suppliers in Thailand, a major supply hub for the region, to ensure quality and adherence to technical standards.

Meanwhile, TEP acquired a 1,000-ton capacity press to allow it to stamp larger parts.

TBPC specializes in process improvements to increase productivity.

CARS provides incentives for the volume manufacture of small cars, thereby spurring investment and employment.

In the statement, TMP said the parts projects were worth P1.3 billion. It did not specify whether this total represented its investment in localization.

The contracts were issued to upgrade the automaker’s capacity to deal with large expected volumes under CARS.

TMP also approved 26 local direct suppliers for the new Vios.

The company expects to start local production of the new Vios in mid-2018.

The high volume of production under CARS will give suppliers greater operational stability, Toyota said.

“The benefit of CARS to suppliers is long term. The newly acquired production capability and manpower skills will become their advantage even after the CARS program,” TMP President Satoru Suzuki said. — Janina C. Lim

ERC orders TransCo to respond to consumer petition over 2016 FiT

THE Energy Regulatory Commission (ERC) ordered state-run National Transmission Corp. (TransCo) to respond to a petition filed by a consumer group seeking to render null and void the regulator’s decision that called for the collection of a higher feed-in-tariff allowance of P0.1830 per kilowatt-hour for 2016.

In its order dated Feb. 27, 2018 the ERC gave TransCo up to 10 days upon receipt of the order to respond to the petition filed by Victorio Mario A. Dimagiba, president of consumer advocacy group Laban Konsyumer, Inc. (LKI).

The ERC order was in response to Mr. Dimagiba’s petition that was filed on Oct. 27, 2017. It followed the decision by the regulator to grant a feed-in-tariff allowance (FiT-All) that is higher than the P0.1025 per kilowatt-hour (kWh) asked for by TransCo.

Calculated annually, the FiT-All is a uniform charge applied to the kilowatt-hours billed to consumers who are supplied with electricity through the country’s distribution or transmission network.

The uniform charge is paid to developers of renewable energy power plants. The FiT-All mechanism was established under the Renewable Energy Act of 2008, which aims to jump-start the development of renewable energy sources such as wind, run-of-river hydroelectric-power, solar and biomass plants.

The collected amount is managed by TransCo before the fund is paid to the developers. The FiT-All was added in the monthly bills of electricity users starting in 2016.

TransCo applied for a FiT-All for 2016 of P0.1025/kWh and set the case for submission of jurisdictional compliance on March 8, 2016 for the Luzon consumers and other dates for the rest of the country.

On Feb. 16, 2016 while TransCo’s application was pending, the ERC issued a provisional authority for a FiT-All for 2016 in the amount of P0.1240/kWh, which took effect immediately.

But on May 9, 2017, the commission granted an additional amount of P0.0590/kWh from the current P0.1240/kWh, bringing the total FiT-All for 2016 to P0.1830/kWh.

Mr. Dimagiba said in his petition that there was no amendment and no republication of the TransCo application on the FiT-All variance approved by the commission in May 2017 and the rate applied for by TransCo.

He cited a Sept. 5, 2017 order by the ERC on TransCo’s FiT-All application that laid down doctrines on jurisdiction and due process. He then raised the issue of whether or not there would be legal implications in allowing the proposed amendments.

In his petition, Mr. Dimagiba asked the ERC to render the May 9, 2017 decision null and void for lack of jurisdiction.

Mr. Dimagiba said he had received a copy of the ERC order to TransCo on March 12, 2018. He said it was “good the petition is now moving.”

“LKI will exhaust all legal remedies to ensure a successful petition,” he said.

Melvin A. Matibag, TransCo president and chief executive officer, earlier said that he expected to end 2017 with P8 billion in outstanding payables. The amount includes the interest incurred because of the delay in meeting payment obligations.

He said the P0.1830/kWh approved by ERC for 2016 was insufficient to address TransCo’s total payables. TransCo has a pending application for P0.2291 for 2017 and has yet to receive even a provisional authority to collect the higher amount.

Mr. Matibag said for 2018, TransCo requires a FiT-All of P0.29 to P0.30/kWh.

As of Nov. 6, 2017, TransCo has managed to pay P27.26 billion or 79.44% of its obligations. Its unpaid balance as of the period was P7.06 billion, excluding interest payment of P288.92 million. — Victor V. Saulon

Unraveling the secrets of ERM

If we liken businesses to machines, risk management would probably be those cogs scattered throughout that are so tiny one cannot help but overlook them during maintenance. And yet, when even one of them breaks, the machine would continue to run but at the cost of rapid deterioration. Eventually, when it stops running, only then do we realize how critical these small bits of metal are to the machine.

Risk management is an interesting conundrum. The challenge of managing risk is like clearing a maze with no end in sight — as soon as you think that you’ve found the correct path, you find yourself back at the multiple, twisting crossroads where you started. Thus, the cycle continues all over again. Such is the landscape in which businesses currently find themselves.

There have been great improvements though. Where traditional risk management only focuses on managing risks with performance, the new COSO ERM framework takes this concept even further at the onset of strategy formulation. This helps in ensuring a smoother trajectory towards the goals to maximize business profits and to enhance corporate performance.

APPLYING ERM TO FAMILY AND ONESELF
What comes to mind when you hear the term “risk?” The regular person would most probably think of these words: dangers, crises, and disasters. Corporate boards and managers, on the other hand, would probably think of strategy, operations, technology, legal, finance, regulatory compliance — anything that may cause business profits to drop or anything that could prevent the achievement of goals that were originally set by management.

ERM concepts do not only apply to a workplace setting. Look at this (rather oversimplified) overview of child rearing in a typical household:

• Governance and Culture. Parents can be likened to the Board, the ones at the top who set the tone, which would shape the child’s behavior.

• Strategy and Objectives. At this stage, the parents have an idea of the objectives that the child needs to become successful. They chart a winning strategy in order for this to happen, debating the pros and cons of each decision they make, such as which school to send their child to and the amount of resources that they need.

• Performance. Parents would carefully consider the possible risks that could affect the results and determine the appropriate actions to take. For example, if the child’s progress is lacking, the parents may arrange for additional tuition.

• Review and Revision. Regularly, parents would monitor the child’s learning and development (such as through games, tests and report cards). This would allow them to determine if additional changes to the “game plan” are required, as well as appropriate corrections.

• Information, Communication, and Reporting. Parents would continuously interact with other stakeholders involved in the child’s development such as relatives and teachers to guide the child’s growth.

Risk management is something that is actually ingrained in the human psyche. We all have a corresponding “fight-or-flight reaction” to any perceived risk to our well-being. Our instincts immediately warn us as soon as we perceive something wrong with our environment. We then decide if we should stay and fight, or if we need to run. This is ERM in its purest, basest form.

BUILDING RESILIENT ORGANIZATIONS THROUGH ERM
Businesses require more intricate and comprehensive tactics to ensure the proper achievement of goals and objectives. Philippine businesses need to ensure that threats to business strategy and performance are being handled in an efficiently and effectively.

As a risk management professional, an observation is that the powers and responsibility for risk management are often than not too concentrated and reliant on the directives issued out by the Risk Oversight Committee (ROC) and by extension, the Risk Management Department (RMD). This is something that organizations should act upon with great speed — while it is true that (as watchdogs) the ROC and the RMD should take the lead in matters involving risk, effective risk management is a collective responsibility of all the units of the organization. It entails active collaboration between the organization’s front line units (i.e. operations) and the other lines of defense (i.e. risk, internal audit, and compliance). The actual units themselves have a more comprehensive view of the risks that affect organizational performance.

With the new COSO ERM framework, organizations have the opportunity to think about how they can ready themselves to confront the threats to the viability of their business strategies. At PwC, we have identified five specific trends that are reshaping the world: rapid urbanization; climate change and resource scarcity; shifts in global economic power; demographic and social change; and technological breakthroughs. All these require consideration from strategic formulation down to execution. For businesses to flourish, management should continuously assess such risks and have the ability to deploy the appropriate strategies and tools to minimize their adverse effects to operations.

LIGHTING THE SPARK
Now that we’ve gained a clearer understanding of Enterprise Risk Management and how it relates to businesses (and one’s personal life), where is the way forward? How do we leverage ERM to make businesses grow? Having the right policies, procedures, and tools have a large impact on the effectiveness of risk management processes; the starting point, really, is to incorporate them into day-to-day operations by weaving it into the very heart of our conversations at the office.

Management should consider potential risks to the organization at all steps of the decision making process. This would facilitate the development of strategies that result in the continued resilience of the organization. Otherwise, it might find itself overtaken by competitors who able to navigate in trying times.

All of us need to do the right thing. Everyone must be willing to bring up issues to be considered to the table, no matter how small, especially if it would have an impact on business.

The views or opinions expressed in this article are solely those of the author and do not necessarily represent those of PricewaterhouseCoopers Consulting Services Philippines Co. Ltd. The content is for general information purposes only, and should not be used as a substitute for specific advice.

 

Rochelle C. Dichaves is a senior associate with the Risk Consulting practice of PricewaterhouseCoopers Consulting Services Philippines Co. Ltd., a Philippine member firm of the PwC network.

+63 (2) 845-2728 local 2121

rochelle.dichaves@ph.pwc.com

ADVERTISEMENT
ADVERTISEMENT