Black Swans, Grey Rhinos and Ugly Ducklings

Business leaders and experts led the discussions at the FINEX week sessions on Oct. 2-6 with the theme “Navigating Global Uncertainties Towards Sustainable Growth”. Former Bangko Sentral ng Pilipinas (BSP) Governor Say Tetangco, now SM Investments Corp. chair, was the keynote speaker. His topic was “Black Swans, Grey Rhinos and Ugly Ducklings.” Black swans are unexpected events with high impact such as the COVID-19 pandemic and the Ukraine war. Grey rhinos represent highly likely threats that are ignored, which can lead to business upsets and hurt economic growth, like climate change and technological disruptions. Lastly, ugly ducklings are hidden and overlooked opportunities that may seem unattractive but have the potential to transform and drive sustainable growth.

What are some global risks and challenges that may affect the Philippines? Governor Say named a few:

1. Higher for longer interest rates – Higher interest rates mean tighter credit conditions and higher borrowing costs, which could add pressure to debt servicing burdens, dampen aggregate demand and lead to a slowdown, lower profits, and greater unemployment. A widening interest rate differential with the US exposes the Philippines to higher capital flow reversal and currency depreciation pressures, resulting in increased volatility in financial markets.

2. Technological disruptions – While digitalization and technological innovations are beneficial, they have the potential to disrupt markets.

3. Climate change – Climate change and the transition to sustainable energy present risks that can affect the broader economy. The Nanyang Technological University and University of Glasgow estimates that ASEAN could potentially lose up to 35% of gross domestic product by 2050 if no remedial measures are taken to address climate-related risks.

How can the Philippines successfully navigate these global risks and the grey rhinos? Governor Say said the best strategy is to build resilience to preserve the business while investing for the future, as well as harnessing data and experience for better strategic decisions. How then do we build resilience?

1. Diversification – Never put all your eggs in one basket. Diversify your portfolio in terms of products and geographical location. At the national level, Governor Say said it will be good to advance trade and economic integration by aligning with the Regional Comprehensive Economic Partnership.

2. Agility in embracing technology – Respond fast in essential in times of uncertainty. Embracing technology is important in achieving modern agility. Technology can help enhance risk assessment exercises in times of heightened uncertainty. Leverage on big data applications for more comprehensive analysis. Rely on machine learning algorithms to identify market trends and patterns and enhance ability to identify potential risk factors on time and enhance productivity.

3. Resilience in collaboration – Collaboration brings diverse perspectives and also paves the way for shared capacity and resources when tackling resource-intensive challenges.

Another interesting topic during the conference was “Sustainable Cities: A Key Pillar for Nation Building.” Presenters were real estate developer Delfin Wenceslao, urban planner Paul Alcazaren, newly appointed first woman president of Ayala Land, Inc. Anna Margarita Dy and Makati Mayor Abigail Binay. Many of us now want to go to Iloilo to see the wonderful developments presented by Mr. Paul.

FINEX goes “beyond the bottom line.” So, there was a panel on “Protecting the Future, Preserving the Past: Built Heritage in the Philippines” with Ateneo Art curator Victoria Herrera, Old Manila Walks founder Ivan Dy and Galleria Duemila founder Silvana Diaz. We now appreciate old art works and their value.

There was also a discussion on “Generative Artificial Intelligence and Digitalization: Harnessing Emerging Technologies to Sustainably Increase Productivity” with SAP Philippines Management Director Rudy Abrahams, Mastercard Country Manager Simon Calasanz and Concentrix Vice-President Larah Sta. Maria.

The “Forging Alliances Towards Achieving Digital Inclusivity” panel was also informative. The panelists were Maya President Angelo Madrid, Ayala’s Managing Director for Data Science and AI Karl Chua and Google Cloud Philippines’ Ferdie Saputil. The conclusion is to welcome and utilize technology to make work easier and faster.

“Ethics in Technology” was presented by the FINEX ethics committee with Father Ben Teehankee of De la Salle, Dominic Ligot of Data Ethics PH and National Privacy Deputy Commissioner Leandro Aguirre. Ethics is ethics and it is always about “doing the right thing right all the time even when no one is looking”.

FINEX week successfully ended on Oct. 6 and FINEX executives unwound with a party. Little did we know that another black swan event was about to happen. Hamas attacked Israel the next day, with Israel immediately declaring a state of war.

The world is full of surprises and uncertainties. Let us be resilient and let us keep our faith up above. He is in control!

Flor G. Tarriela is former PNB chairman. She is lead independent director of Nickel Asia, director of LTG and FINEX, and a WomenBizPh member.  A gardener and an environmentalist, she founded Flor’s Garden in Antipolo which practices natural farming technology.