Risk management vital to company’s growth

By Cris Evert Lato, Reporter

For a company to reach its objectives, it needs to identify risks and barriers that may impede its growth.

Implementing a risk management system is one way to do that, according to Juan Carlos Robles, Punongbayan & Araullo (P&A) risk management partner.

“The key to risk management is to identify which risks are important,” Robles told Cebu Daily News during the second day of the week-long seminar at the Cebu Parklane International Hotel.

P&A, an accounting, tax and business advisory firm, gathered during the seminar 30 internal auditors, faculty members, company owners and engineers to deepen their knowledge and skills on various topics involving business risks.

These include corporate governance, enterprise risk management (ERM), fraud concepts and internal auditing.

Robles said participants come from different companies nationwide with the majority based in Cebu.

Robles said it is essential for internal auditors to “professionalize their knowledge in attaining business objectives.”

“Risk auditing is the modern way to address that. (It is) because you make sure that objectives of the company will be attained by identifying the barriers. After identifying high-risk areas, you can put in recommendations, strategies and action plans,” he said.

It will take two to three weeks for a company to undergo the process of identifying risks.

Robles said there is still no full implementation of ERM in the country except for big companies involved in the banking and power sectors.

In the Philippines, Robles cited Team Energy Corp. (formerly Mirant Philippines) with a high-level ERM implementation.

He said other companies implement ERM in “silos,” which meant that one or two departments of a company might know the risks but others do not.

Robles noted synchronization of the implementation of the ERM is crucial in attaining the objectives of the company.

“Board discussion is more focused when they know the business risk model because it’s color-coded. When it’s red, it means that you don’t have action plans for the risk area. If it’s green, you have action plans,” he said.

Robles said a concrete example of an effective ERM implementation was done by a pharmaceutical firm, which has the goal of becoming a P10-billion company in the next 10 years by acquiring smaller pharmaceutical firms and increasing sales.

Because of ERM, the company was able to identify risks such as absence of qualified people to conduct the M&A, no clear policies and procedures and unavailable targets for increasing sales.

Robles said the company later on formed a team that handles M&A and hired qualified people to reach objectives.

“They were able to acquire two to three companies in a year and they are on their way to reaching their goal of becoming a P10-billion company,” he noted.

(As published in Cebu Daily News, 7 May 2008.)