Suits the C-Suite

26 June 2023

Janet A. Paraiso

How embedded finance elevates the customer experience

The global market continually evolves as customers look for ways to better integrate financial services into their daily lives. Consumers now prefer a holistic customer journey rather than siloed transactions. As such, banks and other financial institutions must identify opportunities in this developing ecosystem to stay competitive and drive long-term growth.On a micro-scale, individuals can locally use e-wallets and online banking apps to send and receive money, pay bills, and perform cashless transactions on their mobile phones. These integrated experiences have evolved past digital financial services, bringing us closer to the next economic revolution.NOVEL FINANCIAL EXPERIENCESNon-financial organizations have started recognizing the value of offering seamless financial services to meet the needs of “digital citizens.” These businesses are now capitalizing on customer data and analytics to boost brand loyalty, generate new growth, and refine the customer experience. In this new age of technology-driven finance, services are most effective when delivered conveniently and frictionlessly.Changing and developing customer expectations are driving this new era of integrated finance. E-commerce platforms, online marketplaces, and retailers are starting to embed financial products and services into their end-to-end customer journeys.Fundamentally, embedded finance involves a non-financial services company integrating financial products or services into its value chain to bolster its customer experience.According to an EY market survey, with respondents from 21 technology providers across the Americas, EMEIA, and APAC, 94% of global financial technology leaders said that addressing customers’ needs in real time is a significant feature of financial products. As such, there is a burgeoning interest for financial and non-financial institutions to collaborate and identify opportunities for mutual growth. Additionally, EY financial research predicts the valuation of global embedded finance to grow from $264 billion in 2021 to $606 billion in 2025.THE RISE OF EMBEDDED OFFERINGSBanking-as-a-service (BaaS) providers use modern application program interfaces (API) to provide regulated banking solutions to non-financial institutions. These platforms and related technologies make it easier for financial technologies (Fintechs) to work with brands. The advancement of cloud computing and the omnipresence of mobile devices enables considerable connectivity between brands and consumers.Moreover, other integrated value propositions are on the rise. For example, a local e-commerce platform allows buyers and merchants to transact within its mobile app through its e-wallet feature. This service eliminates the need for a separate, traditional bank account. Another example is what started as a ridesharing app, but which now has transitioned to payments, food delivery, e-wallets, and more. Furthermore, the EY market survey shows that over 70% of respondents think that non-financial institutions will offer more financial products and services in the future.For a non-financial services company, having customer transactional data can help the organization create bespoke offerings for its consumers. Online marketplaces, retailers, and software companies, among others, are expected to play a crucial role in the future of the finance sector. Hence, organizations must rethink their positioning, strategic vision, and value propositions to capitalize on this nascent market opportunity.THE VALUE OF PAYMENTSEmbedded finance is manifold, but payments are the most significant in terms of revenue. According to EY research, the value of embedded-channel payments will grow to $6.5 trillion by 2025 from $2.5 trillion in 2021. Non-financial businesses make use of payments as the first touchpoint of customer transactions. With various offerings like discounts, gifts, and pre-orders, payments can help an organization create new experiences and increase customer retention. Furthermore, brands can integrate other services like insurance into this transactional flow the further it evolves.Likewise, consumers worldwide have increasingly adopted the use of digital wallets. This development has revolutionized the payment process for customers and merchants. According to an EY report, The Rise of Paytech — seven forces shaping the future of payments, mobile commerce comprised 52% of e-commerce spending, surpassing that of desktop users. Mobile wallets also held a 49% share in worldwide e-commerce payments in 2021. Finally, according to Juniper Research, an analyst house specializing in digital technology market research, the number of digital wallet users globally may exceed 5.2 billion by 2026, up from 3.4 billion in 2022.THE ROLE OF FINANCIAL SERVICES PROVIDERSEmbedded finance is a disruption that forces traditional financial institutions like banks to embrace this development. It is crucial for banks to adapt, as non-financial institutions have shown that they can now occupy the traditional role of banks. Brands that integrate finance into their customers’ end-to-end journeys create a convenient and robust user experience, which can cement their place in the global market.Once organizations clearly grasp their capabilities, leaders can devise strategies to incorporate embedded finance in the following ways:1. Customer- or product-centered approach This is a traditional model where banks can extend their services to others while innovating their core offerings. This approach means financial institutions are agile and introduce new products that will retain their customer base as market conditions evolve.2. Enabler approachThis approach centers on banks extending their products and services via a platform business model. Additionally, they must set up a digital set of core offerings while embedding services into other third-party platforms. By doing so, banks must understand which products and services could synergize with third-party platforms. They also need to consider various partnership models based on their existing capabilities.3. Builder approachThis technology-heavy approach involves the creation of platforms that house internal and external products. This method relies on agility and functionality as the model continuously adapts according to third-party functionalities. The bank must consider what offerings they can build in-house and which ones they must outsource. 4. Owner orchestrator approachIn this scenario, the bank owns the platform and customer distribution channels while also delivering its products. As such, it must invest in the right technology to bolster customer interactions. This method requires a scalable operating model that continuously improve the functionalities. The bank needs to measure the platform’s success and identify ways to increase brand recognition and retain customers.The conundrum that banks face is that consumers are opting for embedded channels to tap financial services. Financial institutions must find ways to innovate their products and services, lest they fall behind. As the digital age progresses, banks and other institutions should seize the opportunity to differentiate themselves from their competitors. Ultimately, innovation will drive the advancement of financial services toward integrated customer experiences. The discrepancy between what brands offer and what consumers want creates an opportunity for organizations to develop a new strategic vision to drive long-term growth. Banks and other organizations can explore new options, reimagine offerings, and embrace non-traditional revenue channels as they pivot to a financially embedded world. 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.Janet A. Paraiso is an assurance partner and the FSO assurance leader of SGV & Co.

19 June 2023

Benjamin N. Villacorte

How sustainable supply chains enable business transformation

Supply chains underscore sustainability and serve as the core of an organization’s ESG-related goals and objectives. With this in mind, supply chain leaders are taking the necessary measures to safeguard resources while identifying new opportunities to drive results. EY teams conducted a global supply chain survey, the EY Supply Chain Sustainability 2022 Report, which polled respondents from countries like Argentina, Canada, and the US for insights from the retail, technology, and agriculture sectors. The findings indicate that several executives have long-term goals for sustainable supply chains, but only some have the acumen, programs, and technology to assess their progress. Some challenges included costs and a need for a strong business case to justify expenditures. According to the US Environmental Protection Agency, more than 90% of an organization’s greenhouse gas emissions and around 50% to 70% of its operating costs are attributed to supply chains. As such, executives can clearly realize significant sustainability-related benefits to greening their supply chains in the long term. The study discovered that eight in 10 supply chain leaders are gearing their initiatives toward more sustainable operations. They are increasing efforts toward decarbonization, proper use of natural resources, ethical sourcing, and fair trade. They are also trying to increase innovation, lessen risk, and realize a greater return on investment for ESG-related initiatives. In the Philippines, many manufacturers, retailers, and local governments have taken steps to reduce plastic use in favor of more environmentally friendly materials. For example, several cities have implemented ordinances banning the distribution and/or use of single-use plastics for onsite dining. Several cities have also banned the distribution of plastic bags in their establishments. With the Philippines counting as a significant contributor to the plastic problem, accounting for 750 thousand metric tons of plastic waste entering the ocean in 2010, the Philippine Alliance for Recycling and Materials Sustainability (PARMS) and its member companies have committed to the Zero Waste to Nature, Ambisyon 2030 (ZWTN 2030) initiative. The initiative aims to divert waste from landfills by recycling materials and resources, supported by strategies and a roadmap with specific implementation timelines and targets to ensure that none of the industrial or post-consumer packaging waste generated by PARMS members ends up in nature by 2030. In addition, with the government’s passage of Republic Act No. 11898, also known as the Extended Producer Responsibility (EPR) Act of 2022, obliged enterprises established their own EPR programs for the EPR registration deadline in February. With the Act now being implemented, there is greater anticipation that the country will see a significant increase in its overall recycling rate. While the EPR Act initially covers plastic packaging, the coverage will gradually expand to encompass other materials as well. This article will delve deeper into the most salient insights from the report with the aim of supporting executives in achieving their sustainability-related goals. LACK OF TRANSPARENCY AND ROI-BACKED SUSTAINABILITY EFFORTSThe demand for supply chain-related visibility has increased with the burgeoning expectations of employees, regulators, and stakeholders. Consumers are becoming more mindful of ESG-related matters, such as sustainable sourcing, organizational health, and work conditions. The report showed that supply chain visibility was a top priority that year for executives, compared to it being a second priority for previous years. In addition, there is a crucial need to assess risks and plan for disruptions and crises. However, only 37% of respondents reported end-to-end supply chain visibility. Collaboration programs, data analytics, and digital tools can help businesses set KPIs and establish overall governance. Organization-wide visibility is a comprehensive initiative, and companies can use it to assess program effectiveness, track resources, and understand labor conditions. Management can also capitalize on technology to identify and home in on operational efficiencies. Notably, the report revealed that 33% of organizations lack a business case for sustainable supply chains, whereas almost half of the respondents reported that their companies have difficulties in measuring sustainability-related returns. Consequently, lacking a solid business case could lead to a shortage of financial support for long-term efforts. FOCUS ON END-TO-END SUPPLY CHAIN TRANSFORMATIONAs much as 61% of businesses reported that cost savings and efficiency were primary motivators for undergoing supply chain sustainability initiatives. Even so, financial gain was not the only benefit. According to Andrew Winston from a Harvard Business Review Whiteboard Session, organizations should prioritize four elements to concretize return on investment for supply chain sustainability: 1. Cost reduction. Improve operational efficiency, lessen material waste, and minimize carbon footprint. 2. Revenue growth. Assess how sustainable supply chains influence market share, profitability, and stock price. 3. Supply chain risk management. Create long-term sourcing strategies and manage compliance and regulatory risks. 4. Intangibles. Delve into sustainability’s relationship with brand reputation, customer loyalty, and talent retention. Moreover, 55% of supply chain executives expect improved operational risk management in the next three years, whereas 31% already reported more efficiency and productivity. Regarding long-term returns, 54% of respondents said they expect an increase in share price or other benchmarks of shareholder value. TAILOR-FIT SUSTAINABILITY-RELATED INITIATIVESExecutives must determine how sustainable supply chains fit into their business strategies. Businesses can structure their efforts by identifying how supply chains enable their goals. Deploying technological capabilities to improve visibility can boost supplier and stakeholder engagement. Organizations can broaden their RoI metrics to include intangible impacts and sustainability results. Given the ever-changing nature of the global market, companies need to go beyond standard business-case drivers such as customer loyalty, market share, and revenue. Enterprises should adopt an end-to-end approach, focusing on cross-functional collaboration, planning, and distribution to identify new opportunities. C-LEVEL CONSIDERATIONSAround 10% of respondents stood out in terms of progress in sustainability-related areas, and their organizations are realizing considerate benefits. One thing they have in common is their considerable focus on transparency. More than half (57%) of this group have public-facing sustainability goals. In terms of material gain, almost half of these trailblazing leaders have already reported a better employee experience. Compared with other respondents, these executives are reaping financial gains despite focusing less on cost-saving measures. At least 25% have reported increased revenue from their supply chain sustainability initiatives, while 43% expect an increased share price in the next three years. Lastly, the data show they are more likely to use sustainable supply chains to protect their corporate brand. Supply chain sustainability has become increasingly important as global market expectations evolve. Organizations are starting to identify financial and nonfinancial opportunities of ESG-related efforts, and executives who know which KPIs to prioritize are already reaping the benefits. 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. Benjamin N. Villacorte is a partner from the Climate Change and Sustainability Services team of SGV & Co.

12 June 2023

Armand N. Cajayon, Jr.

The role of micro transformations in organizational growth

The global market and economy continually grapple with various disruptions and crises, and it has become imperative for chief information officers (CIOs) to maintain day-to-day operations with a reduced margin of error. It is incumbent on CEOs to balance technological investment with budget constraints while executives continually face the pressure of showing their clients and stakeholders the value of their operational strategy.The burgeoning demand for investment value underscores the importance of micro transformations in businesses. Micro transformations are incremental yet substantive initiatives that target an organization’s key performance indicators (KPIs) based on their overall business strategies. Compared to traditional projects, micro transformations can help identify bottlenecks and strengths of pre-existing processes. CIOs can use this agile methodology to generate value for their companies.Organizations can effect sustainable change across their people, processes, and technologies by focusing on gradual changes rather than larger-scale and time-consuming efforts. Micro transformations can help businesses adapt to and address disruptions while targeting their most valuable KPIs.Launching a new feature such as an automated customer service chatbot to address customer-specific pain points and adopting the cloud to streamline internal processes are examples of micro transformations. Another example of a micro-transformation project is the implementation of an online deposit account opening solution. In a remote world, financial institutions benefit from a completely digital, user-friendly and seamless customer experience. We see this demonstrated in some digital banks that allow the opening of deposit accounts with only a mobile phone. The ability to open a deposit account at any time and place provides immediate customer value.It should be noted, however, that micro transformations should also be guided by an overall transformation strategy to ensure that all micro transformation initiatives are cohesive. The small victories resulting from smaller, bite-sized technology upgrades can create instant value for organizations while paving the way for more robust digital initiatives, projects, and solutions later on.ADDRESSING DIGITAL TRANSFORMATION FATIGUEDigital transformation can be a cumbersome and intimidating process that may appear promising at the start but fail to deliver results. On the other hand, micro transformations can target benchmarks that would be most impacted by a new offering or service, reducing the time it would take for businesses to realize gains. Organizations can further develop operational efficiencies, risk mitigation, and resource optimization by clearly delineating KPIs.For example, an up-and-coming startup envisions a new strategy after having difficulties with launching its first product offering. This strategy involves interfacing with potential clients and investors while bolstering the former with recent market research. Getting fresh perspectives can help management focus on and refine critical areas most relevant to their strategic priorities. Considering the customers’ needs is vital in formulating a sustainable business plan, which organizations can do via smaller-scale initiatives.If one were to dissect a micro transformation, one could say that it is underpinned by more than just the solution and execution of the work. It also goes beyond automation and changes because it entails continuous improvement and deep process design efforts. This process incentivizes organizations to think big while creating an agile, scalable plan to materialize gains. By returning to the drawing board, companies can identify market opportunities and streamline their day-to-day operations, even if it means upending pre-existing processes. Micro transformations involve adapting to change with a data-substantiated, systematic approach coherent with the organization’s business strategy.REDUCE COMPLEXITY, ADD CONNECTIVITYTraditionally, an organization focuses on initiatives involving collaboration platforms, feedback mechanisms, and workflow plans. While these could yield positive results, siloed efforts often require considerable micromanagement, which could introduce more variables to an already complex system.Micro transformations take a more systematic approach by focusing on project-centered priorities. Data is fed to the appropriate teams, ensuring that the same workflow plan governs everyone. Knowledge is provided to the digital system, which continuously evolves with each project stage. This consolidated approach gives organizations a level of connectivity that would have been a challenge had they abided by standard and traditional practices. Micro transformations assist businesses with streamlining their day-to-day operations to adapt and respond to different risks, which could boost client and customer confidence.As companies pivot into the digital space, micro transformations allow them to capitalize on value-driven core capabilities and identify market opportunities without immense commitments. This streamlined process allows management to deconstruct silos and test the waters with less risk than traditional, larger-scale transformations. In this case, end-to-end digital transformation may be able to help businesses materialize value faster with minimal disruptions to day-to-day operations.ELEMENTS OF MICRO TRANSFORMATIONS1. Processing of data and identification of KPIsIdentifying and articulating KPIs are vital to micro transformations. Organizations can strengthen their overall strategy using analytics-driven data by focusing on metrics that directly impact the business.2. Optimization of KPIsOnce the organization has identified its KPIs, management can identify opportunities and pain points of the company. Consequently, they can refine their product offerings and address underlying areas of improvement.3. Engagement of clients and stakeholdersCommunicating with stakeholders at different points of the project is essential for the success of micro transformations. Organizations should align initiatives and engage interest to foster investor confidence.4. Identification of appropriate technologiesTechnology underpins successful micro transformations, and the former is requisite for implementing changes on an organization-wide scale. By leveraging suitable technologies, businesses can engineer KPI-specific solutions and implement agile application frameworks for various strategic initiatives.GETTING STARTED WITH MICRO TRANSFORMATIONSMicro transformations are holistic approaches that create business value based on their strategy-related benchmarks. This manifold process allows companies to enhance their operating models based on insights-driven data. Management must select projects carefully, delineate the appropriate KPIs, and focus on customer experiences and needs to boost confidence.While micro transformations can yield immediate gains, instant gratification is not the end goal. Ultimately, it is a systematic approach that can help organizations position themselves in the global market and pave their way toward bigger digital transformation agendas. 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.Armand N. Cajayon, Jr. is a technology consulting principal of SGV & Co.

05 June 2023

Maria Kathrina S. Macaisa-Peña

Rethinking value: The evolution of consumer spending (Third Part)

Third of three partsAfter learning to live with less during the height of the pandemic, many consumers have shifted to pursuing simpler, less consumerist values, according to the EY Future Consumer Index. The study surveyed over 21,000 consumers in 27 countries to determine how consumers see changes in their values and how they look at life. With consumers less willing to spend, businesses have the opportunity to rethink the concept of growth and how to evaluate it.In the previous parts of this article, we discussed the drivers that could reshape consumption patterns, the significant changes in those patterns that are predicted to occur over the next few years, the factors affecting drivers of growth, and their implications for consumer companies.In this last part, we discuss how redefining success will reshape business as we know it and how companies can further understand changing consumer expectations.HOW REDEFINING SUCCESS WILL RESHAPE BUSINESSConsumer companies will need to examine their strategies, business models, and operational structures for them to adapt to this shifting consumer climate and make sure they are relevant to the evolving definitions of value. While not all potential changes will occur suddenly, the current trends already show significant changes in how consumer companies will define and assess success.The Future Consumer Index identified the following drivers that can reshape the existing measures of success:Peer-to-peer models. Peer-to-peer activities are expanding quickly thanks to community platforms, online marketplaces, social selling, and agile payment systems. This makes it possible for customers to independently sell, buy, trade, exchange, and gift goods and services. While this is not a new concept, the sudden growth of backyard businesses during the pandemic, as we have seen in our Philippine market, has given rise to a new generation of microentrepreneurs.Pricing at ‘true cost’. The desire for “true prices” that take into account social, environmental, and health concerns is growing despite the fact that algorithms can already optimize prices in real time for commercial impact. Product pricing may become more individualized to user profiles as data quality and analytics capabilities continue to advance.Well-being as status. As consumers promote lifestyles that emphasize well-being instead of wealth, exercise, sports apparel, healthier meals, and wellness getaways serve as status symbols.Co-creation with consumers. Through social influencers and crowdsourcing, interactive media has given rise to a wave of user-generated content. According to the Digital 2023 Global Overview Report, a social media study produced in partnership with social media agencies Meltwater and We Are Social, Philippine social media users account for as much as 72.5% of the population. Less restrictive intellectual property laws, 3D printing, and open-source tools may also potentially make it easier for customers to collaborate with brands to co-design, manufacture, market, and share the value of goods and services.Enhanced leadership through AI. The delivery of optimized insights that support operational and strategic direction will come more frequently via AI and automation. When business leaders outsource certain judgments and make more decisions based on facts and data, this could ultimately redefine functional positions within boardrooms.UNDERSTANDING CHANGING CONSUMER EXPECTATIONSCompanies will need to adapt to a world where growth and wealth are no longer the exclusive measures for development and success. Businesses will have the ability to control what lies ahead for them by recognizing what factors can potentially influence consumer expectations and behavior through the following points of action:Developing fresh value pools. While some existing value pools will provide revenue, others will make additional contributions that will help to create a more comprehensive understanding of how “good” is defined. Having strong financial balance sheets alone will not help a business succeed in the market, especially if they come at the expense of other factors, such as environmental, social, and governance (ESG) considerations. A company’s success cannot be determined solely by how many or how much of a product it can sell, but also by the services it can provide, the impact it can make, and the values or communities it can support.Innovating ways to meet consumer needs. Through scaling AI, releasing new manufacturing techniques, and unlocking efficient operating constructs, technology will allow consumer companies to deliver personalization at a lower cost and with less resource use. By enabling customers to participate in value creation through peer-to-peer selling and brand collaboration, service-based models that span several categories and industries will become more prevalent in order to meet consumer expectations. A new corporate mission that satisfies expectations for wellbeing by evaluating the true costs and benefits beyond those measured in financial currency will be foundational for this development.Reviewing impact and contribution. Retailers can offer more value in terms of the insights and data they share back to brands, their contributions to employee wellbeing, and their position in the community on top of the revenue generated by their stores. The success of consumer goods companies may also depend just as much on their capacity to address systemic environmental problems or enhance consumer health as it does on their capacity to persuade customers to buy their goods.REDEFINING SUCCESS TO BUILD LONG-TERM VALUEOf all the factors discussed, long-term value remains the most important. As social and environmental key performance indicators join financial metrics as drivers of long-term value, intangible assets are likewise becoming more significant in driving value. New definitions of success will challenge the prioritization of growth as stakeholder knowledge and influence expands through increased connectivity and transparency.Growth and profitability are currently viewed as indicators of how well consumer companies are able to meet the demands of the market. However, given rapidly and dramatically changing consumer behavior and priorities, companies will need to reimagine new strategies to build long-term value and sustainably deliver the products and experiences that consumers, both today and in the near future, truly want. 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.Maria Kathrina S. Macaisa-Peña is a business consulting partner and the consumer products and retail sector leader of SGV & Co. RELATED STORIES:First of three parts (22-May-2023) and Second of three parts (29-May-2023)

29 May 2023

Maria Kathrina S. Macaisa-Peña

Rethinking value: The evolution of consumer spending (Second Part)

Second of three partsPeople are buying less and/or buying better in various ways, a trend that is creating new consumption patterns. While consumption is still crucial for economic growth, companies will need to adapt as customers increasingly prefer experiences and digital goods over tangible items. To remain competitive, companies will need to know what is causing those changes, how they will affect their goods and services, and what future success will look like as redefined by evolving consumer needs.With consumer spending such a large source of economic growth, the consumer is truly king. While it has become widely accepted that consumption drives growth, two years of lockdowns have left a lasting impression on consumer preferences. According to the EY Future Consumer Index, which surveys over 21,000 consumers in 27 countries, many consumers have developed simpler, less consumerist values as a result of learning to live with less during the height of the pandemic. Whether by preference or circumstance, we’ve seen the Filipino consumer become more selective in where and how they spend their money. With consumers demonstrating a decreasing appetite for spending, businesses are faced with the opportunity to redefine the concept of growth and how to measure it.In the first part of this article, we discussed the drivers that could reshape consumption patterns and the significant changes in said patterns that are predicted to occur over the next few years. In this second part, we discuss the factors affecting drivers of growth and their implications for consumer companies.DRIVERS AFFECTING PERCEPTIONS OF GROWTHTraditionally, businesses are evaluated by how much they can increase their revenue and profit margins, while entire economies are measured by how much they can grow their GDP. This makes changes in consumer values and spending habits crucial to their success. The measurements used to gauge development and growth will inevitably change as the foundations of consumption change as well.Growth defines progress; strong GDP growth or increases in revenue both indicate that things are moving in the right direction, and when they are declining, they raise red flags. However, the importance of growth is being questioned, with increasing pressure to switch national development indicators from financial measurements to a “well-being economy,” which measures success by the well-being of the environment as well as consumers.Wealth and well-being have long been correlated with each another, and focusing on well-being instead of assuming that wealth itself delivers well-being creates a significant change in how economies develop. This is being increasingly reflected in the development of business strategies. Environmental, social, and governance (ESG) concerns are further influencing investment choices, and ESG goals are being reported more often alongside financial ones.The EY Future Consumer Index identified the following drivers that could reshape existing perceptions of growth and progress.Alternative business models. As resources become scarcer, investments are being driven to find alternatives. This will open up new opportunities, reducing related costs and delivering a new wave of goods and services as a result of rising technologies, data proliferation, alternate food sources, and renewable energy.Immersive virtual economies. As consumers spend more time and money online, alternative digital economies are emerging and becoming larger, more numerous, and more complex. This will open up new opportunities for the creation of value-utilizing digital assets or currencies that are transferable between the real world and the virtual one.Well-being economy. Alternative metrics that produce better social and environmental results are beginning to replace the emphasis on using financial growth and wealth to measure progress and development. There is also the previously mentioned increasing pressure to replace metrics like GDP with ones that instead focus on enhancing the well-being of the environment and the general populace.Social evaluation. Algorithms that monitor factors such as social conduct, consumer spending patterns, media consumption, and credit history can produce holistic and comprehensive ratings that reflect the social value of individuals and organizations. As these scores become more widely used, they may be used to determine who has access to financial, travel, and healthcare privileges.Converging public and private services. The gap between businesses and governments is narrowing as corporations use resources and infrastructure for functions previously performed by the public sector, such as taking back and recycling waste, providing healthcare or education, or using social media for emergency communications. Local fashion corporations in particular have employed ongoing recycling initiatives, incentivizing their customers to adopt more circular lifestyles.IMPLICATIONS FOR CONSUMER COMPANIESThe previously discussed factors show that simply measuring financial growth may not be sufficient anymore when it comes to measuring overall progress. For example, value creation will shift away from physical economies and toward virtual economies due to the scarcity of certain resources and the growing availability of others. Non-financial goals will take precedence over hard currency, pushing back the impact on time, people, and the environment.The well-being of our planet and its inhabitants will be combined with financial security and economic growth on national agendas. The demographic dividend that has sustained economic advancement for centuries will be undermined by declining population growth, while technology may result in shorter workweeks and the need for new welfare programs.In the last part of this article, we discuss how redefining success will reshape business as we know it and how companies can further understand changing consumer expectations. 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.Maria Kathrina S. Macaisa-Peña is a business consulting partner and the consumer products and retail sector leader of SGV & Co.

22 May 2023

Maria Kathrina S. Macaisa-Peña

Rethinking value: The evolution of consumer spending (First Part)

First of three partsConsumer spending serves as the cornerstone of the world economy and society, and both businesses and governments depend on it. It currently accounts for more than half (60%) of the world’s GDP, according to the Global Economy, an online database that compiles over 500 indicators for more than 200 countries since 1960. In the Philippines, private consumption accounted for 75.4% of nominal GDP in December 2022.When consumers spend, the economy grows; when they do not, the economy shrinks — showing us how the consumer is truly king. Even during a recession, consumers always manage to find a way to spend their way back to growth, with methods employed for recovery nearly always centering on getting consumers to spend more money by lowering debt payments and raising wages.Two years of lockdowns in particular have left a lasting impression on consumer preferences. As much as 54% of consumers have noticed changes in their values and outlook on life, according to the EY Future Consumer Index, which surveys over 21,000 consumers in 27 countries. Many consumers have developed simpler, less consumerist values as a result of learning to live with less. An increasing number of reselling, renting, and repair services made possible by technological platforms and new business models also enable consumers to restrict their consumption without affecting their lives.The pursuit of economic growth is also receiving more criticism, with questions raised about the potential social and environmental consequences of economic expansion. Consumption is under pressure due to current macroeconomic instability, rising interest rates and continuously higher than average inflation rates. This in turn is reducing the appetite for consumers to spend their way out of a crisis, possibly redefining the concept of growth and how to measure it.CHANGING CONSUMER BEHAVIORFor many years, encouraging people to consume more has been the source of growth. The introduction of new products, seasonal fashion, bigger portions, and an abundance of options have previously increased consumer spending. However, with increasing signs of consumption fatigue, brands must reevaluate their value proposition to motivate consumers to consume better instead of consuming more.At the same time, consumption is not going anywhere; people still need to eat and drink, although they may purchase food and drink in various ways. Clothing and other necessities will still be in demand, though perhaps in less quantity. Even though consumer aspirations may be less centered on tangible objects, they will still have goals that depend on products and services.The Future Consumer Index identified five drivers that could reshape consumption patterns:Household evolution. With the increasing number of single-person and single-parent homes, household sizes are decreasing. According to a study funded by the World Health Organization and conducted by the Department of Health (DoH) and the University of the Philippines-National Institutes of Health, the number of solo parents in the Philippines is currently estimated at 14 million to 15 million. Longer life expectancies, alling fertility rates, and children staying at home longer also contribute to evolving household compositions, creating new consumption patterns in the types and volumes of products purchased.Experiences over products. Spending on material things will reach a saturation point as consumption rises, lowering the value of tangible commodities. Instead, consumers will start to spend their discretionary income on activities that enrich their lifestyles through experiences.Extended product lifecycles. Companies and customers are under increasing pressure to improve and repair items instead of replacing them. The frequency of new product introductions will decline as the concept of “planned obsolescence” gives way to the “right to repair,” and repair or enhancement services will create new revenue streams.Digital goods and services. With more time spent online, consumers find less need to own or use physical goods and services. While many essential needs will continue to be met physically, the growth of digital goods and services is expanding consumer spending and opening up new possibilities for innovation and value creation.Impact transparency. Consumer awareness of the broader effects of the goods and services they use — on both people and the planet — will only continue to increase. More readily available product information will affect the decisions they make.THE FUTURE OF CONSUMPTION PATTERNSSignificant changes in consumption patterns are predicted to occur over the next few years, according to learnings from the EY Future Consumer Index.Consumption of physical goods as a percentage of total consumption will drop. Less tangible consumables are seeing an increase in consumer preference. In particular, the total amount of physical products will decline as a result of consumers choosing experiences, digital products, and longer product life cycles.Asset-light lifestyles will change basket and product sizes. In a future world when being frugal is commended, less will be more. Everything will be available for rent or subscription, and fluctuating household sizes will determine how much people buy. Bulk purchasing will decline as the number of one-person homes rises, while the practice of purchasing better quality items instead of more and renting the remainder will increase as consumers reevaluate whether they really need certain products.Simplicity and transparency will enable consumer choices. Consumers will be able to cut through complexity with the help of artificial intelligence (AI), enabling purchase decisions to be defined by seamless convenience as much as price. However, consumers will also make decisions that consider the impact of those decisions on their values. They might not give as much thought to daily essentials as long as the items meet expectations in terms of price and use, but consumers will prefer to invest their time and money in the goods and services they genuinely value.In the second part of this article, we discuss the factors affecting drivers of growth and their implications for consumer companies. 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.Maria Kathrina S. Macaisa-Peña is a business consulting partner and the consumer products and retail sector leader of SGV & Co.

15 May 2023

Randall C. Antonio

ChatGPT: A versatile AI model (Second Part)

Second of two partsWhen ChatGPT 3.5 was released last year, it made global headlines for its ability to perform tasks such as analyzing professional contracts and complex spreadsheets. ChatGPT is a rapidly evolving text-based artificial intelligence (AI) that facilitates “human” interactions via its natural language responses. Despite its nascency, ChatGPT has already solidified its presence in various industries. Its myriad of functions (e.g., content creation, data analysis, and code generation) can help organizations enhance their products and services, streamline work processes, and refine customer service.However, many are also deeply concerned about its use in business, education and various other sectors. In the first part of this article, we discussed the science behind Generative Pre-Trained Transformer (GPT), hot topics regarding its human aspect, its response biases, and potential business applications. In this second part, we discuss the practical ways ChatGPT can be used in business and the potential risks it presents.PRACTICAL BUSINESS USE CASESWith the ability of AI to automate several tasks, businesses can reduce their labor costs while simultaneously enhancing workflows. ChatGPT’s flexibility can support and possibly even enhance various corporate functions such as customer service, data analytics, sales and marketing, and finance.Customer service. Given its text-based nature, ChatGPT can leverage its ability to customize responses based on user prompts to facilitate a seamless user experience. The program’s versatility means that it can be incorporated into different platforms such as chatbots, e-mail, and SMS. ChatGPT can provide round-the-clock support, potentially becoming instrumental in the banking, healthcare and information technology (IT) industries. Small- and medium-sized enterprises (SMEs) can capitalize on AI by setting up a chatbot that can interface with customers without needing human moderation. Since the AI will continue to evolve through repeated customer interactions, the company can make use of the data for continuous improvement.Data analysis. ChatGPT has a wealth of information to draw on, potentially making it an asset for tasks such as market research, research and development, and financial forecasts. Businesses will be able to analyze data more efficiently given its comprehensive set of information. A practical example would be ChatGPT’s capacity to break down complex code and generate bug fixes.Sales and marketing. Sales and marketing are corporate functions that require a more personalized approach, and ChatGPT can address this by utilizing its natural language model to create bespoke solutions. Apart from generating SEO-friendly keywords to outlining drafts, ChatGPT can also produce personalized e-mails, blogs and video ideas.BUSINESS RISKSDespite ChatGPT’s potential for streamlining operations, it can pose risks for organizations. Given the nature of this AI and how it can evolve (i.e., it analyzes large data sets on the internet before generating a response based on the user prompt), security, accuracy and fairness are paramount concerns.A potential pitfall for the AI lies in its primary competency — that it can facilitate more “human-like” interactions since humans are prone to error and subject to different biases. Its very strength can prove to be its weakness, since the conveniences it affords can also facilitate the spread of disinformation, ethical issues and copyright disputes.Data accuracy. OpenAI, the company behind the program, acknowledged that the software produced erroneous and/or biased content. One of the program’s limitations is that its learning model was programmed in 2021, which means that it has little-to-no knowledge of developments since then. It is also worth mentioning that not all online information is accurate, proving to be a substantial constraint for ChatGPT. People have even claimed that the AI can “hallucinate” because it has populated user queries with false information, such as listing down incorrect credentials for public individuals.Cybersecurity and data privacy. Its online nature makes ChatGPT vulnerable to cybersecurity attacks that make it a potential risk to businesses. The program can endanger one’s privacy because it can sift through a vast range of data accessible online. Businesses will have to deliberate whether the technology’s benefits outweigh its potential security risks. They must also be vigilant when it comes to the security of both themselves as well as their clients.Bias. In the first part of the article, we discussed how ChatGPT has a category of answers that consists of subjective responses. This inherent bias may deter corporations from assimilating it into their established work systems. There was a case wherein ChatGPT was asked which airline passengers could pose a risk, and it asserted that individuals who traveled to North Korea, Afghanistan, Iraq and Syria were the more prominent dangers. The learning model is continuously evolving, but it still needs some form of arbitration to avoid ethics and bias-related issues.Ethics. In academia, there have been longstanding, divergent opinions when it comes to technological advancements, ranging from the archaic decision of whether smartphones should be allowed in class, to more current concerns, such as the ethics of using AI to accomplish assignments and/or examinations. The jury is still out as institutions have varied responses, with some universities mandating the return of in-person exams to safeguard against cheating, whereas others have started to delineate AI-specific guidelines. Plagiarism, however, remains a principal concern. The convenience of AI may exacerbate issues when it comes to the originality of work, whether in academia or corporations.Intellectual property and copyright. In light of ongoing discussions that ChatGPT can replace, or at the very least, assist with certain types of work, it is vital to understand the legal repercussions. With copyright protection, the US Copyright Office will not register work that was generated by an AI. In accordance with US law, AI-generated output will either be a claimless work available in the public domain or considered a derivative work of the tools that the AI was developed upon. This raises the question as to who the true owner is — the creators of ChatGPT or the user for whom the output was generated.AI IS HERE TO STAYAs one of many developing AIs, ChatGPT offers advantages and risks for personal users and organizations. It is also apparent that human intervention is necessary to truly leverage its benefits and mitigate its intrinsic shortcomings.With the current technological climate though, it seems that businesses will no longer be able to turn a blind eye to the program. Similarly, OpenAI is not the only company making headlines when it comes to artificial intelligence as other companies are racing to develop their own versions. One thing is clear — AI is here to stay.Technology is at the forefront of business change and learning how to leverage it is critical. ChatGPT has jolted the corporate landscape, presenting both challenges and opportunities for organizations. For companies considering the use of AI, it is vital to evaluate its role in their respective ecosystems. Ultimately, the biggest question is whether hypothetical returns will be enough to mitigate the potential risks. 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.Randall C. Antonio is a technology consulting partner of SGV & Co.

08 May 2023

Randall C. Antonio

ChatGPT: A versatile AI model (First Part)

First of two partsIn November, ChatGPT 3.5 was released — and took the world by storm. ChatGPT touted its ability to create essays, write computer code, pass board exams, create business plans, and many other tasks such as, but not limited to, analyzing professional contracts and complex spreadsheets.The ChatGPT 3.5 architecture follows ChatGPT 3, which was launched in 2020 and is now being used by many large organizations such as Microsoft Corp., Google LLC, and Amazon.com, Inc. for chatbots, virtual assistants and other AI-powered applications.ChatGPT, or the Chat-Generative Pre-Trained Transformer algorithm, was developed by OpenAI. OpenAI is an artificial intelligence (AI) research laboratory based in the US established in late 2015. It aims to promote and develop friendly AI, running on the fifth most powerful supercomputer in the world.Close to six months after the launch of ChatGPT 3.5, OpenAI also launched ChatGPT 4. It promises to be even more powerful and versatile than its predecessor, improving on the weaknesses and limitations of ChatGPT 3 (which uses a relatively small database to train on). ChatGPT 4 uses a much larger 50 terabytes of high-quality training data through a combination of automatic and manual curation methods. This allows ChatGPT 4 to deliver better conversational AI applications, understand context, and generate more natural-sounding text. It is powerful enough to detect and respond to changes in tone and sentiment, and unlike ChatGPT 3, can also make images.THE SCIENCE BEHIND GPTGenerative Pre-Trained Transformer (GPT) is a type of large language model (LLM) neural network that can perform various and complex natural language processing tasks. It is a type of a deep learning algorithm that uses a transformer network (a sequence to sequence translator architecture used for language models and computer vision), specifically developed to train from large quantities of unlabeled text using unsupervised learning, analyzing patterns in the data set to generate human-like text in response to input.LLMs need access to large datasets of text called training data. Such data come from a variety of sources including books, articles, websites, academic papers, social media posts, blogs, news articles, and other online and offline text sources — without any explicit supervision or guidance on what to learn, except to automatically discover patterns and relationships in the data and use them. ChatGPT uses this data to generate more natural-sounding text.THE HUMAN ASPECTWhile there are many positive opportunities presented by ChatGPT, ongoing debates in the tech community center on the threats posed by the larger AI. ChatGPT is indeed revolutionary, but it also gave us a taste of the real risks and dangers.Some of these hot topics relating to the human aspect include social manipulation, job losses, social surveillance, gender and race biases, socio-economic inequality, weakening ethics and goodwill, financial crises, and a dangerous arms race of AI-powered weaponry.RESPONSE BIASESChatGPT responses can be categorized into those that are mathematically or scientifically accurate, i.e., the answer to 1 + 1, or that water is liquid at room temperature. The other category consists of subjective responses, i.e., whether red is a better color than maroon, or whether certain politicians are performing better than their predecessors.It is worth noting that there have been concerns about the potential biases in the training data sets used for language models like ChatGPT. Biases in the data can lead to biased outputs, which could have negative consequences in real-world applications. ChatGPT, just like humans, can still provide subjective, inaccurate, or wrong answers that are biased. When these biases cross ethical boundaries because of the quality and manual curation of the training data, this means that such biases can sometimes cause more societal harm than good.BUSINESS APPLICATIONSRest assured, ChatGPT (and AI) will be here to stay, continuing to evolve and advance at lightspeed. It will continue to highlight that the world we live in will be significantly different as early as next year. Many businesses are scrambling to understand both the implications and opportunities provided by ChatGPT to their organizations.ChatGPT as applied in business could, in a lot of ways, improve the bottom line, enhance efficiency, and transform customer experience while reducing costs. Some use case examples for ChatGPT are chatbots, content creation, code development, fraud and abnormality detection, language translation, voice assistants, and hyper-personalization for recommendation engines. There are also potentially vast opportunities, along with accompanying risks, in sectors such as education, creative services, professional services, content creation, and many others.Many more technically adept companies are already finding amazing use cases of ChatGPT and AI that end up disrupting traditional businesses.TRANSFORMING THE FUTURE THROUGH AIThere is no doubt that ChatGPT is still in its infancy stage, which simply means that there is much more to expect. Our lives will change, and the rapid rate of this change will be like no other compared to all human history. Just like electricity and water, ChatGPT is also expected to become a mainstream utility. It will be much faster, cheaper, more accurate, and eventually, some even say it will be sentient. It will become a necessary and unavoidable part of our daily lives.According to a report from Opus Research, 35% of consumers would like to see more enterprises incorporate AI tools like chatbots, whereas 48% of them are indifferent as to whether an AI or a human were to assist them. While not the majority, a considerable percentage of people are seeing the benefits of AI. As this technology only continues to get better, many jobs and traditional businesses will need to transform or be at risk of being displaced. Industries and processes will be disrupted, and new opportunities and applications will surface. The only question will be: are we ready for it?In the second part of this article, we discuss the practical ways ChatGPT can be used in business and the potential risks it presents. 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.Randall C. Antonio is a technology consulting partner of SGV & Co.

01 May 2023

Rossana A. Fajardo

Reshaping the social contract

Since before the pandemic, the social contract defining the interaction between employers and employees has been changing. Rapid advancements in automation as well as the increasing significance of commitments to environmental, social, and governance (ESG) and diversity, equity, and inclusion (DE&I) have all contributed to this shift. The pandemic only furthered the shift by elevating elements such as employee wellbeing and organizational purpose.Employees today show a preference for companies that support their beliefs regarding social responsibility while providing flexibility and specialized opportunities for professional growth. They also want a fair compensation system that includes a transparent rewards and recognition program, which is understandable given the current economic landscape. According to the EY 2022 Work Reimagined Survey, the chance to increase their compensation is the main driver of job switching among employees.Companies are becoming more aware of these expectations and the need to address them. Two-thirds of CEO respondents from the latest EY CEO Outlook Survey agree that pandemic-related working habits are becoming more important for lowering staff attrition and attracting new talent. However, according to the EY 2022 Work Reimagined Survey, only one-third of companies are actively changing how they handle these practices, particularly those involving technology, flexible working, and real estate.The EY Center for Board Matters investigated how boards can help reshape the shifting social contract between employers and employees, sharing three ways that boards can support their organizations.LISTENING TO THE RAPIDLY EVOLVING WORKFORCEOrganizations all across the world are aware that Gen Z workers are responsible for a significant portion of the fundamental shifts in employee expectations. Whereas a greater emphasis on sustainability may have been “nice to have” for millennials, it is non-negotiable for Gen Z. Furthermore, this generation embraces and integrates technology into their way of life. As true digital natives, Gen Z is leading the charge in creating the products, customer experiences, and ways of working that are revolutionizing how we live and work. By 2025, Gen Z will account for 27% of the workforce, and employers will depend heavily on Gen Z to actively contribute to the future success of their companies.Boards can take steps to help their organizations realize this potential by collaborating with their Chief Human Resources Officer (CHRO) or a corresponding function to create a connection with younger workers. That entails encouraging relationships built on active listening, two-way dialogue, and a sense of purpose and value. This means finding ways to involve young professionals in decision-making instead of simply passively listening, and allow decision-making based on personal beliefs and preferences. In addition, the scope for collaboration and the resources available to support health and wellbeing must be emphasized. This group must be able to challenge the organization regarding transparency in its operations, its ESG and DE&I activities, and potential inconsistencies between the organization’s commitments and reality.While talent transformation is crucial, CEOs and their boards may want to consider elevating CHRO support to accomplish these essential changes. AN EMPLOYEE EXPERIENCE TAILORED FOR LONG-TERM SUCCESSIt is imperative to pay attention to the right signals and act upon them to make the changes necessary to successfully attract, engage, and retain talent. This requires boards to have a process for monitoring outside trends and their effects on talent. One approach to achieve this is to include external specialists on the board, such as behavioral psychologists or anthropologists.Another crucial step is collaborating to create an employee value proposition that satisfies the needs and preferences of a multigenerational workforce. This should reflect diversity in the fullest sense, including demographic diversity and inclusion, opportunity, and skills application. In order to acknowledge that talent is both a long-term issue and a short-term challenge, boards can also broaden the scope of the compensation committee. In the current labor market, salary plays a major part in influencing decisions. The organization’s compensation strategy must be able to support employee financial wellness in the short term to attract top talent in the long term.PRIORITIZING UPSKILLINGMore CEOs are concentrating on talent retention strategies rather than managing talent acquisition costs as a result of recessionary pressures. Prioritizing the continued usage of technology and upskilling employees is one way they can respond. Boards can collaborate with management in retaining talent by viewing talent development as a process of progressing individuals. Employers can encourage continuous growth by offering employees new opportunities once they reach the peak of a developmental curve, such as pursuing further education or training, which would facilitate the mastery of a new job or skill. However, as change happens more quickly, these developmental curves get shorter, and skills will need to be renewed sooner. Employers must change the way their learning processes deliver skills and experience in order to do it in a more flexible, timely, and engaging manner.RESHAPING SOCIAL CONTRACTS TO EFFECT POSITIVE CHANGEBoards are poised to affect how quickly and urgently firms refresh and reshape their social contracts with employees. They must, however, push management and themselves to use diverse thinking if they are to have the greatest impact on their talent agenda. By doing so effectively, organizations will be able to effect positive change and evolve for the future.On behalf of everyone at SGV, we would like to wish all those who work a Happy Labor Day! 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.Rossana A. Fajardo is the EY ASEAN business consulting leader and the consulting service line leader of SGV & Co.

24 April 2023

Czarina R. Miranda

The changing nature of workforce mobility

Given the volatility of the labor market, organizations are grappling with a talent-related conundrum — balancing their global talent investment while maintaining a degree of flexibility amid uncertainty. The pandemic introduced novel ways of working, bringing renewed expectations regarding technological innovation, workforce adaptability, and talent-related opportunities. Leaders today need solutions that allay risks and yield rewards to build and sustain value, measures that could enrich employee experience and facilitate cross-border growth.According to the recent EY 2023 Mobility Reimagined Survey, which shares insights from more than 1,000 global mobility professionals and employees recently posted on international assignments, workforce mobility has failed to reach its full potential. While lucrative workforce mobility programs are imperative for the global talent race, with respondents voicing that these programs facilitate growth for individuals and their organizations, the survey showed a discrepancy between mobility programs offered by organizations and talent demand.Among those surveyed, 92% believe that workforce mobility opportunities help organizations drive growth by supporting organizational goals while investing in top talent. However, most respondents were unsure as to whether organizations can handle the potential tax, immigration, and regulatory risks.ADAPTING TO A VOLATILE TALENT LANDSCAPEThe Organization for Economic Co-operation and Development projects gross domestic product growth to be 2.2% in 2023, which is symptomatic of lagging economic growth. Much like the situation under the pandemic, where employees gained more leverage due to the need to retain talent, this slow growth could prompt organizations to renew their priorities to adapt to continually changing conditions.Organizations can focus on retaining key employees to save on costs and establish hierarchical stability. One way would be to develop ways to build on the preexisting employee experience to enhance talent and improve skills and capabilities.The EY 2022 Work Reimagined Survey reveals that mobility professionals believe they significantly influence the talent landscape. As much as 88% believe that mobility is one way to manage global talent shortages, while 76% assert that mobility could affect organizational strategy and 74% think that mobility is fundamental to business continuity. The study also shows that employee priorities have evolved to focus on flexible work arrangements, expansive total rewards offerings, and overall career goals and values.An overwhelming majority of respondents (93%) believe international assignments are lucrative career-building opportunities, with other benefits that include career development, training, and intercultural exchange. Joint research from EY and Oxford University also shows that prioritizing employee concerns regarding workforce mobility results in organizational transformation, making it more important for organizations to view mobility as an integral component of talent strategy, not a siloed transaction. WORKFORCE MOBILITY ACROSS FUNCTIONSThe study presents a disconnect in the strategic and operational identities of workforce mobility. While 42% of respondents believe mobility is highly centralized, mobility practitioners still have to coordinate with various stakeholders to accomplish tasks such as immigration compliance and technology enablement.The strategic potential of workforce mobility increases with the seniority of mobility professionals. More senior mobility professionals view their function to be influential towards business operations and strategy, and believe that a lack of visibility from other functions hinders them from capitalizing on mobility programs to achieve business objectives.This presents an opportunity for organizations to better determine their priorities regarding talent attraction and career development. The mobility function can transform to cover the organization’s overall strategy and business needs such as hybrid work arrangements and both short- and long-term relocation opportunities.MOBILE WORKFORCE DIGITALIZATIONThere is a greater need for technologies that help streamline employee workflows, such as task automation and the simplification of tax, relocation, and immigration procedures that come with cross-border work. Technology is therefore pivotal in transforming workforce mobility programs by alleviating traditional burdens while increasing employee productivity.Most respondents (92%) believe that digitizing processes is advantageous, whereas only 35% believe their organizations have started doing so for various mobility processes. The discrepancy is notable as most believe digitalization investments will increase in the next five years. Respondents agreed that mobility systems are fundamental, with 79% saying they have used two or more when relocating. Organizations with global operations often require multiple vendors to deliver services in select jurisdictions.Streamlining the user experience is especially important when working across borders, as the same tools should function regardless of location. Organizations will benefit from having complete visibility over specific legal, tax and regulatory processes to be aware of accompanying risks.MINIMIZING RISKSThe ever-changing work climate has made international work more complex, and organizations should focus on building capability pipelines to adapt as they scale. Additionally, geopolitical instability has driven organizations to place a premium on risk visibility. An overwhelming majority (97%) of CEO respondents from the EY CEO Outlook Pulse have shared that they have halted investment strategies due to geopolitical issues.While organizational leaders have started assimilating geopolitical risks into their strategic equation, mobility professionals are wary of their organizational capacity to handle risks. Only 29% of respondents believed that their organization could withstand changing geopolitical circumstances.Organizations must know where their professionals are at all times to safeguard against physical or cybersecurity threats and be knowledgeable of potential immigration, tax, or regulatory risks. Most respondents believed their organization have a policy or procedure concerning hybrid mobility (e.g., temporary and permanent remote work, cross-border work, and virtual assignments). However, less than half of the mobility professionals (47%) said the policies were consistent across borders, and an even smaller percentage (41%) believed that the policies tackled significant issues.LEVERAGING WORKFORCE MOBILITY FOR LONG-TERM GROWTHAmid the unsteady geopolitical climate and intense race for talent, mobility programs can facilitate long-term growth and sustainability. Capitalizing on cross-border work entails reimagining mobility programs to gain an advantage in the race for talent.In the Philippines, the pandemic has brought to the fore certain realizations for companies that would allow its workforce to be mobile, where applicable, driving hybrid or flexible work arrangements, virtual teaming, and cross-border work and services to address recruitment and retention concerns.However, not all organizations are mindful of the tax, immigration and other regulatory risks and issues that arise under these arrangements which impact both the company and its mobile employees. More often than not, employers are observed to be more reactive rather than proactive in addressing these risks. Much therefore has yet to be done for companies to create value that will help strengthen corporate strategy for cross-border expansion and facilitate a better employee mobile experience. 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.Czarina R. Miranda is the People Advisory Services Leader of SGV & Co.

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Rethinking value: The evolution of consumer spending (Second Part)

Rethinking value: The evolution of consumer spending (First Part)

ChatGPT: A versatile AI model (Second Part)

ChatGPT: A versatile AI model (First Part)

Reshaping the social contract

The changing nature of workforce mobility

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