Enterprise Risk Managaement System

(a.) Overall risk management philosophy of the company;

The Company’s risk management focuses on safeguarding shareholder value to manage unpredictability of risks and minimize potential adverse impact on its operating performance and financial condition.

(b.) A statement that the directors have reviewed the effectiveness of the risk management system and commenting on the adequacy thereof;

The Company’s Board of Directors is directly responsible for risk management and the Management carries our risk management policies approved by the Board. After the Management identifies, evaluates reports and monitors significant risks, and submits appropriate recommendations, the Board approves formal policies for overall risk management, as well as written policies covering specific areas, such as foreign exchange risks, credit risk, and liquidity risk.

(c.) How often the risk management system is reviewed and the directors’ criteria for assessing its effectiveness; and

The Risk Committee annually reviews the Company’s approaches to risk management and recommends to the Board the changes or improvements to key elements of its processes and procedures. After submission of the Committee’s recommendation, the Board then reviews the risk management system.

2. Risk Policy

(a.) Company

Risk Exposure Risk Management Policy Objective
1. Financial Risks The Company policy is to ensure that the scheduled principal and interest payments are well within its ability to generate cash from its business operations. It is likewise committed to maintain adequate capital at all times to meet shareholders’ expectations, withstand adverse business conditions and take advantage of business opportunities. The Company’s objective is to protect investment in the event there would be significant fluctuations in the exchange rate.
On the other hands, the Company’s objectives to manage its liquidity are:

  1. a) to ensure that adequate funding is available at all times;
  2. b) to meet commitments as they arise without incurring unnecessary costs; and
  3. c) to be able to access funding when needed at the least possible cost.

The long-term strategy is to sustain a healthy debt-to-equity ratio.

2. Operational Risk It is the policy of the Company to be prepared for any event which triggers a material business impact or modifies the existing risk profile. The Company’s objective is to protect investment in the event there would be significant events that would result in material impact to the Company’s operations.

(b.) Group

The Board, thru the Audit Committee, reviews the effectiveness of the Company’s, including its subsidiaries and affiliates, risk management system with emphasis on monitoring of existing and emerging risks as well as risk mitigation measures and on identifying risks before these causes significant trouble for the business.  Based on the set guidelines, directors are assigned specific subsidiaries, affiliates or business where they monitor compliance of the risk management system. Criteria used for review are compliance with established guidelines and controls and the appropriateness of risk management and risk mitigation measures taken.

Risk Exposure Risk Management Policy Objective
1. Hazards and natural or other catastrophes Have an emergency response plan/action Allow the different business segments to continue operations even during natural disaster or calamity
2. Regulatory developments Review of new laws and regulations Ensure the different business segments are compliant with all laws and regulations
3. Money laundering and cheating at gaming areas Constant security check and monitoring, check and balance system Minimize situations when these activities can happen
4. Supply of raw materials and packaging materials Maintain diverse group of suppliers, get at least 3 quotations from suppliers Prevent over dependence on a single supplier, ensure the best price possible
5. Consumer taste, trends and preferences Market study and analysis Be aware of trends and preferences to develop new products or adapt existing strategy
6. Competition Market study and analysis; Maintain a diversified earnings base; Constant product innovation Be aware of trends and preferences to develop new products or adapt existing strategy; Revenue and property diversification
7. Philippine economic/political conditions Review of business/political situation Ensure the different business segments can immediately adapt to changes in economic/political conditions and can devise strategies to meet these changes

(c.) Minority Shareholders

Risks to Minority Shareholders
The majority shareholder’s voting power in the Company may affect the ability of minority shareholders to influence and determine corporate strategy

3. Control System Set-up

(a.) Company

Risk Exposure Risk Assessment
(Monitoring and Measurement Process)
Risk Management and Control
(Structures, Procedures, Actions Taken)
1. Financial Risks It monitors potential sources of risk through monitoring of investments and assets, and projected cash flows from operations.
The Company also maintains a financial strategy that the scheduled principal and interest payments are well within the Company’s ability to generate cash from its business operations.
The Company regularly monitors financial trends.
The Company regularly keeps track of its capital position and assesses business conditions to ensure early detection and determination of risks, and its consequent adverse impact. It adopts measures, as may be deemed necessary and appropriate, to mitigate risks.
2. Operational Risks Review of new laws and regulations Any operational risks monitored are brought to the attention of the Risk Committee and addressed therein, together with inputs from corporate officers. The findings and recommendations are then brought to the Board for approval. There has been no significant operational risk determined by the Company in its operations in the past year.
3. Philippine economic/political conditions Review of business/political situation Ensure the Company can immediately adapt to changes in economic/political conditions and can devise strategies to meet these changes
4. Liquidity Minimize exposure to financial markets Actively secure short-to medium-term cash flow

(b.) Company

Risk Exposure Risk Assessment
(Monitoring and Measurement Process)
Risk Management and Control
(Structures, Procedures, Actions Taken)
1. Hazards and natural or other catastrophes Have an emergency response plan/action Allow the different business segments to continue operations even during natural disaster or calamity
2. Regulatory developments Review of new laws and regulations Ensure the different business segments are compliant with all laws and regulations
3. Money laundering and cheating at gaming areas Constant security check and monitoring, check and balance system Minimize situations when these activities can happen
4. Supply of raw materials and packaging materials Maintain diverse group of suppliers, get at least 3 quotations from suppliers Prevent over dependence on a single supplier, ensure the best price possible
5. Consumer taste, trends and preferences Market study and analysis Be aware of trends and preferences to develop new products or adapt existing strategy
6. Competition Market study and analysis;

Maintain a diversified earnings base;

Constant product innovation

Be aware of trends and preferences to develop new products or adapt existing strategy;

Revenue and property diversification

7. Philippine economic/political conditions Review of business/political situation Ensure the different business segments can immediately adapt to changes in economic/political conditions and can devise strategies to meet these changes

(c.) Committee

Committee/Unit Control Mechanism Details of its Function
Board Audit Committee Provides oversight over the Company’s and its subsidiaries, affiliates and business segments risk management process, financial reporting process and internal audit. Provides oversight over the Company’s and its subsidiaries, affiliates and business segments risk management process, financial reporting process and internal audit.