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By: Aubrey Camille J. Perez Research and Content Coordinator, Research and Development Institute of Corporate Directors The Institute of Corporate Directors (ICD) held the Board Education Series: The Sustainable Financing Alternative on August 28, 2025, at Ayala Triangle Garden Tower 2 in Makati City. The event, organized by the ICD Sustainability Committee and BPI, brought together governance experts, sustainability practitioners, and corporate leaders to talk about how boards can integrate sustainable financing into their strategies and day-to-day decisions. In his opening remarks, Mr. Dennis Montecillo, FICD, Chairperson of the ICD Sustainability Committee, shared his own journey in governance and sustainability. He shared that his work in ESG started long before sustainable finance became a common topic. Participants were encouraged to see not only the challenges, such as political setbacks, but also the opportunities, including stronger ESG frameworks in Asia and the Philippines’ growing green financing initiatives. The remarks concluded with the reminder that sustainable finance is gradually becoming a standard part of how companies make business and investment decisions.  Macroeconomic Environment and Investor Sentiment Towards Sustainability The first session featured Ms. Pushkala Ratan from the International Finance Corporation and Mr. Jonas Marie Dumdum, AICD, Vice Chairperson of the ICD Sustainability Committee, with Mr. Montecillo moderating. Ms. Ratan observed that board experience with sustainability varies from country to country. Some boards are still learning the terms and concepts. She emphasized that boards are key in guiding organizations toward sustainable financing and reminded participants that staying committed is essential, even when upfront costs or short-term challenges come up, to avoid larger setbacks. Adding a local perspective, Mr. Dumdum traced the Philippines’ corporate sustainability journey back to the 1970s. He explained that corporate focus has shifted from just compliance to innovation and long-term business viability. While challenges remain in capacity, knowledge, and reporting, he said that incorporating sustainability into everyday operations can turn ideas into real action, creating value for companies, communities, and society. Lessons Learned from the Sustainable Finance Journey Ms. Jo Ann B. Eala, Head of BPI’s Sustainability Office, moderated the second session where industry leaders shared practical examples. Ms. Sheryll Verano of Arthaland described how the company developed the Philippines’ first green finance framework for certified sustainable projects. She noted that Arthaland is the only developer with fully certified residential and commercial portfolios, crediting strong board direction and a culture of accountability for the achievement. Mr. Jose Arturo Yan of Glacier Megafridge talked about their energy-efficient cold storage investments. He shared that early transitions can be costly, but they result in long-term savings and stronger competitiveness. Innovations like CO₂-based cold storage, solarization projects, and international recognition for energy efficiency were also highlighted. Both speakers emphasized that continuous innovation, capacity building, and structured financing are essential for lasting progress. Board Approval of a Sustainable Financing Proposal The program also featured a board simulation on the approval of a sustainable financing proposal, with Mr. Montecillo as chairman together with ICD Sustainability Committee members Mr. Benjamin Rex Emilio Azada, AICD for sustainability, Mr. Dennis Choa, FICD for finance, Mr. Michael Arthur Sagcal, FICD for risk, and Mr. Roberto Bascon Jr., AICD for governance, alongside Ms. Marie Antoinette Cortez of BPI as the banker presenting the proposal. This demonstrated how boards evaluate decisions by weighing finance, risk, regulatory, governance, and sustainability factors. Conclusion The event showed that sustainable financing is becoming a key part of corporate strategy, with boards leading the way. Through shared experiences, examples, and interactive discussions, participants saw how sustainable financing goes beyond compliance. It can drive innovation, boost competitiveness, and create long-term value for organizations, communities, and society.

By Dr. Ramon Segismundo, FICD, DBA Fellow Institute of Corporate Directors (This is the first of a series of 3 articles on advancing Governance Excellence across the private, public sector, and nonprofits in the Philippines) Having recently run a Masterclass session for the Institute of Corporate Directors on “Turbocharging Talent at the Top: The Board’s Role in Succession, Leadership, and Rewards” targeted at experienced, new and aspiring board directors and similar sessions for the boards of publicly listed organizations, the key reflection question that popped in my mind is as follows: “How much have Philippine boards really leveraged Human Capital Governance in unleashing the performance and potential of an organization’s leadership, talent, and workforce?” HUMAN CAPITAL GOVERNANCE Just what is Human Capital Governance? In a nutshell, it is essentially corporate governance applied to people. If you believe that talent is the company’s most important asset and a key driver of long-term value, then attention should be paid by the boards and senior management to develop and implement an optimum oversight and decision-making framework to ensure that the organization’s leadership, talent, and workforce are effectively managed, developed, and aligned with corporate strategy. In the sessions that I have run, I asked the question of whether there is a board committee particularly devoted to human capital in their organizations. These are my observations: Some do not have one entirely leaving it to the Human Resources function and the chief executive officer to identify and resolve human capital issues and challenges. Some have it, diluted in some way, in combination with other board responsibilities, for example, nomination and governance committee, remuneration and nomination committee, etc. The more progressive ones have a dedicated committee covering the key levers of human capital governance (which I will discuss later in this article) and name the committee distinctively and appropriately such as People and Culture Committee, Remuneration and Leadership Development Committee, Personnel and Compensation Committee, etc. What are the consequences of sub-optimum human capital governance? As I have mentioned in my sessions, A panel consisting of Gallup, Bain, McKinsey, BCG, and Deloitte indicated that 60 per cent to 80 per cent of business problems are people related. This causes “strategy execution failure”- certainly a major board concern. ONCE YOU HAVE SET IT UP, NOW WHAT? Developing and implementing an optimum human capital oversight and decision-making board framework entails identifying what are the “hot button areas” that the Board needs to have stewardship of to ensure that the leadership, talent, and workforce of the organization provides maximum value to all stakeholders. In my view, there are four pillars of effective human resources governance at the board level: Succession Planning, Leadership Development, Rewards Management, and Culture. Pillars may be added, modified, or deleted depending on the industry and company strategy priorities. Each of these pillars are discussed in the following sections. Succession Planning A sustainably successful company has a robust pipeline of executive and leadership talent, and it is the Board’s responsibility to ensure that this happens. This will manage the risks of: Not having a ready now candidate when incumbent senior executives unexpectedly leave. Prized senior executives “jumping ship” as their career future is not spelled out. The organization placing executive development at the back burner, thereby not seizing on the opportunity for the executive cadre to build capacity. In succession planning, a robust succession analysis is undertaken. This involves evaluating the readiness and availability of internal (and external) talent to fill key senior leadership and critical roles. A tool that is used is the 9-box grid (a 3 x 3 matrix) that classifies executive and leadership talent according to low, moderate, and high performance and low, moderate and high potential. Every succession candidate for executive and leadership positions will have to be in the board’s radar in terms of their aspirations, strengths, development needs, and development actions for the next 12 months. When the above analysis is done in relation to target positions such as the CEO, COO, CFO and CXO roles, the Board and management will be able to establish the succession candidates who are ready now, ready in 1-3 years, ready in 3-5 years and “high potential” over the long term. Leadership Development A robust succession plan needs to have an accompanying leadership development plan built around a leadership brand, a competency model and a program. Just what is a leadership brand? A distinct and consistent leadership identity that differentiates the company in the marketplace. By having this brand, the company can differentiate itself and utilize this to drive leadership attraction and retention. On the other hand, a leadership competency model serves as a foundation for the leadership development program of the company. Communicated to all leaders, the model outlines the required knowledge, skills, abilities, styles, mindsets, and habits of the organization’s leaders. Based on the above model, a leadership program is designed, regularly delivered and continuously evaluated to enhance the effectiveness of leaders in the company while staying in their respective roles. Therefore, from the standpoint of each individual leader, personal growth and development could happen “on the job” without waiting for the next organizational opportunity to open up. Rewards Management Typically, Boards approve merit increase budgets for the next year. They may also approve bonuses and other rewards programs as presented by operating management on their own or through a committee. The question is how much time is devoted to reviewing the rewards recommendations presented to ensure that we get “the biggest bang for the rewards” bucks and maximize human capital performance, productivity, and morale. Boards could also look at innovative rewards management practices. To drive long term value creation, the Board could also look at compensation plans designed to reward employees- especially senior executives and key talents- for achieving performance goals that create sustained value over multiple years (usually 3-5 years). This will align employee interests with the long-term success of the company and shareholder value creation. Organizational Culture Peter Drucker’s famous quote: “Strategy eats culture for breakfast” resonates well in boards. Typically, boards spend a lot of time discussing strategy, but very little time is spent on culture. These two sides of the same coin ensure sustainable success- yet only one side (strategy) is given attention. In short, the Board- working with executive management and the company’s CHRO- must be active in designing and shaping the culture that will help achieve strategy. If this is left to chance, you may not want to see the culture that evolves. As a starting point, the Board looks at both the espoused culture (what the company says it values) and the lived culture (what the leaders and the people do in reality). Examples of areas to review include leadership behaviors, risk orientation, incentives and rewards, decision making norms, employee communications, innovation mindset, change readiness, to name several. Designing the culture aligned with the strategy involves ensuring that: The organization’s leaders serve as the cultural role models and champions. The company’s processes and practices “walk the talk” in terms of the culture. This forms the foundation for a comprehensive roadmap to build and develop a culture that ensures governance excellence. (My next two articles over the next four weeks will focus on transformational directorship and what does it take. Please watch out for this)

By: Senen L. Matoto, FICD President Institute of Corporate Directors The Capital Markets Efficiency Promotions Act, or CMEPA, was signed into law on 29 May 2025 and took effect on 1 July with no less than President Bongbong Marcos gracing the Philippine Stock Exchange to formally announce what hopefully signals the beginning of a new dawn for our stock and bond markets. For readers out there who may not be too conversant with the financial markets, let me briefly explain what the CMEPA is all about. CMEPA is a law that aims to streamline and harmonize the confusing array of various tax rates imposed on investment transactions in stocks and debt instruments from the straightforward bank deposits to the more sophisticated products such as mutual and unit investment trust funds which hopefully will attract more Filipinos, and not just those with deep pockets but even the ordinary Juans, to invest in the capital markets and earn a better return for their money. Furthermore, CMEPA will somewhat reduce our investment friction costs, aligning us more closely with our ASEAN neighbors, and with our fingers crossed, in the process, attract more foreign investors to give our country’s financial markets a closer second look. So now that the hoopla of the CMEPA commencement is over, will the new law indeed boost our capital markets and make us more competitive? Let’s begin with the regional comparison of tax rates. Our stock transaction tax rate is now down to 0.1 percent from the previous 0.6 percent, putting us on the same level as Indonesia. That’s great, but then there’s Malaysia, Singapore and Vietnam which are at 0 percent. Hmm… a relatively small amount, but still. Perhaps something for our economic team to reconsider in the future? On capital gains tax for foreign share transactions of Pinoys, we’re now at only 15 percent compared to the final tax rate of 25-percent on all income. Again, that’s great! But perhaps applicable only if that type of offshore income is declared by the taxpayer to begin with? However, I believe it no longer requires tons of money to open online an offshore trading account with foreign stock brokerages, which can simply be done with a no-hassle transfer of funds from an FCDU account. This, of course, means a 0 percent tax rate, realistically, for those who don’t bother to declare. Our peers in the region apparently don’t bother to have any tax on these types of transactions. On dividends, final tax withheld is 10 percent for Pinoys but 20 percent for non-residents. We’re at par with Indonesia and Malaysia but Singapore doesn’t tax its residents and Vietnam only taxes at 5 percent. On the Documentary Stamp Tax, we’re now at 0.75 percent from 1 percent. Great! But all our peers don’t have any DST. On interest income, at 20 percent, it’s the same as before the CMEPA, but for the FCDU it’s a notch higher from 15 percent to 20 percent. Ouch! On balance, our investment-related tax rates are now indeed more streamlined and have nudged us closer to our neighbors. But, let’s have a reality check—our government treasury needs more revenues to shore up our coffers that were eroded by the pandemic standstill on most businesses. Also, the wasteful, inefficient and perhaps even dubious misallocation of funds our country has had to suffer hasn’t helped any. So for now, let’s not bet on any additional loosening up of taxes for the near future. But are taxes the only reason for the dismal state of our markets? Unfortunately, there are a host of other issues that we have to contend with. The most glaring is the lack of depth of our stock market in trading volume and, more significantly, the relatively low number of listed stocks compared to our neighboring peers. There are only 270 listed companies in the PSE with a market capitalization of about $200 billion as of November 2024. On the other hand, consider our neighbors. Singapore has 643 listed companies with a market cap of $600-B; Thailand has 600 listed with a $500-B market cap; Indonesia has 936 listed with a market cap of $829-B; Malaysia with 900 listed and a market cap of $200-B; and Vietnam combining Hanoi and Ho Chi Minh has 750 listed and a market cap of $750-B. Embarrassingly, the only neighboring stock exchanges trailing us are Cambodia with 12 listed and a market cap $3-B, Lao 10 listed and a cap of $1B, and Myanmar eight listed with $200-B market cap. Given the above numbers, is it any wonder then that foreign investors who drive the markets have such a minuscule share of their indexes for the Philippines? There are of course other Gordian Knot market issues that the capital market stakeholders have been grappling with for decades. And in this regard, Institute of Corporate Directors Chair Emeritus Dr. Jesus Estanislao has proposed a marketwide initiative to untie these knots. He has given ICD the task of enlisting the cooperation of other market players and, more importantly, the regulators. Hopeful first steps are already in place—the passage of CMEPA and the appointment of market savvy Francis Lim who is fully tuned in to these issues as the new SEC Chair. Until next week… OBF! Disclaimer: On July 9, 2025, “Will CMEPA boost capital markets?” was published. It was authored by Mr. Senen L. Matoto, a fellow and President of the Institute of Corporate Directors. You can read the original article through this link:

By: Dr. Carlos P. Gatmaitan, FICD Fellow Institute of Corporate Directors Family businesses are the backbone of many economies, including the Philippines, where they account for a significant share of employment and economic output. However, as these businesses grow and transition through generations, tensions often arise around how profits should be shared between family shareholders and management. To address these challenges, it is best practice for family businesses to clarify ownership structure in their Family Constitutions and dividend policies in their Shareholder’s Agreement. Separately, it is imminent to establish a Profit-sharing Agreement that is distinct to shareholders, tied to executive performance and divided among management. This approach offers clarity, fairness and sustainability. While a Family Constitution typically outlines the overall family’s values, vision and principles regarding the business, including ownership principles and succession plans, a Shareholder’s Agreement, on the other hand, formalizes legal commitments regarding ownership rights, voting and profit distribution to all shareholders, including non-family members who are shareholders. Including a clear Dividend Policy in these documents ensures that all family members understand how and when profits will be distributed to shareholders. This promotes transparency and helps prevent future disputes. A well-crafted Dividend Policy outlines the conditions under which dividends will be declared, the formula for determining the payout, and the frequency of distribution. It balances the family’s desire for cash flow with the business’s need for reinvestment and growth. By institutionalizing this in the Family Constitution or Shareholders’ Agreement, the family signals its commitment to financial discipline and long-term business health, while also ensuring that passive shareholders receive their fair share of returns without interfering in management decisions. Meanwhile, family members and non-family executives who serve in management roles should be subject to a profit-sharing agreement that is separate from the dividend policy. This agreement should link profit-sharing to clear performance metrics such as profitability, efficiency, and strategic achievements. By doing so, compensation is tied to the actual contributions made to the business’s success, encouraging accountability, motivation, and professionalism among the management team. Separating dividend policies from profit-sharing plans is a practical and equitable solution that minimizes confusion. It ensures that family members who are owners receive returns based on their capital investment (via dividends), while those who are managers earn rewards for their operational performance (via profit-sharing). In many family businesses, these roles overlap — some family members serve both as shareholders and as executives. The distinction in policies helps next-generation leaders appreciate the difference between returns to capital and rewards for labor and skill. This dual-policy approach also helps reduce potential friction between active and passive shareholders. Family members who are not involved in management are assured of fair financial returns without questioning executive compensation structures, while those in leadership are appropriately incentivized to drive business performance without undue pressure to pay excessive dividends that could harm the business’s future. The ultimate goal is to sustain harmony within the family, ensure business continuity, and professionalize governance as the business transitions through generations. Family businesses that adopt these best practices strengthen their ability to attract outside talent, build investor confidence, and create a legacy that balances family welfare with corporate success. As such, families are encouraged to work with governance advisors, legal experts, and trusted board members to design and formalize these policies early in the company’s life cycle. In aligning long term sustainability with family businesses, best practice is to regularly review all three — Family Constitution, Shareholder’s Agreement and Profit-Sharing Policy — and revise as needed. After all, from the family’s perspective, family comes first. Disclaimer: On June 30, 2025, “Best practice in family businesses: Aligning dividend policies and profit-sharing agreements for long-term success” was published. It was authored by Dr. Carlos P. Gatmaitan, a fellow of the Institute of Corporate Directors. You can read the original article through this link:

By: Ma. Aurora D. Geotina-Garcia, FICD Fellow Institute of Corporate Directors In today’s fast-evolving world, women are breaking barriers and making significant strides across various industries. Whether in corporate leadership, entrepreneurship, health care, technology, or the creative industries, business education can play a vital role in equipping women with the skills, knowledge, and confidence to navigate challenges, foster innovation, lead with purpose, and be successful. A recently published book “Wowsome Women of the UP School of Business” authored by my marketing professor at the University of the Philippines College of Business, Dr. Victoria Jardiolin-Villa, highlights the remarkable journeys of UPCBA alumni who are driving change across various industries and sectors. I’m honored to be featured among these inspiring leaders, sharing how I champion women’s empowerment through the organizations I lead. Reading the stories of other thriving women in the book was both enlightening and empowering—it deepened my appreciation of how access to business education can significantly contribute to developing women business leaders who can contribute to our broader socioeconomic progress. I wish to share my own reflections on how our business training has helped us become successful. 1. Building foundational business acumen. Regardless of one’s profession, understanding business fundamentals, such as finance, marketing, and operation, is crucial. Business education provides women with insights into economic principles, organizational management, and market trends to help them make informed decisions. 2. Strengthening leadership and decision-making skills. Leadership is essential in every profession, and business education cultivates strong leadership qualities. Women who undergo business training develop the confidence to take initiative, manage teams, and drive strategic planning. Effective decision-making is another key component—business education sharpens analytical thinking, allowing women to assess risks, seize opportunities, and navigate complex situations with clarity. 3. Empowering women for entrepreneurship. Many women aspire to establish their own businesses, and business education provides them with the essential tools to be successful entrepreneurs. From understanding financial management to mastering marketing strategies, an education in business prepares women to build sustainable enterprises. 4. Enhancing financial literacy and independence. Financial literacy is critical for personal and professional success. Business education helps women grasp key financial concepts, such as budgeting, investment, and funds management. With this knowledge, they can effectively manage their income, grow their assets, and secure financial independence. 5. Opening doors to diverse career opportunities. A strong foundation in business broadens career prospects across industries. Women with business knowledge can venture into roles in management, consulting, finance, human resources, and beyond. Additionally, business education complements specialized careers—health professionals can enhance their medical practices, engineers can launch innovative tech startups, and artists can build sustainable creative ventures. 6. Bridging the gender gap in leadership. Despite progress, gender disparities still exist in leadership positions across industries. Business education equips women with the expertise and confidence to assume executive roles and advocate for greater inclusivity. By fostering networking opportunities and mentorship programs, business training helps women connect with influential leaders and position themselves for high-impact roles. 7. Driving social change and economic growth. Educated women contribute to economic development and social progress. Business training enables women to lead sustainable businesses that create jobs and uplift communities. Additionally, business education promotes ethical leadership and corporate social responsibility, ensuring women in business prioritize environmental sustainability and social impact. Business education is more than just a pathway to success—it is a catalyst for transformation. Equipping women with essential business skills, financial knowledge, and leadership capabilities, empowers them to excel in diverse careers and create meaningful change. Whether launching a business, leading a corporation, or innovating in a specialized field, women with business education have the tools to thrive and inspire future generations. In the words of the author, “I hope these narratives of women who have succeeded in challenging the gender-based barriers to personal growth should inspire the young female generation to persevere in their chosen field of work and be brave enough to confront or challenge male-dominated norms and values.” Ma. Aurora “Boots” Geotina-Garcia is the founding chair and president of PhilWEN, and the chair of the governing council of PBCWE. Disclaimer: On July 3, 2025, “Nurturing women leaders: The power of business education” was published. It was authored by Ms. Ma. Aurora D. Geotina-Garcia, a fellow of the Institute of Corporate Directors. You can read the original article here:

August 5, 2025 – Makati City  – The Institute of Corporate Directors (ICD) paid a courtesy visit to the newly appointed Securities and Exchange Commission (SEC) Chairperson, Atty. Francis Lim, to reaffirm its commitment to advancing corporate governance in the Philippines and to explore areas of collaboration. Representing ICD were Chairperson Atty. Benedicta Du-Baladad, Vice Chairperson Ida Ceniza-Tiongson, Trustees Catherine L. Hufana-Ang, Amb. Jose Cuisia Jr., Maricelle Narciso, Jonathan Juan D.C. Moreno, and Atty. Jose Tomas C. Syquia, Sustainability Committee Chairperson Dennis Montecillo, Consultancy Committee Chairperson Dr. Vaughn Montes, Board Diversity & Inclusion Committee Chairperson Monette Iturralde-Hamlin, Executive Director Catherine Denise Jalandoni, Programs Director Carla Ronquillo-Solis, and R&D Assistant Manager Kenneth Vicarl Lagera. Chairperson Lim was joined by Atty. Rachel Esther Gumtang-Remalante, Director of the Corporate Governance and Finance Department, and Atty. Jacqueline Liu, Chief Counsel of the Corporate Governance Division, and Chairman Chief of Staff John Cedrick De Leon. The meeting underscored mutual priorities in advancing good corporate governance and capital market development, as both parties exchanged views on strengthening oversight, enhancing investor confidence, and supporting initiatives that promote sustainable economic growth. The ICD delegation expressed its readiness to work with the SEC in pursuing these shared objectives. The discussions ended on a positive note, with both institutions reaffirming their commitment to advancing a corporate governance culture that benefits companies, investors, and the broader economy.

15 August 2025 NOTICE & AGENDA, ANNUAL GENERAL MEMBERSHIP MEETING OF THE INSTITUTE OF CORPORATE DIRECTORS 10 October 2025, Friday, 2:00 PM to 4:00 PM NOTICE IS HEREBY GIVEN that the Annual General Membership Meeting of the Institute of Corporate Directors (ICD) will be held on, Friday, 10 October 2025, at 2:00PM via videoconference using Zoom platform as well as onsite at the Mayuree 2, Dusit Thani Manila, Ayala Center, 1223 Makati City. The Agenda items are as follows: Invocation and National Anthem Call to Order Proof of Notice of Meeting & Certification of Quorum Induction of Members Approval of Minutes of the 16 October 2024 Annual General Membership Meeting Message of the Chairman Report of the President Messages from the Trustees Report of the Approved Audited Financial Statements as of 31 December 2024 by the Treasurer Appointment of External Auditor for Fiscal/Calendar Years 2025 & 2026 Ratification of all Acts and Resolutions of the Officers and Board of Trustees from 01 October 2024 to 30 September 2025 Election of the Board of Trustees (announcement of results of Online Voting) Open Forum Closing Message from the Chairman Emeritus Adjournment Please note that only Fellows (FICD) in good standing are entitled to nominate, be nominated, vote, and be elected to the Board of Trustees. Separate notices for nomination and election, including relevant deadlines, will be sent directly to qualified Fellows. The membership book will be closed 20 days before the meeting, on 20 September 2025. All members in good standing may attend the meeting in person or via Zoom. The Zoom link for the meeting will be shared on 09 October 2025. For Fellows who wish to be represented at the meeting by proxy for quorum purposes, a signed proxy authorization should be submitted through the online proxy form on or before the close of business day at 5:00 PM of 09 October 2025. Four (4) seats on the Board of Trustees are up for election this year 2025 to fill up the corresponding vacancies in the Board due to the conclusion of regular terms of four trustees. The final list of nominees will be announced on 18 September 2025, and thereafter, election and voting will follow. Similar to last year, voting shall be online. Instructions for the online elections will be emailed to Fellows in good standing on 18 September 2025 . The voting results and the names of the duly elected trustees will be announced during the Annual General Membership Meeting. The organizational meeting of ICD’s newly-elected Board of Trustees shall be held immediately after the adjournment of the members’ meeting, if there is a quorum for the Board meeting. Please note that both the annual general membership meeting and, if it proceeds, the organizational meeting shall be recorded. For questions about the meeting, you may email membersrelations@icd.ph . Thank you and we look forward to your participation on 10 October 2025. Sincerely, Atty. Felix Sy Corporate Secretary Note:  Registration and materials for the 2025 Annual General Membership Meeting are sent via email to all ICD Members. For inquiries, kindly email ICD Members Relations at membersrelations @icd.ph .

By: Nelljay Kahlil Tuppal Research and Content Coordinator, Research and Development Institute of Corporate Directors Makati City, July 7, 2025  — As artificial intelligence (AI) continues to transform industries and public institutions worldwide, the Institute of Corporate Directors (ICD) brought together corporate leaders, governance experts, and policymakers for its event, Board Insights: National AI Strategy , held at Dusit Thani Manila and streamed online. The forum explored how AI is shaping national development and changing the way companies are governed. Organized by ICD’s Membership and Technology Governance Committees, the event aimed to help directors and senior leaders understand the responsibilities and opportunities brought about by AI. The event began with a solemn invocation, followed by warm welcomes to both in-person and online attendees. Atty. Benedicta Du-Baladad, FICD, Chairperson of ICD, opened the session by emphasizing AI as a national priority. “We’re here to talk about artificial intelligence as a national imperative,” she said. “Embracing AI with a clear purpose and strategic intent could open new opportunities for growth, improve public services, build smarter institutions, and respond to the evolving needs of our people.” She also raised important questions for leaders: How do we adopt AI responsibly? How do we govern its use while still encouraging innovation? Keynote Insights: A National Vision for AI DOST Secretary Renato Solidum Jr. Introduced by Ms. Ida Tiongson, FICD, Vice-Chairperson of ICD, Secretary Solidum presented a comprehensive update on the National AI Strategy (NAIS) and the Philippines’ rising global innovation standing. “Innovation is more than technology—it is a test of our values and vision,” he said, proudly noting the Philippines’ leap to 53rd place in the Global Innovation Index. He highlighted how AI is already improving healthcare, agriculture, education, and disaster resilience, and stressed the importance of data sovereignty: “Data will fuel AI. Without sovereign data, we cannot build reliable systems.” Secretary Solidum emphasized that innovation must remain accessible, ethical, and responsive to real needs, guided by five pillars: infrastructure, workforce, innovation, ethics, and deployment. DICT Secretary Henry Aguda, FICD (via video) Secretary Aguda, who was accompanying the President at another event, shared his keynote through a video message. “AI is no longer the future—it is now. But with powerful tools come great risks,” he said. “Digital transformation is not just about tech, it’s about people. We must build not just fast systems, but fair ones.” He echoed the government’s commitment to a digitally empowered Philippines: “No Filipino left offline. No Filipino left behind.” DICT Atty. Leandro Angelo Aguirre, GICD Representing DICT, Atty. Aguirre stressed that AI governance must be local and context-specific. “We cannot simply copy what other countries are doing. AI must reflect our own realities.” He clarified that while there’s no dedicated AI law yet, several existing laws already govern aspects of AI. He advocated for regulatory balance, cautioning against both over- and under-regulation, and emphasized the need for stronger inter-agency collaboration. Panel Discussion In the afternoon, the panel discussion—moderated by Mr. VJ Africa, FICD—featured DOST Secretary Solidum and Atty. Aguirre. The session tackled pressing questions around: Expanding scholarships in STEM Regulating AI in public services Energy demands of AI data centers Creating job-ready training programs Adopting global regulatory frameworks with local context Both panelists reiterated the importance of reskilling the workforce, leveraging DOST’s infrastructure, and aligning AI efforts under the National Innovation Council, led by the President, to ensure a unified whole-of-government approach. Attendee questions sparked discussion on data readiness, digital infrastructure timelines, and practical implementation of AI tools in government. The importance of interoperable data standards, especially for disaster response, was also highlighted. As the event concluded, ICD President Mr. Senen Matoto, FICD, expressed heartfelt thanks to the speakers and moderator for their insights. Induction of New ICD Members A special highlight was the Induction of New ICD Members, strengthening ICD’s growing community of governance professionals. Trustee Mr. Donald Patrick Lim, FICD, led the induction and oath-taking ceremonies. Newly Inducted Members: Fellows (FICD): Rev. Msgr. Roger Joseph B. Erestain, FICD Joselito Mallari Jr., FICD Graduate Members (GICD): Atty. Leandro Angelo Aguirre, GICD Aaron Jon Atienza, GICD Atty. Celine Melanie Dee, GICD Brent Estrella, GICD Associate Members (AICD): Freniel Mikko Austria, AICD Joseph Feliciano, AICD Charting the AI Journey Together Board Insights: National AI Strategy  affirmed the Philippine government’s serious commitment to using AI for inclusive development, backed by ethical guardrails and responsible governance. The open dialogue between public and private sector leaders made one thing clear: advancing AI in the country is not a task for government alone, but a collaborative national effort . With the support of the ICD community and a broad range of stakeholders, the Philippines is steadily building a future where AI becomes a powerful tool for innovation, resilience, and inclusive growth.

By: Hanna Arrojo and Nicolie Narce Intern, Research and Development Institute of Corporate Directors Every fourth Monday of July, the Philippine President delivers the constitutionally mandated State of the Nation Address (SONA), offering a comprehensive overview of the country's economic, political, and social landscape, alongside government accomplishments, ongoing initiatives, and future objectives. In his fourth SONA, President Ferdinand "Bongbong" Marcos Jr. spotlighted critical national issues, outlining current efforts and future strategies to bolster key sectors vital to the nation's progress. This article delves into these pivotal topics, highlighting their significance and impact on members of the Institute of Corporate Directors (ICD). Key Takeaways from the SONA Governance President Marcos Jr. emphasized his administration's drive for improved governance in the remaining years of his term. He called for unity and collective action in national service, pushing for enhanced government performance. Labor & Enterprise The President remains focused on strengthening job creation and entrepreneurial endeavors: The Department of Labor and Employment (DOLE), Department of Trade and Industry (DTI), and Department of Social Welfare and Development (DSWD) will continue their joint efforts in job creation and livelihood support. The government plans to expand low-interest, collateral-free loans for small businesses. Free training and funding support will be provided for 2.5 million low-income households to establish microenterprises. Agriculture & Food Security The administration reiterated its commitment to agricultural development and food affordability: The PHP 20/kilo rice initiative launched in several areas is backed by a PHP 113 billion allocation to Department of Agriculture (DA) programs for its sustainability and expansion. Rice traders were warned against price manipulation, with violators facing prosecution. Targets include increased production of pork and other crops through local support and biosecurity measures. Over 8.5 million farmers and fisherfolk received aid. The government will continue developing farm-to-market roads and providing more irrigation systems, farm equipment, fiberglass boats, and rice processing facilities. Plans include planting 15 million hybrid and high-quality coconut seedlings this year to boost the coconut industry, with a broader goal of planting 100 million trees nationwide. The Department of Science and Technology (DOST) will promote scientific innovations and modern farming techniques like intercropping and off-season planting to support farmers. Emphasis was placed on expanding key industries such as automotive, electronics, biotechnology, pharmaceuticals, critical minerals, textiles, Halal products, construction, and power generation. Efforts are underway to fast-track the distribution of land titles (CLOAs, E-Titles, COCROMs) to help farmers own their land and be free from agrarian debt. Education The administration reinforced its commitment to improving educational quality and accessibility: Expanded school mental health programs received a PHP 1 billion allocation, with more counselors hired. Over 300 Barangay Child Development and Bulilit Centers were developed. The Yakap Caravan was launched, offering free health checkups, lab tests (including cancer screening), and medicines for students and teachers. Digital tools such as smart TVs, free Wi-Fi, and Bayanihan SIM cards with load are being prepared to support digital learning. 60,000 new teaching posts were created, and nearly 100 non-teaching tasks were removed to reduce paperwork and support educators. Remaining work processes are being digitized, and laptops are being provided to teachers. Teacher overload and overtime are now compensated. 22,000 new classrooms have been built, with 40,000 more planned. Scholarships and agriculture-focused programs are being introduced to attract youth to farming. President Marcos urged DOLE and DSWD to continue internship and pre-employment programs for college students. Laptops will be distributed to teachers, with transparency in procurement ensured. Free Tertiary Education The President highlighted significant achievements in free tertiary education: The Philippines now ranks second in Southeast Asia for youth enrollment in college and TechVoc programs. Over 2 million students benefit from the government’s free higher education program annually, with an additional 260,000 pupils supported. More than 200,000 TESDA scholarships were awarded in 2024 alone. For 2026, the government provided almost PHP 60 billion for free college and technical-vocational education. Funding support for tertiary education over the next three years will prioritize students under the Pantawid Pamilyang Pilipino Program (4Ps) and Listahanan. The government reaffirmed its long-term vision of having one scholar or TESDA graduate per Filipino family. Tech-Voc Education Expansion The President underscored the integration of Technical-Vocational Education and Training (TVET) into the Senior High School curriculum through the TESDA program: This program, already implemented in various schools, allows Senior High School students to earn National Certificates (NC I and NC II) through TESDA-accredited training in specialized fields like bookkeeping, agribusiness production, electrical installation and maintenance, computer systems servicing, animation, and graphic design. These qualifications are recognized by employers and are improving employability both locally and internationally. Presidential Merit Scholarships A new program, the Presidential Merit Scholarships, was established to recognize exemplary academic achievement among graduating high school students, awarded to those who graduate with Highest Honors. While official guidelines are pending, this program signals the government's push to enhance merit-based incentives and promote academic excellence. Poverty Reduction and Social Protection The President highlighted remarkable progress in poverty reduction and social protection: The 4Ps program has benefited over 5 million families since 2022. Local Government Units (LGUs) were instructed to prioritize the integration of homeless individuals into 4Ps and other DSWD programs. The "Walang Gutom" program already reaches 600,000 nutritionally vulnerable families and aims to expand to 750,000 families by 2027. The DSWD and Department of Education (DepEd) are sustaining feeding programs in daycare centers and public schools, providing nutritious food and milk to over 3.5 million children. An additional PHP 1 billion has been set aside to increase feeding programs next year. Promotion of Active Lifestyles The administration aims to promote active lifestyles: The Philippine Sports Commission (PSC) will provide track and field ovals for open public use in Pasig, Manila, and Baguio. Engagement in people-oriented health activities like fun runs, Zumba, and grassroots sports competitions is encouraged to address increasing obesity among Filipinos. LGUs were encouraged to open parks and plazas and implement Car-Free Sundays to promote physical activity. The government will continue to push the development of national sports through competitions like the Palarong Pambansa and Batang Pinoy Games. A new national sports program is planned for public schools, emphasizing the revitalization of sports clubs, intramurals, and competitions. President Marcos also acknowledged prominent Filipino athletes like Senator Manny Pacquiao, Hidilyn Diaz, Carlos Yulo, EJ Obiena, Alex Eala, and the Philippine Men's Curling Team. Healthcare Healthcare remains a top government priority, alongside education and poverty reduction: At least one doctor has been deployed to every city and municipality across the country. The President declared the upgrading of public hospitals through the opening of 53 Bagong Urgent Care and Ambulatory Service (BUCAS) facilities across 32 provinces. These centers offer free checkups, X-rays, laboratory tests, and outpatient care. PhilHealth now covers heart disease treatments (stents, open-heart surgery, valve replacement, post-kidney transplant care) and provides free year-round dialysis treatments, including associated drugs. A Cancer Assistance Fund was launched, making funds available for HPV vaccines and allocating PHP 1.7 billion for cancer patient medicines not covered by PhilHealth. Increased PhilHealth coverage also includes a maximum of PHP 47,000 for severe dengue in children, an increase from PHP 16,000 to PHP 87,000 for cataract operations, and coverage for therapy and assistive aids for individuals with disabilities (PWDs). Procedures for seeking medical aid will soon be integrated into the eGov PH app for greater accessibility. Infrastructure & Utilities The administration continues to prioritize access to power, clean water, and modern infrastructure to drive inclusive growth: 2.5 million households now have electricity, with 3 million remaining a priority. Around 200 new power plants are targeted for completion in the next three years to electrify 4 million households, over 2,000 factories, and about 7,000 offices and businesses. The Department of Energy (DOE) and the National Electrification Administration (NEA) will extend power to areas with limited electricity access. Plans include electrifying 1 million more homes using solar home systems by 2028. The DOE will push the Net Metering Program to help lower electricity costs, and the Lifeline Rate subsidy will be expanded to benefit more low-income families. A state of calamity was declared in Siquijor due to power issues; President Marcos Jr. ordered DOE, NEA, and ERC to restore electricity by year-end and implement long-term solutions. Government large-scale projects prioritize bulk water supply and access to potable water, especially for island communities, addressing the over six million consumers still facing poor water service. The Local Water Utilities Administration (LWUA) is taking strong action against underperforming water districts. The Build Better More program continues, including the building and upgrading of roads, bridges, railroads, airports, seaports, irrigation facilities, and public housing. Announced enhancements in mass transport include more fare discounts for LRT and MRT passengers. Free Love Bus Revival and Other Projects President Marcos Jr. highlighted progress in infrastructure projects: The "Love Bus" free public transport service will be brought back, starting in Davao and Cebu, and eventually expanding throughout Visayas and Mindanao. Large-scale transportation and infrastructure projects include the completed Nalil-Sikkiat Bridge in Tawi-Tawi, the Bataan-Cavite Interlink Bridge (construction to start before year-end), and the Malassa-Lupa Pula Bridge (expected to open in 2026). Rehabilitation efforts are underway for the PNR Bicol Line, Binahan Bridge, and SLEX Toll Road 5. The Mindanao Transport Connectivity Improvement Project is under active development, and rehabilitation of Guadalupe Bridge is in progress. The President cited the collapse of the PHP 1-billion Cabagan-Sta. Maria Bridge in Isabela, emphasizing that the safety of hanging bridges, particularly in rural regions, is now a top priority. Internet Connectivity Significant strides have been made in countrywide internet speed and connectivity: Completion of Phases 1, 2, and 3 of the National Fiber Backbone Project has significantly boosted internet infrastructure. The administration has fixed 19,000 free Wi-Fi hotspots nationwide. Over 1 million SIM cards offering free data were distributed, particularly to schools in disadvantaged areas. The government has accelerated the rollout of cellular towers in Geographically Isolated and Disadvantaged Areas (GIDAs). The President assured that the entire public school system will be internet-enabled by the end of 2025. eGovPH App Expansion Launched in 2023, the eGovPH application has expanded to include over 40 government services, such as driver’s license renewal, PhilHealth, Pag-IBIG, and GSIS management, customs and immigration declarations, OFW document access, bio-data creation, and national/government ID management. Future services include NBI Clearance and Beep Card integration for MRT/LRT and eTIN services from the Bureau of Internal Revenue (BIR). LTO Backlog Clearance The Land Transportation Office (LTO) has resolved the motorcycle license plate backlog since 2014. The administration instructed the agency to issue new vehicle plates and registrations within three days. Peace and Security The President highlighted progress in peace and security: Hundreds of former rebels have been successfully reintegrated into society, receiving livelihood and community development assistance. There are no more active guerrilla fronts, and efforts are focused on preventing their return. The modernization of the Philippine National Police (PNP) and Armed Forces of the Philippines (AFP) continues with new firearms, vehicles, and equipment. The AFP, PNP, and former rebels are now collaborating to achieve peace in the Bangsamoro Autonomous Region in Muslim Mindanao (BARMM). Crime and Human Rights The administration is actively investigating cases of missing individuals connected to illegal sabong syndicates. The President reiterated commitment to uphold human rights and pursue accountability. Anti-Drug Campaign The administration confiscated around PHP 83 billion in illegal drugs. More than 153,000 people have been detained, including over 9,600 high-value detainees and 677 government officials. Foreign Policy The President reasserted the country's independent foreign policy, declaring, "A friend to all, an enemy to none." Key foreign policy achievements include the release of Filipino hostages by Houthi rebels with assistance from Oman, clemency granted to over 600 overseas Filipinos in UAE, Qatar, and Bahrain, and the Philippines hosting the ASEAN Summit in 2026. Disaster Preparedness The government is actively improving disaster preparedness and response to climate change: Active use of advanced technology, including Doppler radars, seismic stations, and command cars, is enhancing early warning systems and emergency response. Proposals to build modern evacuation centers aim to avoid disrupting school activities. The President emphasized discipline, vigilance, and solidarity in saving lives during calamities, calling on citizens to participate in preparedness programs, engage in drills, obey evacuation orders, practice proper waste disposal, and assist others during crises. Appeal to the People The President called on the Filipino people to maintain their focus on the country's direction toward progress, promoting patriotism, courage, diligence, and compassion as fundamental Filipino values that foster change. He concluded his speech by saying: "Tayo ito. Tayo ang Bagong Pilipino." Strategic Implications for Corporate Directors President Marcos Jr.'s 2025 State of the Nation Address presents a clear roadmap for inclusive growth, digital transformation, and enhanced governance. For board directors, the SONA underscores the critical importance of aligning corporate priorities with these national development goals. Specifically, boards should consider strategic partnerships that support: Micro, Small, and Medium Enterprise (MSME) development: Leveraging government initiatives for loans and training. Workforce upskilling and and reskilling: Supporting programs that align with the government's focus on tech-voc integration and digital literacy in schools. Agriculture modernization: Exploring investments and collaborations that enhance food security and support farmers. Expanded access to education and healthcare: Identifying opportunities to contribute to these vital social sectors. The administration’s commitment to merit-based programs, TVET integration, and digital tools in schools calls on businesses to strengthen talent pipelines, support scholarship and internship programs, and invest in digital inclusion. Infrastructure, energy, and connectivity were again emphasized as national enablers. With over 200 power plants, mass transport upgrades, and digital infrastructure projects in the pipeline, corporations in construction, utilities, real estate, and telecommunications can actively engage in public-private partnerships and green investments. The administration's efforts to expand access to clean water, reliable electricity, and affordable internet—especially in rural and underserved areas—offer strategic openings for inclusive innovation and long-term growth. Finally, the President’s renewed call for unity, ethical leadership, and patriotism places a significant spotlight on corporate governance. Boards are strongly encouraged to lead by example, embedding sustainability, accountability, and and stakeholder responsiveness into their core strategies. As the country enters a critical stage in its post-pandemic recovery, ICD members play a vital role in shaping organizations that not only deliver shareholder value but also contribute meaningfully to the broader vision of a resilient and equitable Philippines.

By: Ma. Aurora D. Geotina-Garcia, FICD Fellow Institute of Corporate Directors For decades, diversity, equity, and inclusion (DEI) initiatives have played a significant role in creating inclusive workplaces, which contributed to women achieving progress in society, particularly in business and leadership. Yet, as with any advocacy, there are shifts in perspectives, and DEI is now facing a crossroad. While some corporations, like Facebook (now Meta), have reduced or eliminated DEI as a priority, institutions like the Vatican are breaking new ground by appointing women to senior roles. This tension between corporate retreat and societal advancement leads us to question: Is DEI still relevant, or has it become a passing trend? DEI in the corporate world: Retreat or recalibration?  The evolution of DEI has reshaped the corporate landscape. Historically, many companies viewed DEI initiatives as a moral and ethical obligation. However, over the past decade, a broader understanding emerged: diversity isn’t just “nice-to-have,” it’s a strategic advantage. A 2023 McKinsey and Co. report revealed that businesses with more diverse leadership are 39 percent more likely to outperform their peers in profitability. Despite these benefits, DEI faces criticism. Meta, for instance, scaled back its DEI efforts citing “shifting legal and policy landscape,” questioning whether the costs outweigh the benefits. According to Forbes (2025), some critics argue that corporate DEI programs have become too focused on quotas or symbolic gestures rather than driving real systemic change. Undeniably, this necessitates a delicate balance. On the one hand, DEI is about promoting a workplace culture that values diverse experiences and perspectives. On the other, it requires ongoing evaluation and recalibration to ensure that it does not become a box-ticking exercise. For DEI to work, it must be approached as a long-term commitment to transformation, not just an annual initiative. A broader view: Gender inclusivity in the Vatican.  In striking contrast to the corporate world, the Vatican recently made history by appointing a woman, Sister Raffaella Petrini, to the highest-ranking position ever held by a female in the Vatican’s governance structure. This move signals the Church’s commitment to inclusivity in one of the most traditional and male-dominated institutions globally, expanding beyond business and politics into cultural and religious institutions. This is a powerful reminder that DEI efforts need not be confined to the corporate sector; social change can happen anywhere, and the appointment of women to leadership positions in religious institutions signals a transformative shift toward equality in all domains. DEI in the current and future environment.  The views on DEI vary across different regions and industries. A 2022 PwC survey revealed that while 85 percent of organizations believe DEI is crucial for success, 31 percent see it as a barrier to their progression. These mixed sentiments suggest that many business leaders are rethinking how to approach DEI, especially in light of shifting economic priorities. These global concerns are mirrored in the Philippines. In some industries, DEI is viewed as a marketing tool rather than deeply embedded in a company’s DNA. The Philippine Women’s Economic Network (PhilWEN), through the Philippine Business Coalition for Women Empowerment (PBCWE), advocates for DEI by demonstrating how it can be a catalyst for business success. A recent census conducted by the PBCWE shows a steady increase in the number of women in leadership roles in publicly listed companies across various industries in the Philippines. However, challenges remain in ensuring equal representation at the top levels. For PhilWEN and many Filipino businesses, the future of DEI lies in its integration into every facet of the company—from hiring practices to leadership development. Global surveys such as those from Glassdoor show that three in four job seekers consider diversity and inclusion as consideration in their choice of potential employers. This means that DEI is not just a trend but a key factor in creating a long-term employer-employee relationship. The path forward: Why DEI matters.  As we move further into 2025, it is clear that DEI is not fading but evolving. For some companies, this evolution means refining their DEI approach to focus on systemic change rather than just representation. While some companies may question the long-term viability of DEI, we should stand firm and believe that it is more than just a passing trend—it is a necessary evolution for every sector, including business, politics, and culture. As we look back on the significance of Women’s History Month, let us reaffirm our commitment to advancing gender equality and social justice through effective, meaningful DEI strategies. By doing so, we ensure that women, and all marginalized groups, have an equal stake in shaping the future. ————— Ma. Aurora “Boots” Geotina-Garcia is founding chair and president of PhilWEN, and governing council chair of PBCWE. ————— Women Who Lead is an initiative of PhilWEN. Disclaimer: On April 3, 2025, “Divergent perspectives on DEI: Is it still relevant?” was published. It was authored by Ma. Aurora D. Geotina-Garcia, a fellow of the Institute of Corporate Directors. You can read here:

By: Mr. Michael M. Calma, FICD Fellow Institute of Corporate Directors (Part 1 of 3) Last 29-30 May, the Institute of Corporate Directors Technology Governance Committee (ICD TGC) hosted an online seminar entitled: “Beyond the Algorithm: Exploring the Cybersecurity and AI Revolution.” The two-day event brought together more than a hundred board directors and senior executives of publicly listed companies, government agencies and MSMEs. (Because nothing says “AI revolution” quite like buffering Zoom connections and “Can you hear me now?” moments.) At the ICD TGC, our goal is simple: to demystify AI and cybersecurity for boards so they can govern effectively in this new era. Or at least ask slightly smarter questions at the next board meeting. Fresh off the grill — here are your nuggets of insight, expertly curated from our speakers and served with a side of straight talk: Henry Rhoel Aguda , secretary of the Department of Information and Communications Technology: Speed is survival . Speed is no longer a competitive edge. In the AI space, it’s a requirement for survival. Risk isn’t a brake, it’s a compass . If you identify an AI technology risk — that becomes a future market advantage for you. People must remain at the center of tech decisions . It’s so easy to get lost in the narrative of AI — but ultimately it redounds to how it affects people’s lives. Jennifer Tongco , president, CEO and founder of Netrust Philippines: Cyber risks require board-level attention . AI and cybersecurity governance are now boardroom issues — not just technical concerns. The board is ultimately accountable for cyber risk and AI transparency . The board is ultimately accountable for cyber risk. One of the most important questions boards should ask is: How did the AI arrive at that decision? If no one can answer that, that’s a warning sign of falling behind in AI and cyber governance. Actionable governance starts with visibility . Start with an inventory of all AI tools being used across the organization. Paul Albert Sy Santos , lead consultant at Arrows Consulting: Boards must ask higher-order questions, not just use buzzwords . Let’s avoid asking, “Are we using AI?” Instead, ask: “What specific business problem are we solving with AI — and how will we measure its success?” AI strategy must link directly to shareholder value . If your AI project doesn’t tie back to margin growth, cost containment, or risk reduction, it’s not a strategy — it’s a science project. Balance speed with governance . Let me challenge the panel a bit — should boards slow down innovation to manage risk, or speed up innovation and embed risk along the way? In Part 2, we will distill the takeaways from the speakers of Day 2. Disclaimer: On June 21, 2025, “Back to Basics” was published. It was authored by Mr. Michael M. Calma, FICD, a fellow of the Institute of Corporate Directors. You can read here:

By: Dr. Carlos P. Gatmaitan, FICD Fellow Institute of Corporate Directors Let me share a true story of a dilemma faced by a Board of Directors of a fast-growing dealership in Cebu not too long ago. Typical of a well-run business that has grown so fast, its exposure to risk has grown exponentially as well. Variances of forecasts were alarmingly volatile, having insufficient attention to the necessity of a Risk Management Framework for strategic governance, risk avoidance, and potential impacts of the market fluctuations, technology changes, human capital, economic ups and downs… and so on. Thankfully, the creation of a more structured approach to addressing these inevitables were put in place. One of the major outputs was the creation of an Internal Audit Department, which represents the gist of this article. So, what role does the Internal Audit (IA) Department play?  Surely it is understood to be a compliance mechanism, one wherein internal controls are strengthened, however, the IA has evolved to become much more than this. The IA these days provides a strategic function that provides valuable insight and foresight into the corporation’s risk landscape aside from operational effectiveness — a coach to the Board and the CEO as well.  To perform this role effectively, the Internal Audit Department must operate with full independence and professionalism. It reports functionally to the Board — through the Audit and Risk Committee — and administratively to the CEO, allowing it to escalate issues without interference. This reporting line enables auditors to carry out their responsibilities objectively and to maintain freedom from undue influence in the performance of their duties. A sound Internal Audit Charter provides a formal mandate, granting the department unrestricted access to records, personnel, and resources necessary to carry out its work. It also empowers the department to determine audit scope, allocate resources, engage external expertise, and communicate results directly to the highest levels of governance. A cornerstone of effectiveness is the commitment to The Institute of Internal Auditors’ Global Internal Audit Standards, including a Quality Assurance and Improvement Program (QAIP). This ensures that the internal audit function operates in alignment with global best practices and that its performance, ethics, and quality are continuously assessed and enhanced. Internal auditors must embody principles of integrity, objectivity, competency, confidentiality, and due professional care — while avoiding any roles that might impair their independence. At the center of this function is the Chief Audit Executive (CAE). The CAE leads the Internal Audit Department, ensuring the team possesses the right skills, methodologies, and resources to meet its mandate. The CAE is responsible for developing an annual risk-based audit plan, reporting performance and risk insights to the Board, and adjusting the plan in response to evolving risks. The CAE must also communicate any limitations in scope or independence, and ensure that all findings and recommendations are clearly reported and followed up on. The scope of Internal Audit’s services is enterprise-wide, covering all units, assets, and operations. These services include both assurance — evaluating the effectiveness of governance, risk, and control systems — and advisory engagements that may identify improvement opportunities. Internal Audit may also provide operational support services when requested by management, as long as it does not assume operational responsibility or audit its own work to preserve objectivity. Audit engagements often assess whether: risks are well managed; operations align with objectives; laws, regulations, and policies are followed; data integrity is maintained; and resources are used efficiently. In doing so, Internal Audit acts as a proactive guardian of value, offering clarity in uncertainty and helping management navigate complex operational and regulatory environments. In summary, the Internal Audit Department is a critical partner in achieving sustainable organizational resilience, integrity and performance. Its independence, professionalism, and strategic insight enable it to fulfill a vital oversight role while driving continuous improvement across the enterprise. Through an IA charter and its practical application, the IA supports the Board and Management in making informed, ethical, and forward-looking decisions for the organization’s sustained success. A sound IA approach is essential for sustainable success. Your shareholders deserve and demand it! Disclaimer: On May 18, 2025, “Internal audit: A strategic governance imperative for board directors” was published. It was authored by Dr. Carlos P. Gatmaitan, a fellow of the Institute of Corporate Directors. You can read here: