How businesses prepare for disruption

MANILA, Philippines — Rising costs, changing consumer habits, supply-chain interruptions and extreme weather are testing how Philippine businesses operate.

While companies cannot predict every disruption, they can prepare by managing their finances carefully, understanding their risks and making investment decisions with the long term in mind.

For SM Investments Corp., the parent company of the SM Group, resilience means building businesses that can withstand difficult periods without losing the ability to invest for the future.

“Financial discipline gives businesses room to respond when conditions change,” said Erwin Pato, executive vice president for Finance, Treasury and Planning at SM Investments. “A strong balance sheet, healthy cash flows and careful investment decisions allow us to manage risks while continuing to pursue opportunities for long-term growth.”

SM’s business structure supports this approach. Its core businesses in retail, banking and property serve different but related needs. Retail provides everyday goods, banking supports households and enterprises, while property develops places where people shop, live and work.

Each business has its own management, financial resources and growth plans. Their ability to fund their own expansion allows SM Investments, as the parent company, to benefit from their growth and the dividends they generate without having to finance all that expansion itself.

This gives SM Investments greater flexibility when economic conditions change. While each business faces its own risks, their different sources of earnings help reduce the Group’s dependence on any single sector.

“Businesses cannot control every change in the market,” Pato said. “What they can control is how well they manage their resources, assess risks and prepare for different conditions.”

Financial strength, however, is only part of resilience. In a country exposed to typhoons, flooding and earthquakes, businesses must also consider how physical risks could affect their operations.

SM Engineering Design and Development Corp. (SMEDD) helps plan, design and engineer SM developments with attention to the environmental, geological and operational conditions of each location.

“Resilience begins long before a building opens,” said architect Fides Hsu, SMEDD’s chief design architect. “It means understanding the risks at a particular location and taking them into account in how developments are planned, designed and built.”

These decisions affect more than safety. Developments designed with local risks in mind are better placed to withstand disruptions and resume operations.

The same thinking applies to how businesses use energy and materials and manage waste. Improving efficiency can help manage operating costs, reduce dependence on resources and make businesses less vulnerable to disruptions.

For SM, sustainability is part of how businesses manage risks and improve operations, rather than a separate undertaking.

Preparing for the future also means investing in businesses that address the country’s long-term needs.

Through Philippine Geothermal Production Company (PGPC), SM has invested in geothermal energy, a renewable source of baseload power. PGPC’s steam fields in Mak-Ban and Tiwi support approximately 400 megawatts of generating capacity, contributing to the country’s need for reliable electricity.

In logistics, SM’s investment in 2GO provides a presence in the movement of goods and people across the Philippines, where dependable transport remains essential to businesses and consumers.

These investments serve different markets, but both address needs that will remain important as the economy develops.

The aim is not to expand for the sake of expansion. It is to invest in areas with lasting demand while allowing each business to develop its own capabilities and opportunities.

Across the Group, experience in financial management, operational planning, risk assessment and resource efficiency can also be shared where relevant. The businesses remain independently managed, but lessons learned in one can help another address similar challenges.

No company can predict the next disruption, whether it comes from the economy, the climate or changes in consumer behavior. What it can do is prepare.

For SM Investments, that means maintaining financial discipline, strengthening the businesses it owns and investing in areas that meet the country’s long-term needs.

The objective is not to avoid every setback, but to remain strong enough to manage one and continue growing beyond it.