RISK MANAGEMENT

Globe’s Risk Management philosophy is based on three key pillars of Structure, Process and Culture.

STRUCTURE. We strive to cultivate an organizational structure that supports strong

corporate governance, clearly defines risk taking responsibility and authority, facilitates
ownership and accountability for risk taking, and ensures proper segregation of duties.

PROCESS. We strive to sustain sound processes that facilitate the identification,

assessment, quantification, mitigation, management, monitoring and communication of
risks at the enterprise and operational level. We also regularly review our RM processes
and policies on a continuing basis and stay abreast of current developments to ensure
that we remain robust and relevant, through benchmarking against industry and global
best practices.

CULTURE. We strive to nurture a risk aware culture by setting the appropriate tone at the
top, defining clear accountability for risks, espousing transparency and timeliness in
sharing risk information, enabling risk-adjusted decisions, recognizing appropriate risk-
taking attitudes, and embedding the right risk skills across the organization (Globe
Integrated Report, 2017).

The company believes that practicing Risk Management effectively plays an essential role in sustaining
profitability and resiliency as a company. It ensures that their Risk Management remain a core capability
and an integral part of how decisions are made within the organization to provide value to their
shareholders. According to Rizza Maniego-Eala, Chief Finance Officer and Chief Risk Officer of Globe
Telecom, Globe enables its employees to be aware of possible risks, advising them how to react properly
and reminding each other to remain committed to the company’s purpose, values and principles (Globe
Integrated Report, 2017).

Globe uses the ISO 31000 framework for Risk Management as the basis of their processes. The Company
closely monitors the plans and actions being taken to assess critical risks which includes the
institutionalization of key risk and performance indicators to assess management of critical risks. This
process is reviewed by the Management Team, which monitors enterprise-level risks such as strategic,
major programs and regulatory risks; and the Business Team and Group Heads Team that handles
operational, legal and project risks.

Taken from Globe’s annual report on Risk Management, some of the principal risk factors faced by Globe
Telecom are universal, while some are exclusive to the telecommunications industry:

a.) The Political and Socio-Economic situation of the Philippines may influence Globe Telecom’s
growth and profitability, for any political instability in the country will bring-fourth negative
impact on the general economy which, in turn, could affect the business operations and financial
condition of the company. The potential changes that can negatively or positively affect the
industry include pressure to improve network performance, pressure on pricing, potential entry
of foreign telecom players, improved LGU support and promised infrastructure spend. An
environmental scanning exercise is performed regularly to identify any uncertainties arising from
these political and socio-economic factors. There is also a close monitoring of shift in policies to
 estimate impact on business plans, and to maintain an open communication to the governmental
sectors.

b.) In order to fund major expenditures of the company, Globe has entered short-term and long-term
debt obligations and ultimately exposes them to Financial Risks in changes of interest and
currency rates. These risks are being managed through regular evaluation of projected and actual
cash flows, and continuous assessment of financial market conditions to pursue fund-raising
activities when needed.

c.) Competitions in the telecommunications industry remains intense as the current operators seek
to increase market share with aggressive offers and new entrants continue to heighten the
competitiveness among the mobile and telecommunications market. Cheaper alternatives to
communication also contribute to the risk of competitions driven by the proliferation of
affordable smartphones and internet-capable devices. The continued growth of the industry
depend on many factors, and any significant changes on the economic, technological and
regulatory development may result in either a slowdown or growth in demand for mobile services.
Globe asserts its market position by offering personalized text, calls and mobile data plans,
product or device bundles and focusing on customers’ needs and experiences.

d.) Globe Telecom is regulated by the National Telecommunications Commission, an attached agency
of the Department of Information and Communications Technology, for its telecommunications
business and the Securities and Exchange Commission with Bangko Sentral ng Pilipinas for the
other aspects of their business. The newly-formed Philippine Competition Commission inspects
the company’s mergers, acquisitions and related transactions to effectively level the playing field
of businesses and penalize those who abuse market dominance.

According to Globe Telecom, “The introduction of, changes in, or the inconsistent application of
laws or regulations from time to time, may materially afect our operations, and ultimately our
earnings which could impair our ability to service debt. There is no assurance that the regulatory
environment will support any increase in our business and financial activity” (Globe Telecom
Annual Report, 2016). The company manages its regulatory risks through regular monitoring of
regulatory rulings, more importantly those that may impact its businesses and proactive regulator
engagement negatively.

e.) Data traffic has been placing a strain in Globe’s network capacity as well as its supporting back
end systems due to rising popularity of smartphones and mobile data applications, which
negatively impacts customer experience. To manage Consumer Preference and Technology Shift
Risks, Globe’s product and technical teams continue to improve and invest in its technologies and
infrastructures. Crucial changes in the company’s network infrastructure are being pursued
mainly to improve network quality, anticipate the surge in voice and data traffic, decrease total
cost of ownership and make the network robust enough to meet future needs.

f.) Leading the digital lifestyle for our customers and diversification of our business portfolio is critical
to maintain our market competitiveness. Failure to drive the entire organization to quickly adapt
work practices and make the right shift in skills and competencies necessary for us to lead in the
digital space and forge into adjacent spaces may lead to missed business opportunities (Globe
Annual Report, 2016). Organizational Agility Risk is being managed by cultural change programs
 focused on customer centricity and innovation. Globe continues to build leadership structures
and system team that supports an “agile, future-ready and customer-centric” organization.

g.) Globe’s greatest asset is its people. To manage risks concerning Human Capital, the company
offers programs designed to engage and consistently motivate its employees, as well as to attract
key talents in the future. Through Kickstart Ventures, Globe has invested in building to scale the
technical foundation of digital and technology start-up businesses operating in the Philippines.

h.) Globe is recognized as one of the country’s top companies which provides for innovative services
and superior customer service while maintaining a socially responsible business. With this, it is
exposed to Reputational Risks that may result from their actions or of the competitor’s, which
negatively affects its operations and customer relationship. To manage feedbacks effectively and
efficiently, Globe trains front line staffs to enable them to effectively handle customer cases. They
also conduct monitoring of online sentiments of their customers to quickly detect issues surfacing
in social media platforms.

i.) Globe also faces Compliance Risks of Cyber Threats, Data Privacy, Business Disruptions, Revenue
Leakage, and Fraud. In managing compliance risks, Globe ensures to continue to strengthen and
enhance its existing security detection, vulnerability and patch management, configuration
management, identity access management, events monitoring, data loss prevention and
network/end-user perimeter capabilities. They also provide hazard identification and risk
assessment for Globe Telecom’s operations, activities, events, and infrastructure. Furthermore,
Globe establishes an effective framework of business continuity management for the organization
to effectively respond to threats such as natural disasters, equipment failure, data breaches and,
in effect, protect its business interests (Globe Annual Report, 2016).

8PS

PLACE – Globe engages with and values its customers by providing convenient and accessible connections
with them. As of 2018, there are 241 reported stores and kiosks nationwide, where customers are able to
inquire and subscribe to wireless, broadband and fixed line services, pay bills, purchase accessories and
request repairs.

They also have an official website (https://globe.com.ph) where people can get in-touch with the latest
news and events, access investments, apply for a job position and reach their customer help and support
system. On the other hand, Globe Online Shop (https://shop.globe.com.ph) is also made available to the
customers for them to shop online their products and services such as postpaid and prepaid plans,
broadband and prepaid WiFi, phones and devices, and Globe Life which includes lifestyle products such
as Go! Magazine for entertainment updates and the 0917 Apparel.

Globe Sales Hotline is (02) 730-1010 where customers in a hurry may course their product inquiries and
application. Dialing *143# into your phones also gives subscribers a menu which is the most convenient
way for Globe Prepaid, Postpaid and TM subscribers to access their load balances and billing information,
and avail of downloads, promos, and other services.
Online mobile transactions are also made possible by Globe Telecom with their mobile app called GCASH.
It “turns your mobile devices into a virtual wallet” where you can Cash-In and Cash-Out money, and also
offers services such as GCASH QR which enables users to pay bills using QR codes—cashless, buy or borrow
Load, send money and make Bank Transfer, pay Bills with over 82 partner billers, shop online, make
investments using GInvest and accumulate GCredit and GScore starting at P3000. The GCASH App is
released on March 23, 2012 by Mynt – Globe French Innovations, and is available on Google Play Store
and App Store.

PRODUCTS – Globe offers a wide range of products and services including Prepaid, Postpaid and TM plans,
and some with mobile phones subscription. Postpaid loads can be customizable or personalized
depending on the preference of the user based on their lifestyle, needs, consumption levels and more.
Users can either choose unlimited texts and/or calls to all or Globe and TM networks, or add mobile data
for surfing the internet. Globe also offers landline, broadband and WiFi connections with the Globe At
Home services. They also started to sell handsets, mobile accessories and merchandise available at their
retail stores nationwide, including the 0917 brand apparel such as shirts, hoodies and jackets. Globe also
has partnered with HOOQ, Spotify, iWantTV and other entertainment platforms as an additional promo
for their prepaid users, at a lesser or free monthly subscription price.

To survive the intense market competition against other telecommunication companies, Globe maintains
its large market share by continuous assertion of their our market position through the offering of
personalized plans and attractive product/device bundles, and launching innovative products and services
that are relevant and responsive to the needs of the customers and focusing on superior customer
experience. They also partnered with leading providers of content, mobile messaging, social media and
other popular applications in order to provide products and services that anticipate and cater to shifting
customer preferences.