II.

Risk Exposure

1. Project Execution and Timely Delivery(Medium) - The Company continues to benefit

from the construction industry’s better performance, particularly in the residential and retail
sectors. As the company expands its footprint across the country, continued pressures are felt
on the following areas, among others: keeping development costs competitive, attracting
qualified and dependable contractors and suppliers and ensuring that quality standards are
consistently applied across all projects in various geographies.

2. Organizational Risk (High) - This is the key reason why organizational development
should be on top concern. Employees are recognized for their contributions to the company
and are continuously empowered through professional development opportunities, thus the
company continues to tap diverse sources to ensure that there is adequate and quality
personnel to meet the demands of the business. The company performs organizational climate
surveys on a regular basis to measure employee engagement and give additional controls to
address areas where engagement is less than optimal.

3. Environmental Risk (Medium) - The company recognizes that unfavorable environmental

challenges like as natural disasters, water shortages, climate change effects, earthquakes, and
other similar events may have an impact on Ayala Land’s operating properties and ongoing
projects. All land acquisitions and project launches must pass a thorough technical due
diligence process and environmental scanning to identify all other potential risks to which the
company may be exposed in order to mitigate the risk of changing environmental and site
conditions and as part of a more thorough due diligence process. Environmental studies are
included in these technical due diligence reports, but they are not limited to, not only for the
individual property parcels, but also for the surrounding areas.

4. Financial Risk (High) - Major financial choices are aimed toward capital and cash flow
efficiency and availability to support the company’s development ambitions in the next years.
With capital expenditures of P85.4 Billion in 2016 and a continuous growth in project
launches, the corporation must guarantee that it has appropriate finance capacity. The treasury
division has established a three-layered approach to liquidity management to centrally
manage financial risks, including prudent management of sufficient cash, money market
placements, and high-quality and marketable securities, a continuous program for the sale of
receivables, and the maintenance of ample short-term revolving facilities from both domestic
and foreign banks. To proactively manage its liquidity situation, the company uses scenario
analysis and contingency planning.

5. Government and political risk(High) - the country’s general political and economic
climate drives the expansions of the local real estate industry and specialized commercial
sectors like hotels and resorts, which are part of the company’s expanding portfolio.
Furthermore, when the company expands into new development centers, there is a greater
need to build positive connections with local government agencies in these areas. Recent
changes in the domestic and international political scene have created market volatility, which
might negatively impact various business lines as well as the company’s overall operating
capabilities and development ambitions.

6. Company Fraud Risk(Medium) - The company has often stated its dedication and loyalty
to its ideals and to doing things correctly. However, the company knows that there are
chances for fraud because of the company’s significant contacts with vendors and contractors,
as well as the industry’s overall susceptibility to this sort of risk. The company has
established a code of ethical behavior for all employees, a code of ethical procurement
process, and a vendor’s code of ethics to promote a culture of transparency within the
company and to guide both employees and vendors in determining acceptable and ethical
business and conduct.