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Roald Dahl, one of the greatest children’s book authors, once said, “A little nonsense now and then, is cherished by the wisest men.” This came to my mind when I heard that some executives are hooked on Pokemon Go. Pokemon Go is an augmented reality geo-tagging game for your tablet or smartphone. Some of the characters can be caught in real time in the office, public spaces or even roads. This is the latest mobile game sensation that has captured the interest of tech savvy millennials, and apparently, of many company executives. So, is the idea of executives playing computer games like Pokemon Go nonsensical? Does it only make sense if these games are played only by millennials, even those who are company employees? Is it okay if the games are played during office hours? Does playing computer games on company hours affect productivity? We were asking the same things when Facebook was being introduced. In our age demographics, where the veterans are mainly retired and the baby boomers are retiring or near retirement, many found Facebook counter-work-productive while the Generation X’ers and the early millennials (who are now the management) were able to use Facebook to their business advantage. Facebook has become so common and omnipresent that it is being used literally every minute. Executives, nowadays, use Facebook while in transit, while waiting for a client to show up for a lunch or dinner appointment, or even while a meeting is ongoing. In essence, Facebook is now used during company hours. (By the way, at P&A Grant Thornton, everyone has been granted access to Facebook.) But Facebooking is way different from computer gaming. Facebooking is usually a quick peek on posts of friends while gaming is too engaging and takes time. Gaming is literally taking a longer break from work. A bit like playing golf. However, unlike golf where executives play with clients and, therefore, takes the form of a marketing activity, computer gaming is usually by the player’s lonesome and therefore totally personal in nature. Despite this, studies have shown that many computer games have educational, physical, and psychological benefits for players. Some train the brain to perform better in real-life situations and video game brain training has the same effect as reading a book because they make the brain learn and thousands of neurological connections are made. Games are even touted to mold leaders as players develop skills like collaboration and building alliances, efficient use of resources, focus on strengths, and confronting enemies. Realizing this, smart teachers, educators and trainers have included plays and games in their learning sessions. Silicon Valley companies are now into gamification, the process of incorporating gaming elements (game mechanics and psychology) into their work processes to improve employee engagement and productivity. Gaming is also mainly about taking a break. We all know that work breaks help reduce stress, improve concentration and focus, and increase productivity. Schoolchildren become more attentive to academics after having recess; so how different are we from them? Thus, companies are mandated to have regular work breaks, usually called coffee breaks, in the morning and in the afternoon. At our company, P&A Grant Thornton Outsourcing, Inc., we even have a “Me Time” — a ten- minute lights off break (in addition to the regular breaks) where everyone is encouraged to do their personal stuff including Facebooking, playing, chatting, meditating, walking around, reading magazines and probably playing Pokemon Go. Me Time is into its third year and is still warmly embraced by the staff. But there also has to be a balance between breaks, playing games and getting back to work. Game addiction is also a growing problem not only among children but also among workers. It takes someone with significant self-control to walk away from an ongoing game because a break has ended. Does playing computer games on company time improve productivity? We haven’t come across a study correlating gaming during office hours with productivity. We have heard of Silicon Valley types of companies where gaming is totally allowed but the employees are technically not working by the clock but by deliverables. Even then, with gamification, these companies are weaving the games into the work making full time gaming by employees irrelevant. How about management playing games? I’ve heard of executives who play Sudoku and Solitaire and of younger managers who play DOTA 2 and League of Legends, all popular and addictive computer games. Almost all play outside company time. All of them call it relaxing and de-stressing and they believe they sharpen their mind and their reflexes. Roald Dahl is right all along – smart people know that indulging in nonsensical things, now and then, can be a cherished thing. Jessie Carpio is a Partner and Head of BPS/Outsourcing of P&A Grant Thornton and concurrently President of P&A Grant Thornton Outsourcing Inc., an entity wholly owned by P&A Grant Thornton. P&A Grant Thornton is one of the leading Audit, Tax, Advisory, and Outsourcing firm in the Philippines, with 21 Partners and over 700 staff members.

Internship, Practicum, On-the-job training (OJT); we call it by different names. But it is simply an opportunity offered by business establishments mostly to students interested in their industry—a supervised practical training for students at the company’s offices.

Whenever one hears about bank secrecy law these days, there’s always a controversy attached to it. Recently, it was mentioned in the Senate hearings on the proliferation of drugs and illegal activities in our country. Before that, it crept up in impeachment proceedings on graft and corruption, investigations on tax evasion cases and international discussions on financial reforms.

Professional service firms, as unique organizations, cater to the needs of companies across various industries through vending time, knowledge and expertise of skilled individuals. With talent as the core of our business, it comes as no surprise when the business strategy starts to shift from being R.O.I-centric to being people-centric. We call it the “People Strategy”.

We are all familiar with the refrain: Management finds employee performance to be slacking off while certain routine matters are flagging. What are the common responses to an issue and what are needed to provide or revive knowledge and skills within an organization? The typical answer, of course, is training. While effective, if designed and implemented right, one would think at some point whether training is the only solution, and how does it really impact on the business strategy. Many companies, especially the more progressive ones, now look at learning solutions as an integral part of their business strategy. They adopt a broader perspective and approach for assessing and meeting their organizational requirements. Based on my experience with some of these organizations and their leaders, I have chosen three key principles, which I now put forward to other companies for consideration and, if deemed appropriate, apply them. They are: Make the Learning & Development (L&D) group your internal business consultants The L&D group is often looked at in an organization as just a provider of training and seminars. This calls for a change in mindset, from being a training provider to an internal consultant. As consultants, their value comes from them being able to understand the “business” of the company, including how it operates, its product and service offerings, its constituents, its business strategy, etc. Thus, when a problem that is initially identified as a training issue is given to the L&D group, they should first find out what the business and performance requirements are, determine the issues and the root causes of such problems, and only then recommend the appropriate solution. In some cases, it may turn out to be outside the scope of L&D. This should be fine. But thinking only like trainers, on the other hand, would often limit them to the discussions they have with you and their solutions might just be too focused on the training needs. That will prevent them from seeing the bigger, truer picture. So, how do you make them consultants? Make the L&D group your business partners, and encourage the group to ask questions; the right questions. Typically these questions are open-ended at first, so that they will encourage a broader discussion of the issue. Questions like, what keeps you awake at night, what is the problem you are trying to solve or what does success look like, may seem to be simple and trite, but it really opens up the discussion to explore the different areas that may be contributing to the needs or even beyond. Provide a variety of learning solutions, not just training Learning solutions, unlike training, provide a broader perspective that considers a wider array of learning approaches—experiential, social, and structured programs—typically referred to as the 70-20-10 Principle that were introduced by the Center for Creative Leadership, to enhance organizational competencies. In this model, training is just one of, but not the only, solution. So how do you apply the 70-20-10 Principle? Consider ways by which your organization can enhance the learning experience. You can implement on-the-job programs through secondment, cross-team postings, or individual swaps/exchanges. These assignments can even extend to clients or external organizations. You can also cascade a coaching and mentoring process where constant feedback and knowledge sharing is done across all levels. It’s about building a culture and structure where your employees seek and are able to learn by application and from others, through programs or ad-hoc opportunities. Align the learning strategy with the business strategy Learning can be strategic as well as tactical. A major difference between the two is that strategic learning focuses on supporting the organization’s vision and strategy, while tactical learning focuses on addressing performance gaps. Strategic learning is long-term and tied up to organizational metrics while tactical learning is short-term and measured through team or individual performance indicators, typically around productivity, quality, and timeliness. Training done across the organization is not necessarily strategic unless it is aligned with organizational outcomes and goals. So what do you do to start aligning your learning programs into strategy? A useful first approach is auditing your learning initiatives. Determine which of those initiatives support your strategy and which address specific team or individual performance needs. It’s a simple method to see where the gaps are, but it really challenges you to evaluate whether the effort and resources are being channeled to where they make the most impact and sense. As we strive to direct our organization forward, there has to be a deliberate effort to realign our learning perspective and paradigms. Positioning L&D closer to the business core, and providing a wider range of learning experiences, will help increase organizational effectiveness, improve employees’ morale as well as the company’s chance of success. Mon San Jose is a director with the knowledge management group of P&A Grant Thornton, a leading audit, tax, advisory, and outsourcing firm in the Philippines, with 21 partners and over 700 staff members.

A flexible benefits plan is like ordering a cup of coffee where the cashier will give you a plethora of choices and the barista will make each beverage according to your preferences. Hot or cold? Short, tall or grande? Regular, low-fat or non-fat? Caffeinated or decaffeinated? White, brown or Splenda? To make it even more personalized, you can even use your own mug. Flexible benefits plan—popularly known as cafeteria plan—has been around since the late 70’s, but most of the companies in the Philippines are still into traditional “one-size fits all” benefit plans. Recently, flexible benefits plan is getting traction. Why do companies nowadays need to consider adopting flexible benefits? Companies realize there is a war on talent—not just on hiring new employees but also on retaining good ones. Most, if not all, job seekers these days are concerned about not only the salary package but also about other the benefits employers offer. A good remuneration package will assure employers a better chance to attract the kind of talents they seek to bring in to their organization. BPO companies and other multinationals are disciples of flexible benefits. Some of the not-so-common benefits offered by these entities include health cards of the employees, which are only awarded to the top Health Maintenance Organizations (HMO), tuition subsidies, gym memberships, generous medical reimbursements per sickness on top of those medicines already covered by HMO during confinement, housing assistance, free overseas or local trips including generous pocket money for top performers, free lunch and dinner all year round for all employees, long-term overseas work secondments, etc. Flexible benefits plan addresses the issue of diversity among employees—from age, hobbies and life priorities. Having a workforce that includes a family person, a health buff, a food lover, a mountaineer, or a traveler will require companies a distinct set of benefits. But how does a company transition from the traditional one-size-fits-all benefits plan to a flexible benefits plan? First, for each employee, quantify the peso equivalent of the existing benefits plan. This process of data assessment is the most tedious part and it is the duty of human resources personnel to do so. Normally, this is only done when the management of the company has already decided on the transition to a flexible benefits plan. Secondly, identify the core benefits. These are benefits that are very important to employers such as health and group insurance, annual rank and file check-ups, executive check-ups, medical allowances, sick leaves, vacation leaves (minimum of five days under the Labor Code), among others. Core benefits are non-flexible and not convertible to cash. Hence, each employee must avail for himself or purchase these benefits. Lastly, identify benefits that are non-core and fully flexible. These can be in the form of transportation allowance, communication allowance, and vacation leaves more than five days (some companies provide 12 days of vacation leave in a year, which can be accumulated for two or three years). The company has to create or develop a platform where the employees can purchase the array of benefits. However, there are already a number of providers in the market that can assist a company in converting to a flexible benefits plan. They can set up or provide a platform where a wide array of benefits can be chosen. These platform providers help the companies in converting the peso value of the benefits into units or points. Say, if the converted peso value of benefits of a certain employee is P30,000 which is equivalent to 30 points, the employee has to use these points to avail first of the core benefits by purchasing them via the platform. Once the core benefits are purchased, the employee could now select and choose from an array of benefits that fits the lifestyle and preferences. Assuming further that the employee only utilized 25 points, the remaining five points can be converted into cash at the end of the fiscal or calendar year. However, if the employee purchased more than the allocated benefits, such excess will be deducted from his or her salary. Companies are always looking for competitive advantages. Flexible benefits plan is deemed by some companies as a leg up on the competition. There is a high cost for hiring and training employees and even higher cost for replacing good and potential leaders of the companies. Millennials are already in the workplace and they have different views on work and lifestyle. The flexible benefits plan is becoming more attractive in attracting and retaining talents. Ramil Nañola is a Partner, Audit & Assurance of P&A Grant Thornton. P&A Grant Thornton is one of the leading Audit, Tax, Advisory, and Outsourcing firms in the Philippines, with 21 Partners and over 700 staff members.

Last week, President Rodrigo Duterte sent to Congress the proposed national budget for 2017. This P3.35-trillion budget, which represents an increase of 11.6 percent over the current year’s budget, is by far the country’s biggest. The President described his budget proposals as “for the people and by the people.” That seems true. Look at the budget details, provisions by sector. The largest allocation, P1.34 trillion, is for social services, more than half of which for education, culture, and manpower development. Actually, the increase in intended expenses for social services is even higher compared with the increases in all other sectors combined. On the other hand, if we view the proposed budget in terms of program or objective, we’ll see that an increasing share of the budget is allocated for public infrastructure with capital outlays 15.6 percent larger than the current operating expenditures which will increase by a little over 10 percent. This supports the President’s assessment that this is an expansionary budget. The government is intentionally increasing the share of public spending at 21 percent of the gross domestic product (GDP), which is much higher than the average government spending of 16.6 percent of GDP over the past ten years. Also, consistent with the President’s strong platform of social order, the provision collectively for the Philippine National Police (PNP) and Armed Forces of the Philippines (AFP) has risen by about 19 percent, and this does not yet include his promised increase in salaries for the police and soldiers which will be made in another proposal. All of these increases in cash outflows come with an expected strain on the country’s fiscal position. The deficit, or excess of expenses over revenues, is expected to be higher at almost P480 billion or 3 percent of the GDP (previously targeted at 2 percent by the Aquino government for both 2015 and 2016). Fiscal conservatives might want to sound the alarm, but we have to put this in perspective. Perhaps the easiest way to do this is to view the operations of the national government like a regular corporation. For example, if we are to lend money to Philippines Inc. to fund this 2017 plan, should we be worried? The quick answer is: No. First, a higher deficit need not be a serious concern because the Philippines has a healthy level of international reserves (or foreign currency financial assets of the government that can back its liabilities). Latest data from the Bangko Sentral ng Pilipinas (BSP) puts the country’s international reserves at $85.5 billion—a respectable level that is even higher compared with those of richer countries like Canada, Australia and several large European economies. Second, the peso value of the country’s debt may be increasing but the country’s debt-to-GDP ratio is at its lowest level. If we simplify GDP as the country’s total revenues, we can say that its debt is more sustainable because the country’s ability to pay back its borrowed money has significantly improved these past few years. A testament to this improvement is the numerous credit rating upgrades we received during Aquino’s term. Third, a creditor will be happy to note that there is a steady stream of cash inflows to Philippines, Inc. We all know of the contributions of our OFWs—remittances of $28.5 billion were recorded for 2015 according to the BSP, and the yearly increase is expected to continue. Besides the OFWs, our local workers in the BPO sector are also bringing in foreign currency inflows. Revenues of the BPO sector is estimated conservatively at $22 billion in 2015 and we can assume that a large part of this represents salaries of the industry’s 1.3 million employees. Fourth, the President and his finance team promised a tax reform package that aims to increase the government’s tax revenues. At the center of the soon-to-be proposed tax package is the lowering of tax rates for corporations and a more progressive income tax brackets for individuals. These will then be compensated by the expansion of the value-added tax base and the indexation to inflation excise taxes on oil. Overall, the President believes that the government’s revenue collections as a percentage of the GDP will even improve to 18 percent by 2022 versus the 2015 level of 15.8 percent. Lastly, the increase in deficit is actually lower than the combined increases in education and infrastructure budgets. A creditor might observe that Philippines, Inc. is borrowing funds to support the training of its employees (citizens) and to expand its property, plant and equipment—areas that are expected to provide higher returns in the future compared with the cost of borrowing today. What they say in the private sector is also true for the public sector—you have to spend money to make money. Renan Piamonte is an Audit & Assurance partner of P&A Grant Thornton. P&A Grant Thornton is one of the leading Audit, Tax, Advisory, and Outsourcing firm in the Philippines, with 21 Partners and over 700 staff members.

The most significant accounting change, bigger than the initial adoption of IFRS in 2005, is coming! International Financial Reporting Standards (IFRS) 9—Financial Instruments, a new accounting standard that will take effect on January 1, 2018, carries a provision where impairment losses will be measured based on expected credit loss model (ECL), a measurement method significantly different from the currently-used incurred credit loss model. Under the old model, impairment loss is recognized retrospectively—when the default event occurs—so it is relatively easy to determine. The ECL model, on the other hand, is prospective, since the financial asset is provided with impairment loss at origination or purchase based on the expectation of what will happen to the financial asset over its life, making it more complex because of the involvement of estimates and judgment of future events. The most affected industries such as banks and financing companies need to prepare now, as the implementation is less than 17 months away. It is expected that the implementation would be complex and costly so the adopters would have to consider the following: 1. Profitability and capital—It is expected that the amount of impairment loss under the ECL model will be higher than that under the current model, consequently resulting in reduced profitability and maybe even leading to additional capital infusion for entities with regulatory capital requirements. 2. Organizational involvement—Collaboration from different units across the organization is critical as some of the needed information or expertise may not be provided by the Accounting or Finance department alone. 3. Methodologies, policies and procedures—Most entities may not have the necessary existing methodologies, policies and procedures to determine and obtain critical information needed for this upcoming impairment model. Some of these policies include establishing its own definition of default, coming up with procedures to determine the probability of default, assessing the stage of the financial asset and incorporating forward-looking information. 4. Information systems—The standard may entail enhancing the existing system or acquiring a new system particularly for entities with significant financial assets such as banks. The system is needed to ensure that appropriate data are gathered for proper pooling of financial assets with shared risk characteristics for staging assessment and collective impairment computation as well as generate information about default, the probability of default, discount rate, loss-given default and exposure at default. Some of the data needed for the impairment computation may not yet be available in the current system and the management would need to identify what are lacking. At the core of this implementation is the support and commitment of the board of directors and management or whoever is in charge with governance. To highlight the criticality and importance of the successful implementation of IFRS 9—Financial Instruments, the Global Public Policy Committee (GPPC), a global forum of representatives of the six largest international accounting networks including Grant Thornton International, in a rare move, released The Implementation of IFRS 9 Impairment Requirement by Banks (the paper). Although the paper focuses on banks as it is among the heavily affected industry, the guidance provided in this paper is also applicable to other industries. The paper is organized into two main sections. The first section covers the areas of focus for those charged with governance and addresses the following key areas: (a) The importance of strong governance and controls surrounding ECL models and processes, (b) Considerations regarding sophistication and proportionality—the paper noted that the GPPC networks believe that there is no one-size-fits-all approach and do not expect the same level of sophistication of implementation across all institutions and all portfolios, (c) Key issues on transition—the paper acknowledges that IFRS 9 builds upon existing credit practices, but may also require the development of new processes specifically for the estimation of ECLs pursuant to IFRS 9 and (d) Ten questions that those charged with governance may wish to discuss to help assess the quality of management’s implementation of IFRS 9’s impairment. The second section deals with modeling principles and covers the following: ECL methodology, default, the probability of default, exposure at default, loss-given default, discounting, staging assessment, and forward-looking information. Each of the areas within the modeling principles section presents the discussion in terms of a sophisticated approach that may be appropriate for more complex or material institutions or portfolios; a simpler approach that may be appropriate for less complex or material institutions or portfolios; and also approaches that would be inconsistent with the high-quality implementation of the standard. Participation, support and commitment from those charged with governance are critical for the successful implementation of this new standard. Seventeen months is such a short time. It is better for the company to start doing the necessary impact assessment now as the implementation can be complex and costly. This assessment covers not only the impact on profitability and capital but also its effects on system, policies and organizational architecture needed for the implementation. Boyet Murcia is Partner, Audit & Assurance of P&A Grant Thornton. P&A Grant Thornton is one of the leading Audit, Tax, Advisory, and Outsourcing firm in the Philippines, with 21 Partners and over 700 staff members.