San Miguel Corporation's Exposure to Financial Risks

Proposal:

"San Miguel Corporation's Exposure to Financial Risks, Its Policies and Processes, and Management of Capital"

For almost a century, SMC has been one of the Philippines' forefronts under the food and beverage industry. Today, the multi-national company has moved beyond consumer products, and is participating in other industries which provide essential services in the market. From its traditional food and beverages businesses, the company is now diversified into fuel and oil, infrastructure, power, mining, telecom, and banking industries.

The diversity and complexity of SMC's business portfolios also expose the company to certain financial risks arising from the Group's operating and financing activities, which are deliberately assumed by the management.

This research paper will present the information about SMC's exposure to certain financial risks such as Interest Rate Risk, Foreign Currency Risk, Commodity Price Risk, Liquidity Risk, and Credit Risk, and the company's objectives, policies and processes for measuring and managing these risks, as well as the management of capital.

This paper will describe the company's principal non-trade related financial instruments that include cash and cash equivalents, financial assets, short-term and long-term loans, and derivative instruments which are used mainly for working capital management purposes.

It will also present the trade-related financial assets and financial liabilities such as trade and other receivables, noncurrent receivables and deposits, accounts payable and accrued expenses, finance lease liabilities and other noncurrent liabilities arising directly from and are used to facilitate its daily operations. It will also present the Company's outstanding derivative instruments such as commodity and currency options, forwards and swaps which are intended mainly for risk management purposes. This will further explain how it uses derivatives to manage its exposures to foreign currency, interest rate and commodity price risks.

In the foregoing sections, a number of illustrations are provided to better understand the different elements involved in financial risks. The tables will show pertinent information on interest rate risk, information about the foreign currency-denominated monetary assets and liabilities and their Philippine peso equivalents that will demonstrate the sensitivity to a reasonably possible change in the US dollar exchange rate.

A summary on the maturity profile of the company's financial assets and financial liabilities based on contractual undiscounted payments used for liquidity management is also provided for.

In addition, this paper will also tackle the primary objectives of the company in terms of capital