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Press Releases

15

October 2002

DANGEROUS MARKETS CITES AYALA MANAGEMENT IN FINANCIAL CRISIS

Dominic Barton, co-author of Dangerous Markets: Managing in Financial Crises and director and managing partner of McKinsey & Company, said that financial crises are not as unpredictable as believed to be and chief executives must be constantly aware of such threats.

Barton recently spoke before senior executives and members of the Makati Business Club and the Banking Association of the Philippines to share successful strategies in managing companies during a financial crisis.

According to Barton, global players such as Johnson & Johnson, Citigroup, Unilever, Lafarge, and GE Capital have the benefit of a diverse financial net but domestic companies are no less capable of turnaround success. He mentioned “local champions” in companies that recognized the opportunity for change in times of crises. These include Banco Itau in Brazil, Ramayana in Indonesia, Kookmin Bank in Korea, the Ayala Group in the Philippines, Alfa Bank and Roust in Russia, and the North Carolina National Bank (now BankAmerica) in the USA.

The key is in leaders that have the vision, strategy, courage and operational and financial capabilities to minimize the costs of crises and recognize opportunities for growth.

“Through a combination of insightful understanding of the environment in which they operate, winning strategies, and the ability to seize major discontinuities, these companies ended up winning significant market share and successfully expanding into new business lines in the wake of financial crises,” observed Barton.

Barton referred to Ayala Corporation’s visionary management for using the 1998 Asian financial crisis to transform itself from a property developer to a diversified conglomerate with key investments in telecommunication and financial services as well as property. It was during the crisis that Ayala convinced partner Singapore Telecom to continue investing in Globe Telecom digital wireless business, allowing Globe to establish itself as “the top wireless company in the Philippines.

Another Ayala-owned company, the Bank of the Philippines Islands, used cash reserves and leverage afforded by its parent to acquire competitor Far East Bank & Trust Company. As profits in the banking industry declined sharply, BPI emerged as the second-largest bank in the country.

Explained Jaime Augusto Zobel de Ayala, president and CEO of Ayala Corporation in an earlier McKinsey interview:“We are a 165-year old company accustomed to being prepared and taking advantage of crises. That is why we have survived and thrived.