According to Chinese philosopher Confucius, ‘Success depends upon previous preparation, and without such preparation there is sure to be failure.’
This may sound trite, but it is the bedrock of success that the SM Group has carefully nurtured and continues to nurture for the future as it continues to grow its ever expanding retail, banking, property and diverse portfolio of equity investments.
With its continuing objective of expansion, however, the question remains: how will it sustain growth and continue tapping capital markets-both locally and globally?
In the past couple of decades, access to capital has been easily available, especially for top-rated global companies. Thus, access to capital was strong, interest rates were low and investors were generally willing to ride out short-term volatility.
In an interview with SM Investments Corp. executive vice president for Treasury, Finance and Planning Erwin Pato, ‘Ten years ago, we came from a really high liquidity environment, right? Because that is just what the world economy was. And then I suppose from there, there were a lot of behaviors in terms of being able to access capital easily because a lot of money was released into the system. And this is just as early as five years ago. Five years ago, we had the lowest interest rate regime, like 2020, 2021. That was the lowest interest rate regime. It was easy to borrow, right? Even right before the pandemic, because after, if you recall, most of the central banks were releasing money.’
Pato recalls that at the time ‘there was also concern from a lot of economists and economic planners that it was really a long period that easy money or liquidity could easily be accessed. So the joke, even before, was that some asset managers have not experienced high interest rates because there is just like long 10, 15 years of low, low interest rate policy. Then, in that sense, obviously, today, it’s not that type of market because from the Trump, well, geopolitical race, there’s a lot of volatility that happens affecting the markets. And if you’re gonna observe lately, those combination of geopolitical race and other external shocks are happening in very close proximity in terms of time, right? … And now you have the Gulf War. So if you’re going to think about it within six years, we have had three external shocks. And that’s your question. How do you access financing or how do you become more sustainable with that backdrop? Then my answer to that is really what SM has done is that, even during peacetime, we were preparing for volatility.’
Today, capital and equity markets are dealing with a more complicated mix of geopolitical risks, persistent inflation and interest rates are likely to stay higher for longer. The ongoing tensions in the Middle East is proof that volatility will now be part of the financial landscape.
For emerging markets like the Philippines, this translates to tighter financial conditions, pressure on currencies and a more cautious investor base. In this kind of environment, the challenge for companies is not just about growing, but also about staying resilient.
However, Pato points out that ‘there is a difference between being able to access capital that is efficient versus just what is available. Quality access, not just cost, is what differentiates issuers in this environment.’
He acknowledges that it may seem like a subtle shift, but it matters. In more stable periods, companies focus on getting the best pricing. When markets are uncertain, the priority shifts to making sure funding is available and that it fits what the business needs.It requires preparation well before any stress shows up.
Thus, for a diversified group like SMIC, its core strength comes from how the business is structured – with operations across retail, property and banking, the group benefits from multiple sources of recurring cash flow to help cushion the impact when external conditions tighten.
‘While global tensions have increased volatility, our fundamentals remain unchanged. Our diversified portfolio and strong recurring cash flows allow us to navigate uncertainty from a position of stability,’ Pato said.
The SM Group’s stability isn’t just about size. It comes down to discipline. Companies that keep liquidity strong, manage leverage carefully and execute consistently are in a better position to maintain investor confidence, especially as investors become more selective. That selectivity is becoming more evident, with expectations that interest rate cuts will be slower and borrowing costs likely to stay elevated.
Investors are paying closer attention – not just to returns, but also to credit quality, transparency and track record. As a result of its preparations, SM companies continue to hold top-tier credit ratings, supported by strong profitability and careful balance sheet management. The group has stayed consistent in how it allocates capital, focusing on long-term sustainability rather than short-term expansion.
‘We have operated through multiple cycles before. What matters is consistency in execution and strong liquidity,’ Pato said.
A 2024 report cited by Global Finance found that many corporate treasurers are still cautious, reflecting ongoing concerns about business disruption and financing conditions. One clear lesson from the pandemic is how quickly access to funding can tighten – and how difficult it can be for those caught unprepared. A more effective approach is to build flexibility early.
‘We built capital access even before we needed it so our businesses can keep investing, regardless of market conditions,’ Pato said, adding that, ‘Keeping our balance sheet strong preserves flexibility. Liquidity enables continuity during uncertainty.’
With the preparations SMIC made early on, it now a real advantage. As volatility becomes more constant, companies that stand out will not necessarily be the ones growing the fastest, they will be the ones that can keep moving forward steadily, no matter the conditions, because resilience has been established long before crisis happens.