PART A: 03 Quiz elms (governance)
I. Company Case/Problem:
Let's take the case of PhilHealth, a Philippine government-owned and controlled corporation that
provides health insurance to Filipinos. In 2019, PhilHealth faced a major scandal involving the misuse of
funds and fraudulent activities, which resulted in a loss of billions of pesos.
II. The Root/Origin of the Problem:
The root cause of the problem was a complex interplay of factors. Weak internal controls over financial
transactions and operations created an environment conducive to fraud and abuse. The lack of effective
risk management practices meant that potential risks were not identified and mitigated, allowing
fraudulent activities to go undetected. Insufficient oversight by the board of directors and management
further exacerbated the problem, as they failed to provide adequate guidance and supervision. The
failure to implement adequate checks and balances meant that there were no safeguards in place to
prevent or detect fraudulent activities. Finally, corruption and unethical behavior among employees and
officials contributed to the problem, as they took advantage of the weaknesses in the system for
personal gain.
PART B:
I. Solution to the Case/Problem:
To address the internal control system and risk management framework issues, PhilHealth implemented
a comprehensive solution. The company strengthened its internal controls over financial transactions
and operations by implementing a new accounting system and enhancing review processes. This
included the segregation of duties and responsibilities, as well as the establishment of clear lines of
authority and accountability. PhilHealth also enhanced its risk management practices by conducting
regular risk assessments and monitoring, which enabled the company to identify and mitigate potential
risks. Furthermore, the company improved oversight by the board of directors and management,
including increased transparency and communication. This included the establishment of an
independent audit committee and the implementation of a whistleblower policy. Finally, PhilHealth
conducted regular audits and investigations to prevent and detect fraudulent activities, and took swift
action against those found to be involved in fraudulent activities.
II. Conclusion:
The PhilHealth case highlights the importance of a robust internal control system and risk management
framework in preventing financial losses and ensuring the integrity of financial reporting. The
application of the recommendations of the Code, such as the Philippine Corporate Governance Code,
can help companies like PhilHealth to strengthen their internal controls and risk management practices.
In conclusion, the implementation of a robust internal control system and risk management framework
is crucial for companies in the Philippines to ensure the accuracy and reliability of their financial
reporting. Companies must prioritize the establishment of effective internal controls, risk management
practices, and oversight mechanisms to prevent financial misstatements and maintain stakeholder trust.
