The risks of regulatory lapses extend far beyond penalties. They can delay funding, disrupt operations, and damage business reputation in competitive markets. As regulatory expectations continue to evolve, medium to large enterprises must now view compliance not only as an operational requirement, but as a pillar of long-term financial resilience. 

This article outlines key compliance pitfalls that enterprises frequently encounter and provides practical frameworks to strengthen internal controls, improve board-level oversight, and align financial operations with local and international regulations.

Navigating Compliance Complexity

Where Compliance Breaks Down and How to Reinforce It

1.) Delayed or Incomplete Regulatory Submissions

Late filings to the BIR, SEC, or other government bodies are more than administrative oversights, they can signal systemic control weaknesses to regulators and external auditors.

Fix: Automate reminders and filing schedules across tax, legal, and HR. Ensure cross-checks are in place before submission deadlines. Utilize dashboards for visibility.

2.) Misalignment with Updated PFRS Standards

New Philippine Financial Reporting Standards like PFRS 15 (Revenue), PFRS 16 (Leases), or PFRS 9 (Financial Instruments) have material effects on recognition, measurement, and disclosures. Many companies still apply outdated accounting treatments.

Fix: Conduct annual reviews with external accountants or internal audit to ensure updated application. Train accounting teams beyond basic awareness.

3.) Transfer Pricing Oversight & Lack of Documentation

Enterprises with related-party transactions, especially those in manufacturing, distribution, and holding structures, often lack robust transfer pricing documentation, even when required by the BIR.

Fix: Prepare Form 1709 annually, and maintain supporting documents that comply with the BIR’s Transfer Pricing Documentation (TPD) requirements regardless of audit notice status.

4.) Fragmented Payroll and Labor Compliance

Errors in holiday pay computation, 13th-month pay, and SSS/PhilHealth/Pag-IBIG contributions are common in fast-growing enterprises, especially with decentralized HR teams.

Fix: Centralize payroll compliance under finance or audit, run semi-annual compliance reviews, and use payroll platforms that incorporate government tables automatically.

5.) Procurement and Disbursement Leaks

Weak or informal procurement processes increase the likelihood of maverick spending, non-compliant supplier selection, and undocumented advances.

Fix: Implement e-Procurement workflows and budget control policies. Train department heads on thresholds, documentation, and audit trail requirements.

6.) ESG and Sustainability Reporting Gaps

Companies under pressure to align with ESG expectations may issue sustainability reports with unsupported claims or incomplete disclosures.

Fix: Integrate ESG data collection with compliance audits. Use globally aligned frameworks (GRI, SASB) and align with DENR/EMB environmental reporting obligations.

7.) Lack of Executive and Board-Level Visibility

Executives and board members often receive operational updates, but limited direct reports on compliance risks and mitigations. This results in slow response to regulatory changes.

Fix: Add compliance risk summaries to quarterly management reports. Schedule joint briefings between internal audit, legal, and key executives.

Strengthening the Compliance Culture

Beyond processes, strong compliance requires a mindset shift:

Empower Departments

with clear compliance accountabilities.

Foster Transparency

by rewarding early escalation of issues.

Invest in Education

across all levels. Not just legal and finance.

Organizations that embed compliance into their culture reduce friction during audits, attract better financing terms, and build trust among stakeholders.

When to Conduct a Compliance Health Check

To stay ahead of risk, Philippine enterprises should assess compliance maturity at key junctures:

Prior to major fundraising

or listing

When expanding to new regions 

or jurisdictions

During transitions in leadership

or ownership

After regulatory changes

or tax code updates

Annually, as part of internal audit

or board review

Compliance is a strategic cornerstone for growth and resilience in today’s business environment. By addressing common pitfalls and reinforcing internal controls, enterprises not only avoid regulatory setbacks but also position themselves as trusted, future-ready organizations.

 

Strengthen compliance frameworks, align with evolving regulations, and unlock opportunities for sustainable growth.

Schedule a Compliance Health Check

Let's Talk

Downloadable PDFs

BIR Form 1709

Officially known as the Information Return on Related Party Transactions.

Click to download

DOLE Handbook on Workers’ Statutory Monetary Benefits - 2024 Edition

Helps HR, finance, and compliance teams ensure correct payroll and benefits computation.

Click to download

SEC Memorandum Circular No. 04 s.2019 – Sustainability Reporting Guidelines for Publicly-Listed Companies

Relevant for ESG-aligned compliance and sustainability reporting frameworks.

Click to download

References

1. Bureau of Internal Revenue (BIR) – Transfer Pricing, Form 1709, and other tax compliance requirements

   • Source: https://www.bir.gov.ph

2. Securities and Exchange Commission (SEC) – Ongoing regulatory compliance and financial reporting mandates

   • Source: https://www.sec.gov.ph

   
   

3. Department of Labor and Employment (DOLE) – Labor Standards and Compliance System

   • Source: https://www.dole.gov.ph

   
   

4. DENR – Environmental Management Bureau (EMB) – Environmental compliance for sustainability reports

   • Source: https://emb.gov.ph