The impact of the Covid-19 pandemic has been felt in a variety of industries, and it has

been difficult for all business sectors to cope. Many businesses have closed, and there have been

numerous changes and adjustments in various industries, particularly in the Philippines. The real

estate industry has been one of the greatly affected industries in the Philippines. According to

one real estate organization, "Philippines' Real Estate industry, in particular, has been seriously

impacted by COVID-19 as the pandemic effectively put a stop to the operations of most

businesses." As the pandemic and subsequent lockdowns continue to wreak havoc on economies,

creating a landscape that remains challenging and uncertain even today. Also, real estate players

have been forced to run through quickly, revamp, and recalibrate their strategies to adapt to the

industry's unprecedented changes. This information necessitates a thorough search of several

factors:

1. The market and competition, including demand, capacity, and price competition

According to the Philippine Statistics Office (PSO), by 2020, more than half of the

population will be comprised of millennials in their twenties and thirties. They forecasted an

upsurge of young professionals who will make up roughly half of the country's workforce, which

can thrive a substantial demand in the real estate industry in the coming years. However, due to a

pandemic outbreak in the country, prospects for the real estate sector have been harmed, with

economic trends, policies, and strategies being altered. Ethan Properties Philippines Inc. markets

to office locators and commercial tenants through internal and external channels. Most

commercially built estates of the company are majority leased out to entities in the BPO industry

and remittances from overseas Filipino workers (OFWs). Moreover, Colliers International, a real

estate consulting services firm, advises that converting and repurposing real estate assets to

survive the impact of the pandemic is a wise action because the real estate industry reacts slower
than the stock market due to its liquidity position and slow revenue realization. On the other

hand, this could be an opportunity for the real estate sector because stock market investors are

shifting to real estate investing because it provides more control and long-term wealth.

Risk factor: A decline in real estate demand.

The industry experienced massive disruptions and difficulties brought on by an

unforeseen event, the COVID-19 pandemic, which resulted in one of the industry's risk factors, a

decrease in real estate demand. This condition significantly impacts the real estate industry as a

whole, including Ethan Properties Philippines Inc. The low demand resulting in lower occupancy

and a higher vacancy rate may result in a loss of significant customers, such as employees from

the BPO industry and overseas Filipino workers (OFWs).

The pandemic has clearly ensued in a slow realization of returns, particularly in the real

estate sector, with unprecedented subdued or slow demand, depressed market conditions, rising

vacancy rates, and price appreciation has stalled. Given that Ethan Properties Philippines Inc. is

exposed to different risks in the country's performance and growth if the economy decelerates,

they are certainly affected by this pandemic.

How each risk factor might impact the risk of material misstatements in specific financial

statement accounts or disclosures.

If the decline in real estate demand risk factor remains, there may be an increase in the

risk of material misstatements. Wherein the company may experience an impact on profitability,

liquidity, and even solvency, like a loss in revenue or profit that may lead to insufficient cash to

cover its long-term liabilities and the valuation of its long-term assets. This could result in

substantial uncertainty regarding the company's ability to continue as a going concern.

2. Cyclical or Seasonal Activity

The real estate industry is highly dependent on several factors, including interest rate

movements and investor confidence in the Philippine economy; hence, it is called cyclical in

nature. Ethan Properties Philippines, Inc.'s sales are affected by these circumstances, particularly

in the residential market.

Risk factor: A significant decrease in profitability.

Businesses worldwide have been hit hard by the pandemic, and it is hardly surprising that

the health crisis severely impacted the cyclical real estate industry. Several elements could affect

the real estate industry during this time. These elements include unemployment, consumer

confidence, and a decrease in the flow of remittances from overseas Filipino workers (OFW). It

is anticipated that the revenue generated from residential projects will decrease as a result of a

shift in the spending behaviors of customers as well as general decisions made by customers on

demand for real estate properties like condominiums.

How each risk factor might impact the risk of material misstatements in specific financial

statement accounts or disclosures.

A significant drop in profitability is a business risk that puts the Company's revenue

accounts at greater risk. Revenue is already highly susceptible to material misstatements by

definition. Perpetrators are very likely to have an incentive/pressure to commit fraud under these

industry and economic conditions, as well as the opportunity and ability to rationalize such an

act.
3. Product technology relating to the entity's products.

Before the COVID-19 crisis, the real estate industry had digitized processes and

developed digitally-enabled services for tenants and users. Users' expectations will rise as more

users adopt these digital-first products and services, and players who provide a differentiated

post-crisis experience will stay ahead of the curve. Digitalizing real estate endeavors aids in

promoting newly constructed establishments to potential buyers in order to still expedite their

growth despite the challenging times. The website includes virtual tours, allowing customers to

view the showroom and other business areas by simply using their computers. Furthermore, due

to the current pandemic, the traditional ways to market or sell their properties, such as physical

property viewings and face-to-face transactions, have become nearly impossible. Through this

digitalization, real estate companies like Ethan Properties Philippines Inc. will be able to catch

up with the most recent market trends. Where it collects data more efficiently and engages in

artificial intelligence-driven marketing that evaluates the development and investment in the sale

of properties in the real estate industry. If this digitalization will continue to make the real estate

business more productive, efficient in generating revenue, and competitive while satisfying the

expectations and needs of its clients.

Risk factor: Incomplete and inaccurate data

During the pandemic, the industry in which Ethan Properties Philippines Inc. operates has

changed, and online real estate transactions have become prevalent. This trend has increased the

number of online transactions, making it easier for customers to purchase real estate. However, it

can lead to inaccurate data records, such as client information, property values, and so on. It is
also susceptible to hacker assaults and other forms of cyber security breaches, which means it

cannot make sound decisions about its properties and investments due to inaccurate or

incomplete data, which can lead to financial losses.

Because of the rapid pace of technological change in an industry, an entity may no longer

hold competitive products. This can lead to lower revenues and overpriced inventory,

vulnerabilities to cyber-attacks and data breaches may also be a risk of expanding and

developing more real estate technology.

How each risk factor might impact the risk of material misstatements in specific financial

statement accounts or disclosures.

Incomplete and inaccurate data in real estate companies' records could raise the risk of a

material misstatement by increasing the possibility that financial statements will be misleading or

deceptive. The implications include not only under-reported income but also a fraud, which can

be committed and concealed by presenting incomplete, inaccurate disclosures or omitting

disclosures required for the financial statements to be presented fairly in accordance with the

applicable financial reporting framework.