"The risks won't end when the military declares victory," says Sidney Jones, IPAC director and regional terror expert.

"Indonesia and Malaysia will face new threats in the form of returning fighters from Mindanao, and the Philippines will have a host of smaller dispersed cells with the capacity for both violence and indoctrination."

Despite the looming threat of ISIS in the region, the report acknowledges that "formidable political and institutional obstacles" -- including distrust between the governments of the Philippines and Malaysia -- make launching a coordinated effort on combating extremism in East Asia difficult to effectively implement.

The report said the onus is on the Philippines government to support residents displaced from Marawi, and to rebuild the city to "ensure that local resentments do not make the area even more fertile ground for extremist recruitment."

Drawn-out crisis

The longevity and ferocity of the siege of Marawi has "defied all expectations," and brought the tenacity of Filipino fighters to the attention of ISIS central command in Raqqa, the report suggests.

However, it also says that the ongoing battle has not yet succeeded in establishing the "East Asia Wilaya," or province of ISIS' proclaimed caliphate.

The battle for Marawi is being commanded by Isnilon Hapilon, the leader of the Basilan-based Abu Sayyaf Group (ASG), which pledged allegiance to ISIS in 2014.

The main fighting force, of which it is estimated that only a few dozen militants remain, is mostly comprised of members of the Maute group, a local militant group which has also pledged loyalty to the Syrian-based group.

Hapilon's branch of ASG is one of the most ruthless militant organizations in this part of the Philippines, and is known for its long history of extremism.

Duterte visits front lines

Philippines President Rodrigo Duterte made his first trip to the embattled city Thursday to meet with troops fighting the last remaining militants.

The visit "greatly boosted" the morale of the troops on the front lines, according to the report.

The battle for the city continued while Duterte was in the area, with the area where the helicopter carrying Duterte and his aides was due to land reportedly taking fire.

Martial law extension proposed

While Duterte addressed troops, lawmakers in the capital prepared to discuss his request to extend martial law in Mindanao until the end of the year.

Duterte requested the extension earlier this week because the "looming situation in Mindanao has to be addressed," Presidential spokesman Ernesto Abella said, according to according to CNN affiliate CNN Philippines. The current period is due to end on July 23.

Duterte placed Mindanao under martial law for two months -- the maximum period allowed under the Philippines constitution -- hours after fighting between government troops and militants from the ISIS-linked Maute group broke out in Marawi.

Sen. Leila de Lima, a vocal opponent of the president, told CNN Philippines that the extension would practically be a "foregone conclusion" if lawmakers did not critically examine Duterte's request.

The president's supporters outnumber his opponents in both houses and are unlikely to put up significant resistance to Duterte's plan.

Former extremist: ISIS' ambitions not limited to Marawi

Abu Jihad -- not his real name -- was for years a member of ASG, and a friend and brother-in-arms of Hapilon, the ASG leader.

He says he thinks the experience of holding back the military for such an extended period of time will only have emboldened the group, and its driven, fearless leader.

"The next time they will do this they are bolder," he said. "And they are better equipped. And I am afraid for that."

He tells CNN his former friend's brutality "will not end only in Marawi."