[Lee Jong-gil's Autumn Return] Common Traits of Companies Successful in Risk Management...

"Return to Basics When Things Get Complicated"
Kim Youngsik, Professor of Business Administration at Woosong University, 'Risk Management of Global Companies in Times of Crisis'

The era of predicting the future by reflecting on the past is over. We are now in a hyper-connected society. A single event or one choice can instantly impact the entire world. Combined with other factors, it can lead to enormous ripple effects.

A world with high uncertainty is filled with anxiety about the future. Everyone carries risks without exception. These are not just incidents like theft, fire, or traffic accidents. Economic risks such as unemployment, recession, and panic, once they occur, can harm not only individuals but also households, companies, and governments.

“Risk Management of Global Companies in an Era of Crisis,” written by Youngsik Kim, a professor of Business Administration at Woosong University, emphasizes that the success or failure of corporate management depends on risk management. In fact, even before the hyper-connected society, companies devoted efforts to recognizing risks in advance and preventing and preparing for them. This is because risks always accompanied the execution of management strategies such as new business ventures, overseas expansion, mergers and acquisitions, business portfolio adjustments, and business withdrawal.

However, surprisingly few companies have a flexible risk response system. This is because a rational and agile decision-making system, crisis management know-how, insight, interdepartmental collaboration, and smooth communication are all required. Samsung, where the author worked for 30 years, also experienced the bitterness of trial and error and failure multiple times. They gradually reduced risks while enduring various losses and sacrifices.

The author examines both the successes and failures in risk management shown by Samsung and other companies. The Toyota recall incident and the Volkswagen emissions manipulation scandal are representative examples. He presents the basics and standards of risk management and asks what is truly needed to strengthen competitiveness. The answer is surprisingly simple: “Back to the Basic.”

“There is a saying that the more complex something is, the simpler you should think. Simplicity for solving complex intertwined problems can only be achieved by mastering the basics. ‘Back to the Basic.’ Whenever there was a problem and I didn’t know what the cause was or where to start solving it, I always reminded myself of this phrase. When you go back to the basics and examine the issue, most problems and risks reveal clues for resolution. The same principle applies to corporate risk management.”

Here, risk is not simply summarized as danger. It refers to the degree of exposure to uncertainty, meaning it simultaneously points to negative situations and positive possibilities. For example, in investment, the future situation cannot be known for sure, but it can be somewhat predicted. Depending on the outcome, profits may be good.

It is no different in corporate management. If you prepare well for uncertainty, you can actually achieve good business results. It is a misconception to think of risk only as dangerous and negative. In this sense, the author describes risk as “a shadow that always follows corporate management.” He emphasizes that if you endure risks well, opportunities will surely come.

“When Samsung decided to invest in semiconductors, internal managers fiercely opposed it, saying the group’s survival could be at risk. Chairman Byung-chul Lee and Chairman Kun-hee Lee took on this risk with uncertainty and invested enormous funds and manpower in the semiconductor field, creating today’s global Samsung. Especially Chairman Kun-hee Lee even invested his personal fortune in the semiconductor business.”