[Responsibility Structure Chart Controversy]②"Good in Principle"?Pros and Cons According to Field Staff

Anonymous Survey Conducted Among Securities and Asset Management Firms

"There are aspects that do not fit the actual circumstances. I am concerned about whether continuous management will be possible."

"With hundreds or even thousands of action items to implement and monitor, can we truly make substantive judgments? In the end, it will likely amount to little more than a formality."

Various concerns surrounding the "Responsibility Structure Chart," which was implemented this year, are echoed among working-level staff in the financial investment industry who are responsible for the system. While they agree on the necessity of strengthening internal controls to prevent repeated financial accidents, they expressed difficulties regarding the ambiguous detailed standards set by regulatory authorities, limitations when applying the system to individual companies, and the heavy financial and manpower burdens associated with introducing new systems, which can cost hundreds of millions of won. There is also a sense of caution that the Responsibility Structure Chart could degenerate into an "ineffective shell of a system" or a "tool for shifting blame." This is why calls for more concrete guidance and standards, as well as urgent institutional improvements that reflect voices from the field, are gaining traction.

According to an anonymous survey conducted by Asia Economy from July 4 to July 11, targeting 29 working-level staff responsible for the Responsibility Structure Chart at 28 domestic securities and asset management firms, only about one in four respondents (24.1%) said they "strongly agree" that the introduction of the Responsibility Structure Chart would meaningfully contribute to strengthening internal controls. The remaining 75.9% said they "somewhat agree," indicating that while they understand the purpose and necessity of the system, they see certain limitations in its practical application on the ground.

In this survey, respondents identified the most important objectives for introducing the Responsibility Structure Chart (multiple responses allowed) as ▲clarifying responsibilities and authorities (79.3%) and ▲advancing internal controls (44.8%). However, around six out of ten respondents expressed concerns about excessive workloads and lack of resources (65.5%), as well as the risk that the system might become a mere formality (58.6%). The most significant practical difficulties at this early stage of implementation were cited as ▲administrative burdens such as time and manpower (65.5%), ▲the burden of system upgrades (58.6%), ▲conflicts with existing reporting structures and regulations (27.6%), and ▲challenges in coordinating between departments (27.6%).

A representative from Company A who participated in the survey said, "Consulting and system implementation costs run into hundreds of millions of won," expressing concern over the enormous financial burden. A representative from Company B stated, "Since the system was modeled after foreign practices, there are aspects that do not fit the domestic environment," adding, "Internally, a shortage of working-level staff is also an issue." A representative from Company C commented, "There is a lack of detailed guidelines, and in reality, it is difficult to clearly distinguish responsibilities," and pointed out, "The requirement to submit changes to responsibilities within seven business days after board approval is also a tight deadline."

The Responsibility Structure Chart is a system that clarifies internal controls and risks for each executive, making it clear who is accountable in the event of an incident. For financial investment firms (with total assets of 5 trillion won or more or managed assets of 20 trillion won or more), the system was officially introduced this month, following its adoption by financial holding companies and banks. Of the 28 companies that responded to the survey, 10 began participating this month, while more than half (15 companies) have been involved since the pilot phase earlier this year. Three companies are preparing to introduce the system.

In particular, in the financial investment industry, such as securities firms, the types of work are more segmented than in other financial sectors, and the complexity of product risks and conflicts of interest makes it even more difficult to clearly divide responsibilities. An industry insider explained, "Many of our tasks require a high level of expertise, such as manufacturing, selling, and brokering investment products with loss potential, and new products and services are frequently introduced. These are unique characteristics of the industry," adding, "We need to consider these characteristics to ensure the efficient operation of the system." Previously, the Financial Supervisory Service cited the "co-CEO system" and "the dual role of CEO and board chairperson" as key areas for improvement in the securities industry.

What do working-level staff see as the biggest obstacle to the system taking root at this early stage of implementation? More than half of the respondents cited "lack of practical, working-level operational plans" (51.7%, multiple responses allowed). This highlights the confusion on the ground caused by the gap between legal responsibilities and actual tasks. A representative from Company D said, "Some aspects defined by law are ambiguous or difficult to apply uniformly across the industry, or are merely formalities," adding, "It would be helpful to have more concrete and actionable plans."

Unclear internal responsibility structures, internal resistance to change, and a lack of detailed guidance from regulatory authorities were each cited by around 30% of respondents. A representative from Company E said, "We rely on consulting, but I am not sure if we are moving in the direction intended by the authorities." A representative from Company F commented, "I think the guidelines provided by the regulatory agency are sufficient in scope, but there is a disconnect with actual operations. For example, the guidance that 'organizational restructuring should resolve overlapping responsibilities' does not fit reality." In some securities firms, it was found that working-level staff are under significant stress due to some executives' refusal to accept the allocation of responsibilities.

As a result, there are growing calls from the field for the establishment of clear disciplinary standards, as well as the development of practical implementation plans, best practices, and operational guidelines. In this survey, respondents most frequently cited "practical, working-level implementation plans" (34.5%) and "sharing of similar cases and best practices" (34.5%) as the most necessary elements for the successful establishment of the Responsibility Structure Chart (single response). Another 20.7% said that "clear guidance from the authorities" is needed.

In additional written comments, there were repeated requests for clear standards and specific examples.A representative from Company G said, "There needs to be a clear standard for determining whether executives have violated their internal control management obligations," adding, "At the current level, there is a risk that judgments will remain merely formal." For example, Article 35-2 of the Act on Corporate Governance of Financial Companies sets out factors for leniency in sanctions for violations of internal control obligations, but in this process, it is necessary to examine whether hundreds or thousands of departmental action items have been implemented, making substantive judgment difficult. At the same time, there were also calls for an agreed-upon standard for judgment between the authorities and the industry to prevent the regulatory authorities from abusing administrative sanctions against executives.

Additionally, there were many requests for ▲the regular establishment of standard guidelines ▲specific guidance and examples regarding violations of internal control obligations or the standard of "due care" ▲an extension of the grace period. From an operational perspective, there were also opinions that the authorities should ▲provide minimum standards and detailed operational guidelines for staffing and budgeting related to the Responsibility Structure Chart within organizations, to ensure a consistent level of implementation across companies. A representative from Company H said, "The financial environment is trending toward stronger internal controls, and related laws and systems are evolving in that direction, but there is still a perception that internal controls are a cost rather than an investment. If the financial authorities were to provide mandatory guidance on support for human and material resources, it would be helpful."

Lawyer Jung Sungkoo of the law firm Shin & Kim stated, "Having been involved in the actual preparation of the Responsibility Structure Chart, I found that there are many aspects that are difficult to apply in practice," adding, "In the early stages of implementation, the goal should be to observe and address various practical issues that arise in operation, and to revise the system as necessary."

A representative from the Financial Supervisory Service said, "We are aware of concerns about increased workloads, such as the need for frequent board meetings and potential leadership gaps," adding, "While we will maintain the original intent of introducing the Responsibility Structure Chart, since the system is still in its early stages, we will continue to reflect feedback from the field going forward."