Firms urged to enhance innovation for retooling
By Kim Yoo-chul
Yung H. Chung, AlixPartners Korea managing director
Korean firms should focus more on innovation to revamp their corporate structure, a global restructuring expert said Tuesday.
At a press conference at the Westin Chosun Hotel in Seoul, AlixPartners Korea managing director Yung H. Chung said that companies’ innovation efforts can be one of the best ways to solve their structural problems.
He pointed out that top-tier Korean conglomerates are pursuing various changes to produce innovative products, which is good for corporate restructuring. AlixPartners is a U.S. consulting firm specializing in this field.
“In the case of LG Group, restructuring is always happening as LG Group’s affiliates are trying to develop something new. The conglomerate is allocating more qualified human resources on emerging business units and changing business portfolios, which we see as a positive factor,” Chung said.
While Korean firms are getting better in terms of awareness of turnaround programs and restructuring, he said that many are still vulnerable to structural risks.
“Korean companies mostly focus on financial restructuring rather than operational turnaround by disposing of important assets to meet urgent demands for cash,” Chung said.
He said that of the 1,606 firms listed on the main bourse, as many as 17 percent are “on alert” for distress, while 9 percent are at “high risk,” meaning that they have a high probability of distress within the next three quarters, a study showed.
“Turnaround based only on financial restructuring fails to rescue firms. In order to bring consistent value creation to Korean companies, preemptive, holistic turnaround programs, buttressed by an early warning system, are essential,” said CV Ramachandran, managing director and head of Asia for AlixPartners.