[Corporate Turnaround 2.0]② "The Most Important Thing Is Root Cause Analysis, Then Selection and Focus"

Interview with Chi Hong Park, Head of Corporate Restructuring Center at Samil PwC

"Identify Causes - Assess Available Resources and Set Direction - Execute Swiftly"

"If the Problem is Structural across the Industry, Restructuring One Company Alone Won't Solve It"

Editor's NoteThere are always warning signs before a company faces insolvency. Although signals such as falling sales and profits, coupled with rising debt, persist for years, many companies ignore these signs due to the stigma associated with restructuring. Instead, they choose to endure difficult conditions through additional debt, eventually leading to their downfall. In contrast, companies that take proactive measures sometimes manage to turn crises into opportunities. The Asia Business Daily, through a three-part series, examines the golden time for corporate restructuring in Korea. The coverage explores how to establish an ecosystem where companies can act independently before falling into distress, as well as the roles of the government, the financial sector, and private capital.

① "Companies Borrow Up to the Brink of Collapse"…Losing the Golden Time for Restructuring
① [Interview] "Once Cash Runs Out, It’s Too Late…Restructuring is a Management Tool, Not a Failure"
② "Can a Company Really Survive with More Loans?"…The Core of Restructuring is Corporate Competitiveness, Not Debt
② [Interview] "The Most Important Thing is Root Cause Analysis, Then Selection and Focus"
③ The Government Should Set the Stage…The Financial Sector and Corporations Must Take the Lead in a Proactive Restructuring Ecosystem

"The most important thing is to analyze the root cause of the crisis. Next comes selection and focus."

Chi Hong Park, Head of the Corporate Restructuring Center at Samil PricewaterhouseCoopers, made this comment in a recent interview with The Asia Business Daily, when asked about which areas companies should prioritize for successful corporate turnaround.

Park first emphasized, "An accurate analysis is needed to understand which problems have caused a company’s performance to deteriorate and created a liquidity crisis." He pointed out that while performance declines may sometimes occur abruptly due to external environmental changes, in other cases, the fundamental issue lies in weakening corporate competitiveness. He explained that only by cool-headedly determining whether the crisis is temporary and whether business restructuring is feasible can a company prepare alternatives and take the next steps.

Source: Samil PwC

He added, "If the crisis is temporary, short-term support measures such as liquidity provision may suffice. However, if the crisis is due to a structural decline in competitiveness or the failure to respond proactively to market changes, then a sober and detailed analysis is crucial for overcoming the situation." Park further noted that the company itself is usually best placed to understand its own root causes.

However, if the cause of the crisis stems from a structural issue within the industry rather than a single company, the solution cannot be achieved through the restructuring of just one company. In such cases, a comprehensive industry restructuring is required, like the case of the petrochemical industry, in which the government presented the direction and companies autonomously submitted business reorganization plans. On last year's petrochemical industrial restructuring, Park assessed, "It is still too early to make a final judgment, but the overall policy direction is positive."

After identifying the causes, Park said that companies must clearly understand their available capabilities and resources at both the company and group level, then set a strategic direction for restructuring. He emphasized that “selection and focus” are essential in this process. He stated, "It is important to quickly implement self-rescue plans such as selling non-core assets, reducing costs, and improving processes."

In particular, Park repeatedly highlighted the importance of timing. He said, "It is difficult to clearly discern from the outside just how much staying power a particular company has," adding, "It is vital to establish a clear direction as soon as possible, but most companies only embark on restructuring after their limited resources and liquidity are already depleted," he lamented.

Finally, even if the company opts for post-facto restructuring led by creditors or the courts, Park advised that this process must not be delayed for too long. He stressed, "When the company still has some liquidity and resources, it’s possible to execute self-rescue plans and restructuring." He continued, "If companies exhaust all their capabilities and only then enter post-facto restructuring, such as court receivership or workout programs, there is little that both creditors and courts can do. Companies should always maintain enough cash to at least meet their payment obligations to business partners," he added.

This content was produced with the assistance of AI translation services.