[Doing biz in Korea] Trickiness in managing risks in Korea

By Shin Ji-hye
  • Published : Jul 10, 2018 - 18:47
  • Updated : Jul 11, 2018 - 17:11

The Korea Herald is publishing a series of features and interviews on South Korea’s business environment for foreign companies and investors. This is the ninth installment. -- Ed.

Managing risks has been a tricky task for foreign companies operating in South Korea, where personal relations largely overpower official ones and the culture is relatively secluded as well as cautious toward the unfamiliar.

On top of it, disparity between the reality here and formal procedures upheld by headquarters back home make the tasks of communications officials even harder.

However, grasping the nation’s “woori (we or us in Korean)” culture as well as the unique characteristics of the local media environment can help them manage risks, industry experts said.

Aware of South Koreans’ penchant for quick kinship toward foreigners showing efforts to fit in, or to become “one of us,” many foreign CEOs have been known to “Koreanize” their identities.

An example is taking up a Korean name.

Othman Al-Ghamdi, CEO of petroleum and refinery company S-Oil, whose largest shareholder is Saudi Aramco, has a Korean name, Oh Soo-man. Its meaning refers to a person who brings prosperity with wisdom. When Al-Ghamdi exchanges a business card with new clients, he explains the meaning of his Korean name -- a highly efficient ice-breaker.

Bruno Cosentino, chief of Seoul-based Oriental Brewery Co. owned by Belgian firm AB InBev, is another CEO with a Korean name: Kim Do-hoon, which means to succeed with manly capacity.

Some, meanwhile, have taken it to the next level.

Takemura Nobuyuki, CEO of Toyota Korea, is known for his love of the Korean language. When he takes the stage during media briefings he makes a long speech in Korean, each time focusing on pronunciation.

Shin Ho-chang, a professor at Sogang University’s communication college, said such localization efforts not only help boost business performance but also increase public perception that the company is a “Korean company.”

“The creation of such public perception can help lessen damage to brand image if the company meets difficulties exposed on a public scale.”

But even with such a progressive attitude, passive circumstances make it hard for multinational companies operating here, namely in dealing with the local media.

“We know close relationships with media can lead to better risk management. But this is not easy under the headquarters’ strict rules on media relations,” said a public relation official from a large UK company.

His company is one of many foreign companies whose global headquarters are in the US or Europe and which have a strict code of ethics in media relations. 

“In Korea, media culture is formed based on ‘personal relationships’ with the PR people. It is common to see reporters and PR people mingling to build such relationships,” said Chung Yong-min, CEO of Strategy Salad, a consulting firm specializing in risk and crisis management.

Operating press corps and pressrooms within a company’s headquarters is an example of the long-standing culture. Most Korean conglomerates, including Samsung, LG, Hyundai, SK and CJ, have pressrooms within their headquarters. Most local arms of global companies, including Apple, Google, Facebook, Mercedes-Benz and BMW do not.

Furthermore, school or regional ties give reporters greater access to information in companies than other countries, as Jeffrey Jones, former chairman of the American Chamber of Commerce in Korea, said, making it more difficult for PR people from foreign companies, many of whom have studied overseas.

The side effects of such relations between businesses and journalists have even been one of the factors behind the birth of the anti-graft law in 2016, setting limits to entertainment fees, among others.

With the effectuation of the anti-graft law coupled with the emergence of the younger generation with a different mindset, the media landscape in Korea has been changing, albeit slowly.

With the digitization of news platforms, and with Korea being one of the most wired countries in the world, news here travel fast, and through selected platforms of portals, making an initial response more critical, a hard task to achieve while communicating with the headquarters, experts say.

Last year, McDonald’s Korea was embroiled in controversy when a customer accused the company of food poisoning after a child ate a hamburger there.

While the case was closed with the prosecution dropping it, the company suffered brand damage due to the outpouring of inaccurate reports on hemolytic uremic syndrome.

The firm, which has not yet made apologies but instead said "deeply regret," had also applied for an injunction with a court a day before the Korea Consumer Agency’s announcement of its investigation results.

While such moves were apparently made upon legal review and under countermeasure guidelines, they prompted angry mobs of consumers.

Lee Sang-hui, a professor at Semyung University, said such a backlash may have stemmed from different risk management strategies between Western and Eastern companies.

“Western companies’ risk management is based on rational judgment so they first figure out facts and influences before making apologies. Eastern companies based on emotional judgment make apologies first and then figure out what went wrong,” Lee said.

German automaker Volkswagen is another company that struggled for years following its initial response to media and consumers. During the year after news of the manipulation of diesel emissions tests broke out, Volkswagen Korea front-lined legal representatives rather than communications specialists.

An industry source said the company’s initial response was ill-prepared and that made the public outrage uncontrollable. Volkswagen had to discontinue sales for around two years in Korea.

“For better risk management, foreign companies need to understand that the initial action is critical before public sentiment forms fast from the combination of a fast online environment and Koreans’ emotional aspect,” Strategy Salad CEO Chung said.

By Shin Ji-hye (