[New Wave] A Fundamental Approach to Crisis Management for the Nation and Industry

In February, Hyundai Motor Group faced a situation where its entire production line came to a halt due to the inability to receive delivery of the 'wiring harness,' one of the vehicle wiring bundle components, amid the COVID-19 outbreak. This was because three domestic parts suppliers that provide this component have factories in China. As COVID-19 recently spread to Europe and the United States, major global automakers have also suspended production. In South Korea, not only the automobile manufacturing industry, which heavily depends on overseas parts and equipment, but also key manufacturing sectors such as semiconductors, displays, smartphones, and batteries are experiencing disruptions in logistics supply.

Last year, Samsung Electronics and SK Hynix faced significant difficulties due to Japan's export restrictions. The current COVID-19 crisis has shown that the risks to domestic industries arise not only from economic provocations by competing countries but also from the impact of new viral infections and natural disasters.

Companies enhance production and cost efficiency through overseas division of labor and collaboration utilizing the global 'value chain,' but as experienced in a series of incidents, they are inevitably affected by various external factors. In particular, domestic manufacturing processes are composed of global chains, and the high dependence on overseas materials and parts raises concerns about the occurrence of crises caused by external factors.

Our companies have only recently begun to recognize the urgency of 'localization' of materials and parts or 'diversification of parts supply chains.' Major domestic companies are planning to expand supply chains concentrated in specific countries to third countries to disperse risks and manage them efficiently. However, most companies lack crisis management capabilities and have not established response measures.

In such crisis situations, the government's role is very important. The world highly praises South Korea's excellent quarantine system in response to COVID-19 and recognizes it as a 'textbook of quarantine.' Our ability to respond quickly is due to past experience dealing with the Middle East Respiratory Syndrome (MERS) outbreak. Countries and companies that prepare in advance and anticipate crises can minimize damage and even turn crises into opportunities. Those that respond improvisationally when a crisis occurs may avoid immediate danger but will ultimately face threats to their survival.

So, what should our companies and industries prepare to overcome the series of crises they face? It is necessary to establish fundamental concepts and systems to respond to industrial threats caused by external shocks. A comprehensive approach system must be in place to protect industrial activities from various industrial threats and challenges. From the perspective of 'industrial security,' a national organization is needed to continuously collect, analyze, and predict information on constant threats and to continuously supplement our weaknesses.

For industrial security, in addition to localization strategies, capabilities to comprehensively operate various means such as research and development (R&D), mergers and acquisitions (M&A), key personnel policies, diplomacy, export controls, third-country cooperation, and the establishment of industrial security funds are required. To this end, dispersed roles must be consolidated, deficiencies supplemented, and a cross-ministerial approach rather than a single ministry approach is demanded.

Industries and countries that manage and overcome crises well will be the winners of the future. After this COVID-19, second and third coronavirus outbreaks may occur in the near future, and economic provocations like Japan's export restrictions may be repeated. By learning from this incident and thoroughly preparing for the crises to come, we will finally be reborn as a major industrial economy.

Seungwoo Son, Professor, Department of Industrial Security, Chung-Ang University

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