"Proactive Business Restructuring Needed... Funding Support Measures That Can Be Guided Must Be Prepared"

Korea Institute of Finance 'The Necessity of Proactive Business Restructuring for Companies and Future Tasks' Report

[Asia Economy Reporter Park Sun-mi] It has been argued that measures should be established to ensure smooth financial support when companies rated A or B in corporate credit risk evaluations by creditor banks pursue business restructuring to respond to negative external shocks or transition to future industries.

Senior Research Fellow Gu Jeong-han of the Korea Institute of Finance recently stated this in a report titled "The Necessity of Proactive Business Restructuring in Response to External Shocks and Environmental Changes and Future Tasks," adding, "Although there is a need for proactive business restructuring as the distress of companies showing signs of insolvency is underestimated, it is difficult to say that various systems supporting proactive business restructuring are well established in Korea at present."

He first noted that if proactive business restructuring is successfully implemented, it can secure future growth engines for the Korean economy and has advantages in cost efficiency and higher chances of success compared to ex-post business restructuring conducted by companies showing signs of insolvency.

Research Fellow Gu advised, "When companies rated A or B in credit risk evaluations pursue business restructuring due to environmental changes, it implies that the entire industry is transitioning to future industries. Therefore, relevant government ministries need to analyze the industry and review plans regarding whether to proceed with restructuring, methods of implementation, specific support programs, and required resources." He added, "Since business restructuring of partner companies is also inevitable, it is necessary to prepare win-win support programs."

However, he noted that when companies pursue business restructuring due to negative external shocks, attracting private capital may be difficult. When companies initiate proactive business restructuring due to profitability deterioration caused by external shocks, uncertainty about the likelihood of success increases, making it difficult to secure restructuring funds from private finance.

He added, "In such cases, if it is necessary to support the industry from a policy perspective due to economic ripple effects such as employment, it is necessary to selectively establish policy directions and policy fund support plans for the relevant business restructuring."

To encourage more active proactive business restructuring, there was also advice to improve investment conditions for sub-funds of parent funds such as the Corporate Structural Innovation Fund and the Policy-type New Deal Fund.

Research Fellow Gu explained, "It is possible to consider measures to expand the proportion of proactive business restructuring companies included in investment conditions by relaxing asset management regulations on sub-funds or establishing separate programs exclusively for proactive business restructuring within parent funds to induce expanded financial support for proactive business restructuring."

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