South Korea martial law crisis: could your company handle the shock?

South Korea martial law crisis: a 6-hour political shockwave that will leave thousands of companies questioning whether they could handle the fallout if they were severely affected. 

It began as most South Koreans were heading to bed and ended before they woke up. Many slept through the whole ordeal. 

And yet the fallout from the most insane night in Korean politics in decades has spooked everyone both inside the East Asian economic powerhouse as well as beyond its borders. 

For businesses directly affected, how do they deal with damage control? For others, could they handle this kind of shock well, especially if things had gotten worse before they got better? These are the questions we must ask after this kind of event.

• On the night of 3rd December, President Yoon Suk Yeol declared martial law in South Korea. He banned political activity and ordered police to seal off the Parliament building. 
• Large protests erupted immediately. Lawmakers bypassed police cordons to enter the Parliament building and voted to nullify the martial law declaration.
• Yoon Suk Yeol announced he would lift the martial law declaration. 
• South Korea won, and Korean shares fell sharply on 4th December.
• ING economists wrote that “martial law itself has been lifted, but this incident creates more uncertainty in the political landscape and the economy.”

The sudden escalation surprised even the United States government, one of South Korea’s most important partners and allies.

No one saw it coming, and people remain bewildered now that it’s over. How could political deadlock have morphed into an alleged “self-coup” overnight? 

It’s hard to be a corporate leader in this kind of situation, especially if your business is exposed to the fallout in any way. There will obviously be some knock-on effects for South Korean companies, but the issue will likely be severe enough for the many international companies with a presence in South Korea to be worried too.  

The country is a corporate focal point, and a crisis like chaotic martial law will leave many businesses scrambling to ensure the safety of their stakeholders and the continuance of their operations. 

The most significant risks currently are Korea’s hugely uncertain political future and the potential for market disruption amid eroding confidence in its stability. 

Had the crisis gone on longer, the risks could have included continuing threats to personnel within South Korea and supply chain disruptions, which could have had global knock-on effects.

The incident should serve as a wake-up call for corporate leaders. It underscored the randomness of many market shocks and the power that politics has over corporate life.

Corporate leaders should ask if they have robust contingency plans to weather these sudden, high-impact events.

You examine your strategy. It should have all the answers relating to how prepared you are because it will clearly state how your company does business and, by extension, the part of your activity that may be exposed to geopolitical risk.

Using South Korea as an example, you need to decide if your company has a presence in that market, has partners, employs people, and uses the country as part of your supply chain.  

If the answer to any of these questions is yes, you have a problem. 

Suddenly, and through no fault of your own, you might now need to ensure that an entire cohort of employees is safe and do what you can to help if not. You need to examine the impact on your strategic goals, revise targets, and make other arrangements to reflect the situation on the ground. 

Next, assess your crisis management capabilities. How do the decisions on the board and among executives? Are these roles well-defined, and do they include cross-functional coordination? Regular stress testing can simulate scenarios and reveal gaps in your response plans.

Finally, you need to evaluate your communication strategy because, very quickly, multiple stakeholders could want to know the next move. During geopolitical shocks, timely and transparent communication with stakeholders is crucial to maintaining trust. This includes investors, employees, and customers who will look to your leadership for stability and reassurance.

• Establish clear protocols for ensuring the safety of all employees if the situation in their country should rapidly deteriorate. 
• Ensure you have a clear chain of command for crisis situations. Split this chain of command by region if necessary. 
• Invest in robust communication channels and have backups if necessary. One of the most critical tasks in crisis mode is to ensure your stakeholders know what you’re planning next. 
• Diversify your operations so that your business can continue if one supply chain is affected.

South Korea martial law – The Corporate Governance Institute