KBLA Value Chain October 2016

October 2016

Korea Intelligence Market Share for Exports Labor Market Costs Government Budgetary Priorities

Change

Change is no longer staying the same.

Korea Voices Bryan Hopkins Steve McKinney Ogan Gurel Tony Michell Michael Conforme

4

In This Month’s Issue Founders’ Message

6

KBLA Update Upcoming KBLA Events

Two Days Down South Professional Seminar: Managing People Risk

8

New Members This Month

11

Korea Intelligence Trade & Industry

14

Economics

20

Finance

22

Risk Management

24

Infrastructure/Transportation

26

Real Estate

30

Legal Analysis

38

Asan Institute Retrospect

42

Korea Voices Bryan Hopkins

44

Navigating the Kim Young-Ran Act

46

Selecting Superior Employees

Tony Michell

48

Michael Conforme CEO and CFO Relationship: Dynamic Duo or Odd Couple?

The New One Million Jobs Initiative

Ogan Gurel, MD

52

The Logic of Medicine: How Doctors Think

About the KBLA

Steve McKinney

58

50

5

6

Founders’ Message

Change is about to Change C

hange is all around us. It has been for some time.

Technology is advancing at an extremely fast rate that only promises to get faster still over time.

With that technological change comes business model changes and market changes that are coming so fast and thick we are already hardpressed to deal with them. The world has grown smaller. Time, whether for acting or even for thinking, has shrunk. Areas we once believed were untouchable by computers, knowledgework and creative thinking, are now being overtaken by algorithms that teach themselves.

At the Crux of Change Looking back over recent history, many of us can say we’ve seen more change during our lifetimes than came in the entire previous history of mankind. If that’s the case, we can say we were born at the middle of all human history: there has been as much history in our time as there has been before our time.

Not All Change Matters While change is certainly scary, not all change is qualitatively equal.

Some change matters and some doesn’t. We can still argue that for all intents and purposes the change we have seen so far, especially since the advent of computing, has not fundamentally changed human life that much. We are still born the same way. We still die the same way. We still live fundamentally the same way, we just do it faster, with a greater geographical and business scope.

We can talk to people on the other side of the world, and exchange data with them effortlessly, but all we are really doing is bringing together everyone in one virtual office. We’re working the way we always would have worked if we had been together at the same place. We’re not working fundamentally differently.

The New Change Change, however, is about to change. Rather than just enhancing, speeding up, and making more efficient the things we have always done, change that is on the horizon now promises to revolutionize how we work and even why we work. Changes in the areas of artificial intelligence, robotics, the life sciences, and connecting everything together will mean the individual worker will be increasingly challenged to provide value.

Beyond just work, we will be born differently, with the ability of parents to select for desirable genes and remove or fix undesirable ones. We may even die differently with great reductions in accident rates (through the adoption of autonomous systems throughout organizations), disease mortality rates reduction (through new therapies and cures), and the merging of human bodies with mechanical elements such as bionics controlled directly through the brain.

The New Change will challenge us to figure out how to stay relevant and valuable. There will also be a greater challenge finding meaning in our lives.

Rodney J. Johnson President, Erudite Risk Co-Founder, KBLA

Steve McKinney President, McKinney Consulting Co-Founder, KBLA

8

Upcoming KBLA Events

Two Days Down South

KBLA South Dinner Friday October 21, 2016 This event is limited to KBLA Members and specially invited guests only.

Chartered Deep Sea Fishing Expedition Saturday October 22, 2016 This event is limited to KBLA Members, member families and specially invited guests only.

Upcoming KBLA Events

Wednesday October 19, 2016 Namsan I, Grand Hyatt Seoul This event is open to the public.

9

New KBLA Members This Month Ms. JungAh Lee Sr. Vice President Prime Airwave

Mr. Bruce SunJae Lee Head of Finance and Taxes Bayer Korea

Ms. Jeongmi Jane Kwak Chief Marketing Officer FUNDamental Investment Group Inc.

Mr. Yangho Bae Vice President Korea Hydro & Nuclear Power

Ms. Honghua Jin CEO TnC Networks

Mr. JunHo Jeff Han Country Manager Edwards Lifesciences

Mr. Steven Hanson Commercial Adviser IPG Legal

Ms. Ceren Donmez Board Member, Public Relation Committee SKK Graduate School of Business

Ms. Kelly Kha Yeun Kim General Counsel Open Net

Mr. Rock Oh Managing Director DEV Korea

Mr. Hyun-Soo Chung Principal Samsung SDS Co., Ltd.

Mr. Bill Miner Chairman Chevron Korea

Mr. SiOn Choi FEI R&E Manager Kimberly-Clark Global Innovation Center

Mr. Michael McCarthy CFO Yongsan International School of Seoul

Mr. Leon Wonjae Lee Country Head YOZMA GROUP

Mr. Dae-ho Kim KEB Hana Team Leader of Foreign Investment & Client Marketing

Mr. Do-Ho Ahn Project Leader IKEA GROUP

Mr. Jose Fernando Di Trani Vice President Business Development YG-1 Co., Ltd

Mr. DH Kim General Manager Gracenote Korea Ltd. Ms. Jing Wang Dr. Corporate R&I / Organic Electronics Platform Manager Solvay

11

14

Korea Intelligence | Trade & Industry

World Market Share for Korea’s Top Exports On September 18, the Korea International Trade Association (KITA) issued a report on Korea’s top thirteen exports, and their world market shares. In 2015, Korea’s top 13 major exports held an average of roughly five percent of the world’s export market share, with Korean shipbuilding exports accounting for roughly one-fifth of the world export market, and textiles account for less than two percent. Of note, China continues to make gains against Korea in terms of world export market share, in almost all of Korea’s top thirteen export categories.

Data KITA, Table and Translation KBLA

Korea’s top 13 exports accounted for 78.6% of all Korean exports in 2015, down 3.6 percentage points from 2011. Semiconductors saw the greatest growth, accounting for eleven percent of Korean exports in 2015, while petroleum products (-3.22 % p) and shipbuilding (-2.54 % p) dropped.

Korea Intelligence | Trade & Industry

In 2015, Korea held roughly one-fifth of the world shipbuilding market, and roughly two percent of the world textile market. Among its top thirteen exports, it held an average 5.3% market share.

Data KITA, Chart and Translation KBLA

Between 2011 and 2015, China made gains against Korea in world export market share in almost all of Korea’s top 13 export categories.

15

16

Korea Intelligence | Trade & Industry

Monthly Per Employee Labor Costs in Fiscal Year 2015 On August 30, the Ministry of Employment and Labor (MOEL) published its figures on monthly per employee labor costs in fiscal year 2015. After surveying 3,388 companies with at least ten employees, MOEL determined that the average employee at the average company costs their employer 4.78 million KRW per month. According to the report, employee base wages accounted for only about 65% of total monthly per employee costs in 2015, with the remainder accounted for by bonuses and indirect expenses (insurance, pension, etc.). On average, employees at the largest companies (1,000+ employees), were far more expensive than those at smaller companies.

Direct labor expenses, in the form of wages and bonuses, accounted for about four-fifths of per employee monthly labor costs.

Indirect expenses accounted for about onefifth of total labor expenses, costing the average company about one million KRW per month, per employee.

Data MOEL, Chart and Translation KBLA

Korea Intelligence | Trade & Industry

Employees working in utilities were the most expensive, costing an average of over eight million KRW per month, followed by those in the finance and insurance sector at 7.9 million KRW per month.

Data MOEL, Table and Translation KBLA

Companies with 1,000 or more employees paid almost three million KRW a month more per employee than companies with 10 to 29 employees.

Data MOEL, Table and Translation KBLA

17

20

Korea Intelligence | Economics

2017 Government Budget Proposals’ Priorities On August 30, the Ministry of Strategy and Finance (MOSF) issued an English-language press relief summarizing the government’s 2017 budget proposal. Per the report, “The 2017 budget proposal promotes both expansionary policies and mid-term fiscal soundness. Total expenditures will be increased by 14.3 trillion won, or 3.7 percent, compared with the 2016 budget, and fiscal balance and national debt will improve compared with the 2015-2019 fiscal management plan. A total of 400.7 trillion won will be spent to successfully deal with economic and social changes and internal and external risks, improve people’s livelihoods, increase birth rates, and enhance national security. The 2016-2020 fiscal management plan is drawn up to bolster up growth and job creation, as well as to ensure fiscal soundness.”

22

Korea Intelligence | Finance

Credit Card Companies’ Earnings, 1H 2016 On September 22, the Financial Supervisory Service (FSS) issued a report on credit card companies’ earnings in 1H 2016. Per the report, “Eight credit card companies found that their net income decreased by KRW139.0 billion or 12.8% to KRW948.7 billion at the end of June 2016. Merchant fees income and card loan interest revenues rose, compared to the same period last year. However, bad debts reserves and other expenses occurred regarding additional services significantly increased, which contributed to the decline in CCCs’ net income.”

Data FSS

“At the end of June 2016, the number of credit cards issued by credit card companies (CCCs) and banks reached KRW94.04 million, and dormant credit cards1 have slightly increased since earlier this year. Check (debit) card issuances have consistently risen since 2010, and the cumulative number of check cards issued was 107.81 million for the first half of this year.”

“Credit and check cards use saw the sharpest jump since 2011, and purchases with credit and check cards came to KRW358.7 trillion for the first half of 2016.

While purchases with credit cards grew KRW30.9 trillion or 12.1% to KRW287.3 trillion, check card purchases increased KRW9.3 trillion or 15.0% to KRW71.4 trillion.”

“The delinquency rate of the assets at the end of June 2016 stood at 1.43%, 0.19%p down from 1.62% the previous year. The delinquency rate for credit card loans was 2.18%, continuing its decline after hitting a record high of 2.82% in 2012.”

Korea Intelligence | Finance

Bank Earnings in 2Q 2016 On September 1, the Financial Supervisory Service (FSS) issued its report on bank earnings in 2Q 2016. Key details are as follows: “Domestic banks reported preliminary net loss of KRW0.4 trillion in the second quarter of 2016, KRW2.6 trillion down from KRW2.2 trillion a year earlier. In particular, specialized banks’ net income fell by KRW2.3 trillion during the period.”

“The total capital ratio of domestic banks at the end of June 2016 stood at 14.39%, 0.41%p up from three months earlier. The Tier 1 capital ratio was 11.77% and the common equity Tier 1 (CET1) capital ratio was 11.39%, both higher than the previous quarter. The growth of the total capital ratio, Tier 1 capital ratio and CET1 ratio was mostly because total capital increased

by KRW2.7 trillion and risk-weighted assets fell KRW22.3 trillion.”

“Return on assets (ROA) for the second quarter of 2016 stood at -0.08%, 0.50%p down from 0.42% a year ago. Return of equity (ROE) was -1.07%, 6.62%p down from 5.55% a year earlier.

Both the ROA and the ROE were lower than the average of recent ten years and the level of advanced economies.”

Data FSS

23

24

Korea Intelligence | Risk Management

Online Advertisements for Illegal Financial Services, 1H 2016 On September 1, the Financial Supervisory Service (FSS) issued a press release urging individuals to be wary of online advertisements for illegal financial services. While the overall number of advertisements for illegal financial services has decreased by almost one-third year-on-year, those for illegal cash conversions (although still relatively rare), have been increasing or decreasing at a slower rate. The report also offers descriptions of the various types of financial scams being advertised, which are summarized below.

Data FSS, Table and Translation KBLA

Korea Intelligence | Risk Management

Data FSS, Chart and Translation KBLA

25

26

Korea Intelligence | Infrastructure/Transportation

Traffic Levels During Summer Vacation Period On September 7, the Ministry of Land, Infrastructure, and Transport (MOLIT), issued an analysis of traffic levels during the summer vacation period. Per the report, a daily average of 4.42 million vehicles traveled on the country’s expressways (고속도로) during the summer vacation period (judged to be a seventeen-day period July 22 to August 7, 2016), up 2.8% from last year’s vacation period (July 24 to August 9, 2015).

A peak of 4.73 million vehicles traveled on the nation’s expressways on July 30.

In terms of interchanges near major tourist destinations, the Busan interchange saw nearly 1.3 million vehicles total over the seventeen-day period.

Jirisan, Geochang, and Yecheon interchanges saw the greatest year-on-year increases in vehicle traffic, increasing around 27-28 percent each. Haeundae Beach in Busan, and Dadohaehaesang National Park near Mokpo were determined to have had the strongest pulls on traffic.

Korea Intelligence | Infrastructure/Transportation

New Stretch of Donghae Expressway Opens On September 8, the Ministry of Land, Infrastructure, and Transport (MOLIT) announced the September 9 opening of a new 18.6-kilometer stretch of the Donghae Expressway, connecting the cities of Donghae and Samcheok. The new road will reduce the distance between Donghae and

Samcheok by 2.1 kilometers, cut travel time by 21 minutes, and reduce logistical expenses by an estimated 32.7 billion KRW a year. Construction on the extension began in 2009, and the project cost a total of 601.9 billion KRW.

Seismic Reinforcements Complete by End of 2017 On September 20, the Korea Expressway Corporation announced that it would complete seismic

reinforcements for 100% of the country’s 8,767 bridges by the end 2017.

KORAIL to Open “Business Lounges” at Select Train Stations

On September 8, Korail announced that, as early as the end of October 2016, it would begin introducing “mobile offices” at 25 major train stations around the country.

The press release notes that, as opposed to existing “membership lounges,” these new spaces will come equipped with a variety of office equipment (printers, copiers, faxes, etc.).

27

30

Korea Intelligence |

Real Estate by Cushman & Wakefield

Korea Intelligence |

Real Estate by Cushman & Wakefield

31

32

Korea Intelligence |

Real Estate by Cushman & Wakefield

Korea Intelligence |

Real Estate by Cushman & Wakefield

33

34

Korea Intelligence |

Real Estate by Cushman & Wakefield

Korea Intelligence |

Real Estate by Cushman & Wakefield

35

36

Korea Intelligence |

Real Estate by Cushman & Wakefield

Korea Intelligence |

Real Estate by Cushman & Wakefield

37

38

Legal Analysis

Variations More than You Guess Korean Capital Markets License Framework Focusing on the Recent Discussions for Mega-Investment Banks Korean government is trying to materialize its scheme for nurturing mega-investment banks (“Mega IB”) from early this year. Mega IB, once launched is expected to be a bigger sized sub category in ‘Comprehensive Financial Investment Companies’ (introduced in 2013) and expected to be embodied next year by the amendment of the Enforcement Decree (“Enforcement Decree”) of the Financial Investment Services and Capital Markets Act (“FSCMA”) of Korea.

In order to assist in the understanding of the background and implication of the above amendment to the Enforcement Decree, this article briefly summarizes the FSCMA license framework and the variations thereof which have been or will be introduced, and further explores the legal and business implications of such amendment.

1. Principle of the License Regulatory Framework in the FSCMA In principle, the granting of a license must be stipulated by law either directly or through a delegation provision. The FSCMA expressly provides for the minimum level of equity capital required for engaging in a business activity. The FSCMA further provides that the specific amounts of the foregoing shall be determined under the Enforcement Decree, and that the scope of licensed activities may vary depending on their level of equity capital contemplating the types of products, the class of counterparties (investors) and the pattern of business activities

(i.e., dealing, brokerage, asset management (collective investment), trust, investment advisory, and discretionary investment).

The above principle, however, has variations. For instance, new business activities may be granted under the Enforcement Decree (and not under the FSCMA) as seen in the Mega IB related discussion, the restrictive conditions to a license may be levied by the Financial Services Commission (“FSC”) to a similar status as license units (note that license units are addressed in the Enforcement Decree pursuant to the delegations allowed under the FSCMA), and license disqualifications which are not provided under the FSCMA or its Enforcement Decree may be implemented as FSC policy.

2. Granting New Activities via Enforcement Decree Korean FSC introduced ‘Comprehensive Financial Investment Companies (“CFIC”)’ in 2013, in which a securities firm with equity capital of more than KRW3 trillion is permitted to engage in corporate lending. However, the securities industry is viewed to having been still focusing mainly on brokerage services and fell short of their IB activities to channel risk capital to innovative companies.

Against this backdrop, the FSC outlined a plan to strengthen securities firm’s IB functions to enable them to engage in more corporate lending expecting to see Mega IBs with equity capital of more than KRW10 trillion in Korea.

Legal analysis provided by Lee & Ko.

Legal Analysis In order to implement the foregoing, the FSS aims to amend the Enforcement Decree in late 2016 and enact it in 2017. The details of the amendment are as follows: For CFICs with equity capital not less than KRW4 trillion, issuance of promissory notes with a maturity not longer than 1 year will be allowed to raise sufficient capital for corporate financing and broader foreign exchange business will be allowed.

For CFICs with equity capital not less than KRW8 trillion, the FSC will permit to establish Investment Management Accounts and engage in property trust business as a means to raise sufficient capital for corporate financing. Securities firms with equity capital less than KRW4 trillion will as well benefit from the key reforms to enable them to secure enough capital to engage in corporate financing such as flexibility in application of NCR-II, increased corporate lending limit up to 100% of equity capital, permitting internalization of order execution for unlisted stocks, and etc.

The above amendment grants specific entities the right to engage in certain business activities while forbidding non-CFIC securities firms and non-Mega IB CFICs from engaging in the same. Given this discriminatory nature, some may argue for the requirement of relevant provisions in the FSCMA or, at least, delegation provisions. Under this view, in order to introduce Mega IBs, the FSCMA ought to be amended relating to Mega IBs, for example, to say that Mega IBs are required to “obtain an equity capital of not less than KRW3 trillion as further required under the Enforcement Decree per business activity unit” and the Enforcement Decree ought to define the business activities of Mega IBs in accordance with their level of equity capital.

There are concerns in the securities industry that allowing Mega IBs to further engage in the granting of corporate financing activities may undermine the growth of small and

mid-sized securities firms, and also flip side views of that the issuance of bills by Mega IBs to acquire capital may increase the leverage ratio which may in turn undermine their financial stability of such Mega IBs. In light of these concerns, it is essential that the above licensing regulations adopt an adequate legal framework.

From the perspective of the financial industry, it should be noted that the industry may request the regulatory bodies for the granting of new or specialized categories of business activities by means other than amendment of the FSCMA 3. Conditioned or Restrictive License The FSC has oftentimes granted OTC derivatives licenses to securities companies under the following wording: “license is granted to the extent of hedging purposed OTC derivatives dealing needed in connection with its issue of equity related derivatives linked notes.” Such conditioned or restrictive license may be arguable from a legal perspective. This is because hedging purposed transactions are not profit generating purposed business activity and even general corporations do not require a derivatives license for hedging transactions. In line of this question, there can be a suggestion that legally appropriate contents of OTC dealing license should just say “issue of equity related derivatives linked notes” and be silent about hedging activities. On the other hand, there can be a supporting argument about mentioning hedging activities in the license considering that hedging transactions are not always straightforward back-toback but instead book hedging or delta hedging where clear-cut classifications between hedging and speculation can be difficult. As additional samples of this restrictive license, in the licenses granted to branches or subsidiaries of global financial institutions, sometimes the counterparties of OTC derivatives

39

40

Legal Analysis transactions are limited to its affiliates. However, the license units subject to the aforesaid restrictions or conditions are not expressly defined in laws or regulations.

As the granting of a license is an administrative action and the FSC therefore has the discretion to impose certain conditions, such conditioned licenses are of course legally permissible. But we may note that the repeated granting of conditioned licenses can ultimately result in the creation of sub-license units and as such, may be deemed as yet another variation to the principle that license units must be defined by law.

are not everything.’ If the industry is to evaluate these policies from another perspective, such policies may be more easily deregulated or revoked through discussions with the regulatory bodies than any restriction imposed by law. Put differently, such policies may be more susceptible to the deregulation efforts of the securities industry.

Financial institutions who do not have sufficient human and/or material capabilities to obtain a full license may consider expanding their scope of work by proposing to accept a conditioned license.

4. License Policy The ‘cooling period policy,’ which prohibited a financial investment company that had received a penalty of or more severe that ‘warning to institution’ from applying for a license for six months from the date of imposition of such penalty, was later revoked by the FSC due to lack of a legal basis.

Likewise, the ‘1group 1license policy,’ which seeks to prevent the unregulated proliferation of financial institutions, is not provided by law.

However, the FSC is selectively deregulating the said policy in light of the criticism that such policy coerces mergers in M&A deals of securities firms and intrudes on the independence of the business sector.

However, certain sectors, including the asset management sector, are still subject to the aforesaid policy.

The above ‘cooling period policy’ and the ‘1group 1 license policy’ are not provided in laws or regulations but have nonetheless been continually evoked by the FSC. In other words, ‘as far as licenses are concerned, regulations

Hyun Joo OH Partner Hyunjoo OH is a partner in the Capital Markets Group. She is a leading expert in the areas of securities, derivatives, capital market licenses, capital market legal compliance issues, foreign exchange regulations and the resolution of disputes in capital markets.

Ms. Oh has represented some of the most prestigious banks and financial institutions and earned a reputation as a brilliant negotiator and strategist in deal structuring. Chambers of Asia and Asialaw named Ms. Oh a leading lawyer in the area of Capital Markets.

Legal Analysis

41

42

Asan Institute Retrospect

South Korea’s Search for Answers to Rising Geopolitical Risk and Mounting Economic Challenges In the aftermath of the fifth nuclear test, the North Korean security risk has risen to be the single most important policy problem for the South Korean government. While President Park has issued a stern warning for the North Korean regime, it is unclear as to exactly what the South Korean government can do to mitigate the growing threat. The US government has reiterated its commitment to the alliance and extended deterrence, but the Korean public is demanding stronger action.

Meanwhile, the South Korean government is also facing growing criticism over its handling of the Hanjin receivership as the company looks to offload the tons of cargo on ships stranded at sea.

deployed two of its B-1B Lancer bombers to the Korean Peninsula on Sept 13. The two aircraft flew over Osan Air Base before returning to Andersen Base in Guam. Eight days later, the aircraft returned to perform a low-level flight near the Demilitarized Zone (DMZ) before one landed on the Osan Air Base.

North Korea responded with a statement promising to “turn Seoul into a pile of ashes.” It also announced on Sept 20 that it had successfully tested a new long-range rocket engine that could theoretically power its intercontinental ballistic missile (ICBM).

North Korea

There is a growing call for South Korea to develop its own nuclear capability. Assemblyman Won Yoochul - the former floor leader of the ruling New Frontier Party (NFP) - for instance, has stated that “the most effective way to deter [North Korea’s] nuclear threat is to possess nuclear weapons.” During an emergency session of the National Assembly on Sept 12, he led a group of conservative lawmakers to propose the establishment of a bipartisan parliamentary panel to discuss effective countermeasures against the North Korean nuclear threat.

Included in the discussion agenda was the topic of South Korea’s indigenous nuclear capability.

Current leader of the NFP, Assemblyman Lee Jung-hyun, has also stated that it is time for South Korea to put the nuclear agenda on the discussion table. This call was echoed by Assemblyman Kim Moosung, who urged lawmakers and the government to consider “every possible measure.” The majority

Responding to the fifth nuclear test President Park Geun-hye has issued a very strong statement in response to North Korea’s fifth nuclear test.

On Sept 13, she asked the Korean military to “continue and increase cooperation with the United States” and to “put an end to the North Korean regime should it fire a single nuclear weapon toward the South.”

On Sept 21, Defense Minister Han Min-koo also revealed that South Korea has a decapitation plan if the North showed any sign of an imminent attack.

The South Korean Air Force is expected to join its US counterpart early next month in a simulated military exercise aimed at targeting North Korea’s nuclear facilities. The exercise, known as RED FLAGAlaska, is scheduled to take place at the Eielson Air Force Base in Alaska from Oct 3-21.

Meanwhile, the US Air Force

Calls for South Korea’s ‘nuclearization’

Authors Han Minjeong, John J. Lee, J. James Kim

Asan Institute Retrospect of Korean public appears to be in agreement. According to a recent survey conducted by Gallup Korea, 75% of South Koreans agree that North Korea’s fifth nuclear test pose a threat to peace on the Korean Peninsula. 58% also agree that South Korea should possess its own nuclear weapons.

Mr. Kim Jong-in, the former leader of the opposition Together Democratic Party (TDP), stated that South Korea should “actively review” pre-emptive and deterrence capabilities in response to North Korea’s nuclear attack. However, Assemblymen Yun Gwan-seok (TDP), Ki Dong-min (TDP), and Park Jie-won (PP), among many other opposition lawmakers, criticized the ruling party’s approach, calling it “inappropriate, “dangerous,” and “irresponsible.”

The official position of the Blue House is strict adherence to the non-proliferation treaty (NPT), which is in keeping with the position of the United States. The US has also rejected calls for the reintroduction of tactical nuclear weapons on the Korean Peninsula.

Hanjin Shipping The logistics crisis caused by Hanjin Shipping’s court receivership on Aug 31 has yet to be resolved.

Many of Hanjin’s ships are still stranded at sea and they have yet to finish offloading their cargoes.

With financial assistance from the Hanjin group (KRW 100 billion) along with contributions by former president Choi Eun-young (KRW 10 billion) and KDB (KRW 50 billion), the company now has enough cash to proceed with the offloading process. As soon as the cargos are off-loaded, ships chartered to Hanjin will be returned to its owners.

Though concerns are raised that the return would drastically reduce the size of the firm devastating its valuable sales networks, the carrier is in need of cash to go through the court receivership process. The bankruptcy court has also pushed back the deadline (from the end of October to the end of November) in deciding whether to move through

with the receivership process or to liquidate the company. As legal claims are expected to follow after the unloading, the likelihood of recovery is becoming a more distant reality. The government opposes bailing out the firm. However, it has announced that it will support the company in offloading 90% of the stalled cargos by the end of October.

43

44

Korea Voices

Navigating The Kim Young-Ran Act Korea’s New Anti-Bribery Law A discussion of human capital in Korea is not complete without considering Korea’s latest anti-bribery law known as the Kim Young Ran Act. The Kim Young Ran Act ( the Act on the Prevention of Improper Solicitation and Receipt of Money and Goods) recently went into effect , and promises to not only penalize various acts of public corruption but also extends the reach of the anti-bribery laws into certain areas of the private sector. In strengthening various provisions of Korea’s current anti-bribery and corruption laws and regulations, the Kim Young Ran Act (the Act) focused on 4 areas: ( I) the expansion of the acts that may be punished; (2) the expansion of the definition of “public official” ; (3) the prohibition of improper solicitation without the payment of money; and (4) the introduction of liability provisions to ensure corporate accountability.

Now, domestic companies must also be concerned not only about potential FCPA issues but violations of the Act and the risk of reputational damage.

1. One of the key provisions of the Act, is of course, its expanded definition of “public official”. Section 2 of Article 2 of the Act provides: The term “public official or relevant person” means a public official or employee performing public duties who falls under and of the following items: ( a) Civil Servants under the State Public Officials Act or Local Public Officials Act, and the persons who are recognized buy other Acts as civil servants in terms of their qualification, appointment, educations training, service, remuneration, guarantee of position and so on; (b) the heads of public service-related organizations and public institutions as prescribed in items (b) and (c) of Subparagraph 1, and their employees; ( c ) the heads of schools of various levels and educational corporations as prescribed in item d) of Subparagraph 1, and their employees; and (d) the representatives and employees

of media companies as prescribed in item ( c ) of Subparagraph 1.

Under Korea’s laws prior to the enactment of the Act, only recipients of bribes or money in the public sector could be found guilty of “public official bribery”. The Act has expanded the scope of the “public official” to now include not only persons in the public sector, but also in various private sectors including employees of media entities and teachers of private schools.

2. Besides expanding the definition of “public official”, the Act also prohibits improper solicitation Article 5 of the Act provides in part: ‘No one shall solicit a public official or relevant person performing his or her duties, directly or through a third party, for an improper act which falls under any of the following subparagraphs: 1. An act of exerting influence in order that authorization , permission, license , patent, approval , inspection, examination, test, certification, confirmation or any other duties, which are handles upon receiving an application from a duty –related party under the conditions prescribed by Acts and subordinate statutes ( including ordinances and rules; hereinafter the same shall apply ), are managed in violation of Acts and subordinate statues; 2. An act of mitigating or remitting various administrative dispositions or punishments such as the cancellation of authorization or permission , and imposition of taxes, charges, fines for negligence, penalty surcharges, charges for compelling compliance, penalties or disciplinary actions in violation of Acts and subordinate statues 3. An act of intervening or exerting influence in the appointment , promotion, job transfer or any other personnel management of public officials or relevant persons in violation

Bryan Hopkins Special Counsel, Lee & Ko bryan.hopkins@leeko.com

Korea Voices of Acts and subordinate statutes’ This is in direct contrast to the previous laws which did not penalize the act of solicitation without the payment or acceptance of some form of monetary interest. Now, the mere act of improper solicitation of a “public official” directly or through a third party is prohibited.

Not only has the concept of improper solicitation expanded to include non-monetary actions, but there is a monetary fine of KRW 20 Million when one solicits a “public official” for the advantage of another party, and the “public official” may also be subject to a criminal fine of up to KRW 20 million and face imprisonment of up to 2 years.

3. For the First Time Companies Can Be Held Liable The Korean Commercial Code contains no provisions which holds companies liable for the acts of employees.

However, under the Act, there is a vicarious liability provision. Article 24 reads in part: “When a representative of a legal person or organization , or an agent , employee or other servant of a legal person, organization or individual commits a violation under Subparagraph 3 of Paragraph (1) of Article 22 (excluding a case where the provider of a financial or other advantage is a public official or relevant person ( including private persons performing public duties to whom Article 8 applies mutatis mutandis under Artice3l 11) ) , Paragraph (2) or (3) of Article 23, or Subparagraph 3 of Paragraph (5) of the same article …., not only shall the violator be punished , but the legal person, organization or individual also shall be punished by a fine or a fine for negligence provided by a corresponding provision.”

4. What Is In Store For Companies Doing Business in Korea?

The risks of companies violating the Act and incurring penalties as well as reputational harm is quite real. Not only does the Act levy large fines on companies and individuals for violations but the courts in Korea are now under a great deal of pressure to enforce the Act . As companies now face vicarious liability, which is something new, they will have to make certain their employees do not violate the Act. This

means companies will have to invest more into compliance training on a local level. Considering the ramifications of the new Act, domestic companies and foreign companies alike that do business in Korea must be sensitive to the demands of the new Act and how it impacts day to day operations. A comprehensive compliance program with robust guidelines needs to be implemented to ensure employees’ compliance and understanding and to provide a defense in case employees violate the Act even after adequate training. This must happen in addition to training over the FCPA and UK AntiBribery Act as well.

No doubt the Act has elevated Korea’s anti-bribery laws to a more rigorous level and exposes companies doing business in Korea to not only FCPA concerns but the Kim Young Ran Act concerns too. In consideration of the double or triple exposure Korean companies now face, it is advisable to consider implementing a comprehensive compliance program with an anti-bribery component and then certifying the anti-bribery program in accordance with ISO 37001. The ISO 37001 standard was created from input from all over the world and is the gold standard for anti-bribery programs.

As the international standard, it also contains processes that are needed to prove a robust anti-bribery program such as: (i) performing a proper risk assessment and implementing controls to mitigate risks, (ii) ensuring training has been properly provided, (iii) having documentation in order regarding policies and (iv) obtaining a proper buy in from management.

By implementing a robust compliance program covering the risks posed by the Act and then certifying the program in accordance with ISO 37001, companies in Korea can go a long way in mitigating their exposure to bribery issues and risks. It is advisable for companies to consider such certification as the benefits of implementing a program and getting it ISO certified certainly outweigh the risks posed by the latest round of antibribery laws and regulations.

45

46

Korea Voices

Selecting Superior Employees 4 Valuable Things to Focus on Superstars: Fact or Fiction I always like the 80/20 rule. The Pareto Principle: eighty percent of the work is done by twenty percent of the people.

That’s fine, but how do we identify and take care of the twenty percent?

How can we be sure we are hiring one of them? In this article, we will try to answer the first question of how do we identify these superior employees and we’ll address taking care of them in a later article.

Everyone wants to hire a superstar, but when asked to describe one, most executives are at a loss for words.

Or, they usually say, “You know what I want!” What is the make-up of a superior employee, and can we agree on those components?

There are a lot of answers to these questions, and I do not claim to know all of the answers, but having placed hundreds of high performance leaders inside multinational companies, I do have an opinion. For those seeking to hire superstars, or become one, it pays to be able to separate FACT from fiction. If we keep our F, A, C, Ts straight, we can’t fail.

The letter “F” in “FACTs” reminds us of the need for great employees to be fast. Today’s multinational companies need to be first at something. This requires speed to market, speed in the development of a product, or rapidly responding to a customer’s need. We need employees who are quick to grab onto new concepts or opportunities, and then run with them.

For example, the sales organization of a typical multinational company has changed quite a bit. In the past a salesman worked only as outside salesman. They would present their product or service to the customer, take their order and then process it. That was the bulk of their accountability. But today’s salesman may work on inside sales as well as outside accounts or manage

distributors, key accounts, or all of the above. Multiple strategies are needed to reach these different customers. It takes smart and able sales executives who can respond to these various needs quickly.

The salesman gets to know the customers within the organization he or she is selling to, such as marketing leaders, research & development directors, as well as the CEO. The superstar salesman listens to the customer, gathers feedback, and reports his findings to leaders within his own company. Then he must sell his own company on making changes to their products or services to meet the needs of the customer. Timing is everything, so a fast response to the customers’ needs is pivotal to the success or failure of the business opportunity. It takes a very different person today to be a salesman in a multinational company, as they must rely on building a strong network of relationships, develop modern sales techniques, learn how to sell ideas internally as well as externally, and be as fast or quicker than the competition.

The letter “A” in “FACTs” reminds us that superstars are adaptable. Who am I? What is mine? In traditional Korean companies, a person’s title and area of responsibility is clearly defined and no one steps over the fences erected. In multinational companies, a superstar must be a team player, as well as adaptable to the constant change of responsibilities of the task.

Instead of having a reporting structure of only one person, a matrix system is common place in multinational companies. A superstar is able to adapt to reporting to multiple bosses at the same time for different tasks.

This morning he might present a marketing report to the CEO in Korea and this afternoon, have a report prepared on new product testing to the Asia-wide category leader located in Hong Kong. A superstar must be

Steve McKinney President, McKinney Consulting Co-Founder of the KBLA steve@mckinneyconsulting.com

Korea Voices adaptable to various cultures and leadership styles.

The letter “C” in “FACTs” reminds us that superstars possess strong communication skills. English language fluency in reading, writing and comprehension is a basic requirement for superstars.

According to Webster, one definition of communication is the imparting or interchange of thoughts, opinions, or information by speech, writing or signs. So, if we are all speaking the same language, why do we misunderstand each other? Well, I don’t have all of the answers but I have a few of them to consider.

The challenge comes from the cultural background of Koreans in comparison with Westerners. We might be speaking the same English language to each other, but the interpretation or understanding can be quite different.

Koreans are often classified as a collectivist society, with the goal of communication being to maintain harmony, while Western cultures are classified as individualistic societies, with the goal of communication being information.

Koreans are emotional, easily embarrassed, and really take feelings into account. Westerners tend to lean toward being more logical, impersonal, and tend to separate issues from their feelings.

For example, Koreans will often give positive answers to avoid disturbing harmony or hurting feelings: Yes (in answer to a negative) I’ll try / do my best / if I can I personally agree / want to do it I agree with you in principle I sympathize with your position However, the Westerner gives factual answers to impart information and to show sincerity: No (in answer to negative) I cannot because I disagree Superstars learn the differences in communication styles and develop strong communication skills to be successful in multinational companies.

This strength allows them to move within the organization and sometimes even to other divisions of the company in other countries.

Finally, the “T” in “FACTs” represents the “tactical” nature that superstars possess. Too often, individuals in companies get stuck at the strategy

portion of a company’s goals and objectives. A superstar knows that it takes tactics to turn a strategy into action.

Being able to think tactically means being able to ensure that strategy turns into concrete steps the company and team can take to get everyone on board the train, and head to the destination of choice. A tactically savvy employee is worth his or her weight in gold. They don’t just talk about where to go and what to do – they get things done.

Tactically skilled employees know how to persuade; pull, push, and get buy-in from the organizations many parts in order to ensure that personal issues, egos, and minor operating obstacles don’t stop strategy from becoming reality. They sometimes overstep their mandate, but only with the intention of ensuring things don’t get held up.

If one will consider the four valuable things of fast, adaptable, communications, and tactical skills in potential employees the odds are greater that you will identify and hire more superstar employees.

Steven B. McKinney is the founder and president of McKinney Consulting an Executive Search and Leadership Consulting firm based in Seoul, Korea, a Certified Master Coach and Co-Founder of the KBLA. www. mckinneyconsulting.com Steven B. McKinney is the founder and president of McKinney Consulting an Executive Search and Leadership Consulting firm based in Seoul, Korea, a Certified Master Coach and CoFounder of the KBLA.

47

48

Korea Voices

The New One Million Jobs Initiative In the dark days of the Asian Financial Crisis when chaebol and banks were toppling, Tony Michell of KABC Ltd, and James Rooney, then of Ssangyong-Templeton, created a one million jobs movement (OMJ). An OMJ report, which was supported by 3M and Citibank, caught the imagination of Korea’s business leaders, so that at its peak, there were daily articles in the Korea Economic Daily and several television programmes, while 80,000 taxis carried the slogan, “Let’s Create One Million Jobs,” paid for

by Seoul Bank, which was a major supporter of the programme.

The Korea Labor Institute provided communications with the Korean government. When the campaign was wound-up following the absorption of Seoul Bank by Hana Bank in 2001, 2.1 million jobs had been created in Korea, many of them in SMEs, which were OMJ’s major target.

Job creation has become a major issue in today’s Korea, and a new OMJ report has just been launched, supported by KCMC (Korean CEOs of Multinational Companies) and coordinated by a committee including Tony Michell and James Rooney. The message of the new report is simple. Korea is slowing down and it doesn’t need to. The emphasis of OMJ is unique – employment generated growth as a yardstick for action and policy, based around a citizens’ movement to create businesses and jobs. Jobs for those not currently in the workforce, primarily career-interrupted women, new jobs for those who must lose their present jobs through structural economic change, automation, and digitalization, new jobs for those who have reached the end of their first work cycle, but who wish to remain active either because they need the

income, or just to stay active.

These innovations and actions are semi-independent of one another, although with strong synergies, and are largely market-led…rather than government-led. This is a micro approach to the problems of Korea which collectively will create a difference for the macro economy, one job at a time, resulting in up to 2% additional growth per annum 2017 to 2021.

• Our initiative is intended not to just produce a report, but to generate a programme to make “growth” happen. We believe that 5-6 million new jobs can be created by 2021.

• Our report aims to be convincingly inspirational to provide the insights which lead to the creation of an “OMJ” mindset about where the new jobs and business will be.

• The most important task is to create a positive mindset about business creation and business survival for SMEs and the selfemployed who together provide about 80% of the jobs in Korea. o Up to 1.5 million new jobs will be in new business startups largely but not exclusively in conventional sectors, o 1.5 million new jobs will be in new industries and services that hardly exist today, o 2-3 million new jobs will be in existing businesses that benefit from increased competitiveness and new support and growth initiatives.

The initiative aims to present a new framework for thinking about the Korean economy based on real peoples’ lives, the life cycle of different age cohorts of the population for which eighteen new dimensions to think about job

Tony Michell Managing Director, KABC Ltd. tony.michell@kabcltd.com

Korea Voices

creation can be derived. Many of these jobs need new vocational skills so the education sector must prepare and shift towards adult education and skill development.

The goals of OMJ are to • Raise confidence and create belief in what is possible.

• Sketch out the new landscape of employment opportunities • Serve as an inspiration for “spontaneous” employment and business growth by ensuring a smooth transition from education to employment to change of job, further training and re-entry into the work force, a process that labour economists call “increasing the fluidity of the labour force.”

• Through a well constituted website, allow Koreans to get the best information on existing schemes, which also allows peer review and debate • Identify worthwhile projects that can create multiple jobs. Work together with cities and rural communities to create OMJ • Foster cooperation with existing government schemes and propose a coordination of existing overlapping schemes, for maximum economy and to release funds for further initiatives.

49

50

Korea Voices

CEO and CFO Relationship: Dynamic Duo or an Odd Couple?

In business, the complicated, ever-evolving relationship between the CEO and its CFO is central to success. In many companies, these roles are the nerve-center of the company – defining the commercial, strategic, operational and financial blueprints. If the chemistry is right, then the relationship blossoms – and, the business maximizes its opportunities to flourish.

In my previous article – On what basis do you compete?– I proposed: exceptional companies, with exceptional products and services require exceptional people. Of course, it goes without saying that ‘people’ also includes an excellent CEO and CFO. In this case, though, there’s an extra consideration – as it’s of paramount importance that their individual excellence is

complimentary to one another.

Given the significance of getting this balance right, it’s an eternally popular topic for academic and business research.

Indeed, from dynamic duo to pilot and co-pilot, textbooks and journals are littered with a seemingly endless myriad of analogies, metaphors and proverbial phrases. The purpose of this article is certainly not to add another description of the CEO-CFO ‘marriage’. Instead, let’s consider the questions behind the platitudes: When are two heads better than one? Why is it a marriage made in heaven? In effect, let’s consider What makes them a Dynamic Duo rather than an Odd Couple.

Michael Conforme CEO, Michael Conforme International michael.conforme@kbla.info

Korea Voices In essence, while every CEO and CFO has their own unique blend of skills and experience, each will depend heavily on the contribution of their counterpart. The traditional and slightly outdated view is: the CEO is the visionary strategist – and might not always understand the numbers; the CFO is the finance & taxation expert – and might not always understand the business. In practical terms, this dividing line is becoming blurred: CEOs are becoming more financial; CFOs are becoming more strategic.

In the current economic climate, investors are cautious: the commercial robustness of a business is being given equal footing to the overall strategic vision. In this regard, the CFO is a business leader, too – and, consequently, the generation of shareholder value is very much a ‘team game’. At the same time, in the aftermath of the global financial crisis, CEOs are judged on delivering achievable strategies based upon sound, evidence-based metrics.

Of course, the more things change, the more they stay the same: the CEO is the boss – this much is clear. This being said, to be an effective relationship there needs to be a meeting of minds: a common purpose and a common vision.

Behind closed doors there might be disagreements – but, to the outside world, they must be as one – presenting a unified, consistent persona to the market. Simply put, it’s about being transparent, engendering trust and maintaining mutual respect. To some extent, perhaps analogies are unavoidable, because it really is like a marriage!

So, what’s the advice? Well, in simple terms, an effective CFO must rise above the numbers – providing analysis & insight – and be given the latitude to engage in no-holdsbarred conversations. They must be confident enough to offer advice and, where necessary, challenge the CEO – while thinking like a business leader who appreciates the need to take risks.

In contrast, an effective CEO needs to listen to their CFO – as an equal – and, when required, take time to digest the financials. They need to respect the opinions, insights and judgements of their trusted right hand. After all, a good CFO is there to give an unabridged ‘warts and all’ opinion, right? As a CEO, if you’re looking for that marriage made in heaven with your CFO – it’s well worth remembering: there’s often a difference between what you want to hear versus what you need to hear!

About the Author Mike Conforme is an angel investor, entrepreneur and mentor based in Asia. He helps clients accelerate growth with a focus on business development, leadership, sales and team building.

51

52

Korea Voices

The Logic of Medicine: How Doctors Think It is said that the only things guaranteed in life are “death and taxes” and while some have been known to avoid taxes, death will eventually claim us all. Indeed, not all of us are doctors but we all have been, or will be, patients. For the past five years I had had the privilege of presenting the MiniMD, a comprehensive overview of all of medicine (some call it a “Mini Medical School) for healthcare professionals worldwide, teaching the program at Samsung, both in Korea and in the U.S., and then more broadly in Singapore, Melbourne, Italy and later this month (October 22nd) back in Seoul. The program is designed for those in the healthcare field, though without formal medical training: they include hospital executives, pharmaceutical and medical technology leaders, government policy makers, biomedical scientists and engineers, healthcare designers, lawyers, etc.

But if you think about it, medicine, for the main reason given above, that it affects us all, is of deep, enduring interest. The human body holds endless fascination, and even more so in the case of disease, and acutely so when it affects us. So how is it that doctors think? How do they arrive at diagnoses? Is it a science—or an art? Some of us may just defer to doctors and leave it at that, but most, especially as we approach our inevitable mortality are more than curious. So I thought I would share here, for the benefit of my fellow KBLA members and wider audience, some of the distilled “pearls of wisdom” on how doctors think. Reading further may not save your life, but, who knows, it might very well do just that …

From the General to the Specific Obviously, we will not cover all of medical school in the space of a few paragraphs but there are some general principles that doctors follow, some of it learned explicitly, others more subconscious. One is the concept of proceeding from the general to the specific. While the structure of medical practice is often oriented towards specialty care (indeed, many people complain that some doctors seem to care only about specific diseases and organs, and not the whole person), medical education is fundamentally general and broad. In the United States, medical school is actually called “undergraduate medical training”, much to the chagrin of college graduates who have already gone through “undergraduate” training, only to have to do it again!! What that means is that all doctors are actually trained to be generalists – there is no “medical school for the liver” or “medical school of cardiology”. Rather, we are exposed to all the aspects of medicine, from superspecialized surgery all the way to the basics of labor and delivery in obstetrics, all in an effort to instill the principles of care for the whole patient, and in the scientific sense, to minimize diagnostic mistakes that arise from overspecialization.

Here’s an example. Say you have a cough: a lay person may logically conclude that the problem is with the lungs. It is the lungs, after all, that are producing the “cough”. Of course, most will do a Google search and if you go to some reputable site you’ll find a long list of possible causes (“etiology” is the technical term) of cough. But a doctor — a good doctor — will be trained to look at the broad range of possibilities first, and then narrow these down more specifically based on information, data, results of tests, and so forth.

Ogan Gurel, MD CEO, NovumWaves ogan.gurel@kbla.info

Korea Voices So, roughly speaking, there are actually three anatomic sources of cough (we would call this the “differential diagnosis of cough”) and they would be the lung (no surprise), the heart, and the stomach. [More on this later, but the heart can cause a cough via “heart failure” in which fluid backs up into the lungs, thereby causing the cough-inducing irritation, and the stomach can incite cough through gastroesogpheal reflux, namely stomach acid getting into the esophagus and creeping up to the lung.] Of course, not everything causes cough. It would be very unusual indeed if one of the anatomical causes of cough were your left big toe. So part of the science and art of medicine – the reason for the long training, is how general to be and how quickly to get specific. Too general, and you waste time, money, and create potential risk for patients, investigating things pointlessly. Too specific, and you run the risk of misdiagnosis some, if not most, of the time.

This principle of general to specific also pervades the process of medical diagnosis, indeed the entire engagement with the patient. As

most people know, on first encounter with a doctor, typically (and there are exceptions such as emergencies, general screening tests, etc.) the relationship begins with a conversation (formally called “taking the history”). “What brings you to the hospital?” or “What is bothering you today?” are typical questions that are posed to elicit what is called the “chief complaint”. After taking the history, a physical exam is performed which begins to get more specific in its focus, after which blood tests are taken, again guided towards more specific results, and perhaps some other tests or imaging studies. The sequence is not random. One does not show up at the hospital and immediately get a test for, say thyroid disease, and then a colonoscopy, and eventually a doctor shows up and gets around to asking what the problem is. From the general to the specific is the guiding principle. It may not always happen that way, but that is the ideal.

Framing the Problem: Dualities So let’s say you’ve seen the doctor with your cough and they determine it’s not the heart (for example, some

53

54

Korea Voices specific heart related tests come back negative) and neither do you have reflux (heartburn). So it’s likely to be a lung problem. Lung disease: now that, too, is fairly broad and often, when faced with a broad spectrum of possibilities, doctors will frame the problem in terms of a duality, namely two contrary possibilities. It turns out that there are two types of lung disease: obstructive lung diseases and restrictive diseases. And this way of categorizing medical knowledge as dualities is extremely common.

For example, there are two types of heart failure: systolic heart failure (poor pumping of the heart with blood) and diastolic heart failure (poor filling of the heart with blood): even though both are “heart failure”, they have entirely different causes and treatments. Stroke comes in two varieties: ischemic stroke (lack of blood flow to the brain) and hemorrhagic stroke (bleeding or too much blood to the brain), for which the treatments are obviously quite different. In fact, the treatment of ischemic stroke, life saving in that instance, could very well be fatal if applied to a patient with hemorrhagic stroke. So these dualities are not just theoretical constructs but have very real implications and consequences.

Back to the cough. In obstructive lung diseases (such as bronchitis or asthma) it turns out that the lung volumes are actually larger than normal, which makes sense as the obstruction, such as with narrowed airways, prevents air from being adequately blown out. In fact, doctors can often spot a patient, even without tests, as potentially having obstructive lung disease, if they show up with a large “barrel” chest, a consequence of a chronic (long-term) obstructive process.

But again, more specific tests, such as spirometry or so-called “pulmonary function tests” (the one in which you are told to breathe in and out of a tube) can pick this up more specifically. Restrictive lung disease, which is generally rarer, is characterized by smaller lung volumes, as you can see from the

diagram. Again, as with the heart failure or stroke examples, the further diagnostic steps and treatment options are entirely different for these two categories.

Dualities are very important in providing structure to medical knowledge and framing the problem.

The offer certainty, an “either / or” kind of thinking that is very important in proceeding to the beyond just the vague amorphousness of “lung disease”. Knowing and understanding these dualities is a key part of medical training.

Prior Probabilities Of course, medicine, and life in general, is not so “black and white”. As is commonly taught, medicine is not an exact science and while frameworks such as the ones I shared above offer some degree of certainty, nothing is more certain than the possibility of uncertainty. But there is a science of uncertainty, which falls under the general scheme of statistics, but in the case of medicine (and other fields) deals more specifically with the concept of “prior probabilities” codified in a mathematical law called “Bayes Theorem”. Without being too technical, Bayes Theorem (the science of “conditional probabilities” or “prior probabilities”) basically states that the probability of an event (say a certain diagnosis) is related to conditions that are related to that event. Let’s look at the probability of a pregnancy test being positive. If one already knows that the patient is male (e.g. a “prior probability” obtained via the history or observation), then we already know, we are certain, that is, that the probability of the pregnancy test being positive is zero. Of course, that is an extreme example but most of medical diagnosis is influenced strongly by such thinking. This is one reason why the “general” approach outlined above, and, in particular, good “history-taking” is so essential to getting the right diagnosis. Lay persons often think that one single blood test “clinches”

Korea Voices the diagnosis, but in reality is a combination of data points, each of which create the circumstances for greater certainty (e.g. “conditional probabilities”) which would otherwise be impossible. It’s one of the reasons why we don’t screen everybody for cancer, for the same reason we don’t screen men for pregnancy.

The prior probability of a 5-year non-smoker getting lung cancer is so infinitesimally small that it is far outweighed by the risk, cost, and inconvenience of submitting that toddler to a CT exam. It may sounds like an oxymoron, but prior probabilities ensure certainty.

The Importance of Talking to the Patient As mentioned, history-taking is absolutely essential to proper diagnosis. Not only does it ensure a “general approach” to the patient, as outlined earlier, but it also obtains a wider matrix of information, the “prior probabilities” in which more correct, more efficient diagnosis can be made. There is a saying in medicine, perhaps not always adhered to, that the “history”, more than any blood tests or other fancy investigations, provides roughly “80%” of the diagnosis. Some say it accounts for even more.

Let me share a story. I worked for four and a half years at Samsung, at SAIT, the central corporate research lab, which also housed the CTO function for Samsung Electronics.

Obviously, we had some of the world’s top scientists and engineers, and our focus was very much on technology. For a leading tech company like Samsung, technology is the mantra, the way, the be all and end all. So imagine the surprise when one of my technologicallyoriented co-workers comes to me first thing in the morning, saying, “when I woke up I had this terrible, terrible, pain,” while pointing and rubbing the middle of his back on the right side. “What happened?!”

I asked. “Did you fall down?”

“Were you in a fight?” (these are obviously diagnostic questions

to rule out a traumatic etiology).

He answered that he had gone to a company dinner the night before, drank a lot (my mind starts thinking “dehydration”) and he was awakened with this terrible pain, which he had never experienced before. And so this is what I told him, “I think you have a kidney stone, and you should go to the doctor to have that evaluating.” Even though I was fairly confident of the diagnosis (e.g. all the prior probabilities pointed to a highly positive outcome on an x-ray for kidney stone), the reason to go to the doctor would be to determine if it was large (e.g. > 5mm) or small (< 5mm) — again, “duality” — which would imply a different treatment approach.

Rather than thank me for my advice, my colleague looked at me with disbelieving eyes: “How do you know that? You didn’t do any tests? How do you know I have a kidney stone?” I answered that while confirmatory tests would be required, the history (he scoffed) strongly suggested that. The next day, after he returned, feeling much better, by the way, I asked him, “So what was the result?” He sheepishly looked down: “a kidney stone.” After that, he seemed convinced that I was some sort of magical “seer” who could somehow conjure up diagnosis from nothing. In reality, I was just applying the power of “talking to the patient”, taking a good history, which is often nearly all a doctor needs to establish the diagnosis. It’s actually one reason why we ourselves (and doctors themselves) are often the poorest diagnosticians when it comes to ourselves. Sometimes we are in our own denial and so we don’t take the right history, we don’t look generally enough, to get it right when it comes to our own illnesses.

Treatment: Is it Medical or is it Surgical?

Among the many dualities in medicine, one of the most fundamental is that of diseases being “medical” or “surgical”. There is a very profound difference between

55

56

Korea Voices the two that is not just theoretical, not just practical, in terms of the care of the patient, but even pervades the entire structure of medicine and the healthcare industry. Roughly speaking, “medical” diseases are those that are generalized or “systemic” throughout the body and are treated by medicines, namely drugs, while “surgical” diseases are those that are localized or regional, and require some sort of intervention for their treatment. Many diseases can actually be both “medical” and “surgical” either at the same time or at different stages in their development. Early-stage cancer, for example, being localized is often treated surgically, with removal of the tumor, while late-stage cancer, with disseminated metastases throughout the body, may no longer be surgically treatable but rather requires chemotherapy.

In the case of the kidney stone example above, I mentioned that 5mm was the rough “cut-off” point for determining whether the disease was medical or surgical. Less than 5mm implies that the stone can likely be passed (usually quite painfully) through aggressive fluid therapy alone (e.g. medical treatment).

Experience has shown that stones greater than 5mm are unlikely to spontaneously pass and thereby require some form of intervention, such as a catheter, stent, shock wave lithotripsy, or even “cutting” surgery, to remove.

So now you can think like a doctor: your colleague comes to you complaining of back pain. You ask general questions, to rule out a wide a wide spectrum of causes, you talk to the patient to find out more background, compiling these among “prior probabilities”, come up with the leading diagnosis of “kidney stone” and then think, “is this medical or is this surgical?” There’s obviously a lot more to how doctors think but these are a sampling of some of the core principles. You can find out more at the Seoul Mini-MD coming up on August 22nd at COEX

(see: http://www.seoul-mini-md. com/). The program will help you be a better health professional and, who knows, a little knowledge and understanding of doctors think may even save yours or one of your loved ones life one day?

About the Author Ogan Gurel, MD, is the CEO / Founder, NovumWaves and former Visiting Professor, Samsung Advanced Institute of Science & Technology. He is an Honorary Fellow, University of Melbourne and an advisor to numerous healthcare startups and companies.

57

58

About the KBLA Korea Business Leaders Alliance Our mission is to serve leaders in Korea, primarily business leaders, but also academics and arts leaders. We bring peer leaders together, help them build relationships, expose them to new ideas and best practices, give them opportunities to interact, publish, demonstrate expertise, and just spend time getting to know one another. We provide information tools and channels for them to interact online and to be informed.

The KBLA also serves business leaders around the world who have a stake in the Korean business environment through our business intelligence reporting service: Korea Intelligence Package.

Partners of the KBLA

About the KBLA Value Chain Advertisers Index EDITOR IN CHIEF Rodney J. Johnson

Cushman & Wakefield www.cushmanwakefield.com

MANAGING EDITORS Steve McKinney Jocelyn Clark

Korea International School www.kis.or.kr

CONTENT EDITOR Kyle Johnson CONTRIBUTORS Bryan Hopkins Jocelyn Clark Michael Conforme Tony Michell Ogan Gurel J. James Kim John J. Lee Han Minjeong Eun A Jo Hyun Joo Oh Kyle Johnson Cushman & Wakefield

Seoul Foreign School www.seoulforeign.org United Airlines www.united.com Lee & Ko www.leeko.com KEB Hana Bank hanafn.com/main.do McKinney Consulting www.mckinneyconsulting.com Asian Tigers Mobility www.asiantigers-korea.com

ADVERTISING Julia Kim (김주희)

Grand Hyatt Seoul http://seoul.grand.hyatt.com/en/hotel/home.html

PUBLIC RELATIONS Jennifer Kim (김잔디)

Hilton Gyeongju http://www.hiltongyeongju.co.kr

Value Chain is published monthly by the Korea Business Leaders Alliance on the ground, in Seoul, Korea.

Value Chain is a digital-only publication available in PDF and online forms.

For advertising and distribution inquiries contact us at admin@kbla.info.

59

â&#x20AC;&#x153;A leader is a dealer in hope.â&#x20AC;?

-- Napoleon Bonaparte