Translation to English

“Excess cash at corporations should be diversified in order to prepare for economic downturn.” CFO Association and TCK Investments hold forum

Jinsung Kim for Korea Economic Daily
November 14, 2018

Invest in dollar assets to be ready when something is ready to buy

Young-key Hwang, former chairman of the Korea Financial Investment Association, said, "It is becoming increasingly important for CFOs to manage their (internal) excess cash,” and “you need to diversify our investments into global markets in preparation for economic downturns."

Mr. Hwang spoke on November 14that a forum held about “Efficient management of excess cash of companies” that global investment advisor TCK Investments and the CFO Association of Korea held at the Westin Chosun Hotel in Seoul. The forum was attended by finance executives from more than 30 domestic companies.

Former chairman, Hwang said, "In the past, CFOs were mainly responsible for corporate debt management and financing, but now they must also play the role of managing the company’s assets.” He also said, “With the US-China trade war and the government's pro-labor policy overshadowing prospects for the economy, (companies should) reduce risk by diversifying into global markets instead of maintaining assets in Korean won.”

Chae Jun, a professor at Seoul National University Business School, said, "Cash-rich companies should invest in various financial products that can be monetized easily in the global market rather than bank deposits." He advised CFOs to identify how much is excess cash above working capital that is spent on raw material purchases, production and sales. If there is sufficient excess cash, it should be invested in financial products that move differently in order to minimize risk. He also added, “If you 

want to acquire companies overseas, you have to reduce your dependence on the Korean won," and said, "If you invest your excess cash in dollar assets, you will be able to respond quickly when a good company comes up for sale during a recession."

It was also suggested that you should prepare for the possibility of increased exchange rate volatility. "The KRW / USD exchange rate has risen sharply in the wake of the financial crisis and the global financial crisis in the past," said Minki Shin, head of the TCK investment office in Korea. "We can increase asset value even in times of crisis with a globally diversified investment portfolio."