The Business Impact of Tensions in the Korean Peninsula

Heightened tension that could result in military conflict on the Korean Peninsula has been a persistent concern since the beginning of 2017. While the likelihood of war remains low, the risks are broadly rising; missile tests, military manoeuvres as well as hostile rhetoric and threats emanating from North Korea and the United States have increased the possibility of a serious miscalculation. For example, there is potential for North Korea to conduct a missile test in the coming weeks as tension remains high in the region, particularly around US president Donald Trump's visits to Japan (5-6 November), South Korea (7-8 November) and China on (8-10 November). Based on these uncertainties, understanding how the tensions could impact your business is critical in maintaining business continuity.

 

Man watching Korean news

The reality of the travel security risks

Tensions on the Korean peninsula are not a new occurrence. In the past, we’ve seen the North engage in hostile rhetoric, missile tests, nuclear tests as well as limited military engagements and localised clashes. However, the current tensions are different. Unlike previous years, North Korea’s missile tests are now designed to see how far they can provoke the US without actually eliciting a military response. This was evident in the threat to strike in the seas off Guam or in the tests carried out over Japan. This military brinksmanship increases the risk of a miscalculation from any parts involved, including North Korea, South Korea, Japan, and the United States.
Similarly, North Korea is testing military systems not purely for symbolic value, but to enhance its military capabilities as quickly as possible. As such, although the US has not specifically articulated a red line, there may come a point that the US cannot accept North Korean capabilities and will have to react. 
 

Escalation triggers

Monitoring for signs of escalation or triggers is an on-going process. The following triggers could signify an escalation in tensions and may require organisations to restrict inbound travel and maintain a higher level of evacuation preparedness. These triggers are ordered in terms of likelihood (from most to least likely):

  1. A missile launch that is misfired or accidentally lands in South Korean or Japanese territory instead of landing on water.
  2. The US intercepts a missile test-launch by North Korea.
  3. An increase in the level of warnings and advisories issued by the governments of South Korea, China, Japan, the US and the UK with regard to tensions on the Korean peninsula.
  4. Missile or artillery fire attack from the North against mainland South Korea limited to the DMZ1, resulting in significant casualties.
  5. Missile or artillery fire attack from the North against mainland South Korea outside the DMZ, affecting major urban centres (even if there are limited casualties).
  6. A move by South Korea to increase military preparedness from the current DEFCON 42 (the second-lowest level of readiness) to DEFCON 33. This last occurred in 1983.
We recommend that all inbound travel to South Korea, Japan, and US territories in the region require a flexible ticket. For longer term assignment, organisations should have preparedness plans in place to react effectively if an escalation were to occur.

 

Korea map

Escalation response: a myriad of challenges

Preparedness plans pose various challenges for organisations, mainly due to the extent of unknowns in the region. However, understanding the internal and external roadblocks will ultimately support the effectiveness of escalation plans. 

External context challenges:

  • Lack of reliable intelligence
  • Sensationalised media reporting
  • Panic and rumours
  • Embassies and official resources overstrained / unavailable
  • Lack of transportation
  • Mobile communications affected
  • Language barrier
  • Major spikes in demand for resources

Internal Context Challenges:

  • No contact with employees on the ground
  • No situational awareness
  • Sympathetic pressures (what are other companies doing?)
  • Decision making lines unclear
  • Heavy admin burden
  • Internal stakeholder management
Creating escalation plans for each possible scenario is crucial for organisations. However, the concerns within the organisation change across different departments. For example, a risk manager at the corporate level needs to determine the level of preparedness across all of their business locations. At a country level, the main concerns are the safety of employees and minimising the impact on business operations. Employees are concerned with their safety and understanding what responsibilities they have in the event of an escalation.

 

Korea border

Best practices to consider:

  • What tools are there to protect your workforce?
  • Do you have access to credible, corroborated security information and advice?
  • Decision making needs to be timely and effective
  • Plans needs to be workable – preparation must include crisis management training and rehearsals
  • Clearly defined roles and responsibilities within the organisation
  • Communication is key – timely and appropriate messaging to employees and travellers
 
As a best practice, planning for the movement of staff members, whether local or international is critical. Different need and challenges for national staff (e.g. Not all workers will be able to relocate due to government responsibilities). 
 

Conclusion:

In preparation for the potential escalation of the situation, we are advising organisations and members to:
  • be prepared to defer non-essential inbound travel at short notice
  • review business continuity plans
  • identify ‘stand-fast’ locations with several days of supplies in case the situation prompts the closure of local airports
  • plans should include provision for internal relocation of employees or withdrawal from South Korea at short notice

 

DMZ (Demilitarized Zone) is a defined strip of land dividing two opposing military forces from which weapons and military organisation have been removed.

DEFCON3 (Defense Readiness Condition) is an alert state used by the United States to indicate an increase in force readiness beyond the normal readiness. 

DEFCON4 is an alert state used by the United States to indicate normal readiness, increased intelligence and strengthened security measures.