Enterprise Risk Management at Posco

In 2001, Posco was the second largest steel company in the world, producing over 27.8 million tons of crude steel. The largest and the only fully integrated steel producer in Korea, Posco manufactured a wide range of steel products, including hot rolled and cold rolled products, plates, wire rods, silicon steel sheets and stainless steel products.

Posco produced almost all of its steel at its Pohang Works and Kwangyang Works. In 2001, Pohang Works had a production capacity of 12.20 million tons of annual crude steel and stainless steel. The Kwangyang Works had an annual crude steel production capacity of 15.80 million tons. Domestic sales accounted for 73.3 % of total sales volume in 2001.

In 1997 and 1998, following the Asian currency crisis, Korea saw a significant increase in the number of companies filing for bankruptcy. As a result of these corporate failures and large levels of short-term foreign currency borrowings, there was a sharp increase in non-performing loans and a deterioration in their capital adequacy ratios. These developments led international credit rating agencies to downgrade the credit ratings of various companies, including Posco. Although the Korean economy recovered more quickly than anticipated, any developments that adversely affected the economy would also decrease demand for Posco's services.