Companies should `expect the unexpected'

Companies should improve their internal management to prepare for unexpected internal or external crises, especially in a rapidly changing business environment characterized by global competition, Acer Group chairman Stan Shih (施振榮) said yesterday.

"Crisis is everywhere and uncontrollable, and therefore enhancing a company's ability to tackle constantly emerging crises is extremely important," Shih said at a gathering organized by the Chinese-language magazine Global Views Monthly (遠見雜誌).

Shih's remarks follow an announcement at the weekend by Lee and Li Attorneys-at-Law (理律法律事務所), the nation's biggest law firm, that it had reached a settlement with SanDisk Corp after one of the law firm's lawyers allegedly embezzled stocks from SanDisk's portfolio. The incident, in which one of Lee and Li's employees allegedly embezzled NT$3 billion worth of shares owned by SanDisk last month, presented a big crisis for the Taipei-based law firm.

Following thorough discussions and negotiations, Lee and Li finally agreed to pay SanDisk NT$678 million, along with an additional NT$1.52 billion over four years in 16 quarterly installments secured by letters of credit, and a credit of NT$620 million to be applied to future legal services.

Shih applauded the ways Lee and Li found to solve its own problems, and said this kind of crisis management is not news to Acer, which has engaged in internal management for over two decades.

In a case of theft in 1984, Acer lost NT$40 million worth of integrated circuits and failed to deliver orders to customers. Another incident occurred in 2001, when Acer's shares plunged after reports that its headquarters in the Eastern Science Park complex (東方科學園區) had been destroyed in a fire.

"After the incidents, we realized that we had to immediately face up to the damage and bring the correct information to our customers and the public first," Shih said. "We downsized the management team and further clarified duties of each team to improve efficiency."

Another two critical incidents pushed Acer to transform its business strategy, Shih said.

One was the problems experienced by Acer Semiconductor Manufacturing due to sluggish demand for dynamic random access memory (DRAM), resulting in a NT$6 billion loss. Acer later sold the company to Taiwan Semiconductor Manufacturing (台積電) in 2000 to solve the crisis, Shih said.

In the same year, Acer suffered the effects when the Internet bubble burst and about NT$10 billion of Internet business went down the drain, Shih said.

Acer has suffered dire losses from these crises, but they have offered valuable opportunities for the company to improve its management strategies and have made it stronger.

"We learned how to better deploy our resources and always keep an eye on the fluctuations of the volatile high-tech industry to adjust our business strategy accordingly," Shih said.

Surviving the losses suffered by companies in the Internet sector, Acer created BenQ (明基電通) in 2001 in response to the fast growth in the telecommunications market. The company is now a leader in the global handset market with earnings of more than NT$10 billion per month.

In response to a question about how to prevent corporate fraud triggered by company staff, Shih said dealing with human nature is every manager's biggest challenge.

"I think they've handled the corporate fraud well, since they reached an agreement with their clients and ensured their interests in such a short time," Shih said.

"This also shows that reputation is an essential asset for prolonging a company's life," he said.