Prevention and Control of Enterprise Financial Risk Analysis 14129.doc

prevention and control of enterprise financial risk analysis abstract enterprises financial risk to be divided into narrow and broad. in this paper, broad set of financial risk that businesses of all financial risks affecting the enterprise ultimately embodied in the enterprises financial position and operating results, and to the causes of the corporate financial risk analysis, recommend preventive and control measures. key words financial risk; causes; prevention; control first, the definition of the concept of financial risk the financial risks of sub-narrow and broad. the narrow sense refers only to enterprises in the financial risk during the use of financial leverage financing for the potential risk of inappropriate, sometimes, also called funding risk. this article refers to the financial risk is a broad sense, is the financial activities of enterprises in the process, due to internal and external environment and a variety of uncertainties, so that corporate finance income and the expected return deviation occurs, resulting in loss of the opportunity to and possible. enterprises financial risk on all the implications of enterprise ultimately embodied in the enterprises financial position and operating results, financial risk is the currency of the performance of enterprise risk form, the nature of the economic changes in the value of capital risk is a corporate financial accounting has a significant impact on the risk, including not only fund-raising venture, as well as investment risks, financial risks and benefits to recover allocation of risk and so on. second, the causes of corporate financial risk analysis of enterprises are many reasons for the financial risk arising both reasons outside the enterprise, but also the reasons for the enterprises themselves, the overall point of view, the following main reasons: (1) enterprise financial management systems can not adapt to the complex and volatile macro environment. enterprise managementfinancial management of the macro-environment is a complex and changing business financial risks arising from external causes. financial management of the macro-environment, including economic environment, legal environment, market environment, social and cultural environment, resources, environment and other factors. these factors exist outside the firm, but the financial management of enterprises have a significant impact. macro-environment, changes in enterprises, it is difficult to accurately foresee and can not be changed, adverse changes in the macroeconomic environment necessary for enterprises to financial risk. (b) the enterprise financial management of the financial risk the objectivity of the lack of knowledge. in the real work, many companies the financial management of risk awareness of the weak, but not fundamentally grasp the nature of the risk that as long as the pipes and make good use of funds, it will not produce financial risk. no positive, proactive, systematic risk management activities, risk management becomes vacant prior, during and after the management but also has a certain way arbitrary, while risk can not be periodically reviewed and re-evaluation, not that the establishment of financial risk prediction , early warning, prevention and control systems referred to the work of the management agenda. moreover, some finance managers do not yet have the corresponding functions should have the ability to resist risks, especially in their professional skills lagged far behind the development of financial practices, and more big businesses of financial risk. (c) the lack of scientific and financial decision-making led to the decision-making errors. to avoid the financial decision-making mistakes on the premise that financial decision-making more scientific. at present, the companys financial decision-making experience widespread the phenomenon of decision-making and subjective decision-making, the resulting decision-making mistakes often occur, resulting in financial risk. (d) the enterprise accounting information of poor quality. of accounting information is a major business decision-makers make decisions based on the quality of accounting information in decision-making impact on business is high. false accounting information not only enables business decision makers in the past to make the wrong assessment of the results, but also will lead to future decision-making businesses away from economic operation rules, forming a huge financial risk business risks. in addition, the accounting information for the allocation of social resources has an important regulatory role, false accounting information so that the lack of efficiency in the allocation of resources is not conducive to social and economic development, resulting in a waste of social resources, increase market risk, and businesses as the market in a economic entities, their financial risk level is subject to market risks, and create a stable market environment for enterprise stability and financial operations and reduce financial risk very important. (5) the enterprise internal control system is imperfect, resulting in confusion in financial relations within the enterprise. on the separation of ownership and management of modern enterprises, in reality the companys managers and shareholders, and conflicts of interest exist between the information asymmetries, which would make the companys managers (agents) are subject to temptation may be much larger than the shareholders (the principal) to provide encouragement to the level, so the manager will be in their own interests at the expense of shareholders, resulting in improper operation and management methods, shareholders goals on the risk. poor management methods are often accompanied by low efficiency of the internal financial relationships. enterprises and various departments within and between enterprises and between enterprises superiors, in the fund management, use and distribution of benefits in areas such as authority and responsibility is unknown, the phenomenon of chaotic management, resulting in inefficient use of funds, a serious drain on resources, capital security, integrity can not be guaranteed. (vi) corporate governance mechanism is not sound. at present, many companies monitoring and evaluation mechanisms are far from perfect, although the levels of government departments have established regulatory bodies of assets, but the management style of government activities is still very serious, direct intervention in the operation of enterprises to manage on behalf of the evaluation of the phenomenon is still pervasive, enterprise has been greatly interfere with the normal conduct of operations, thereby increasing the enterprises financial risk. enterprises to establish a scientific evaluation mechanism for corporate governance and business is particularly important. (vii) corporate finance activities, uncertainty and irrationality. is mainly manifested in: 1. exchange rate movements, the recurrent and uncertainties; 2. enterprise fund structure is irrational, excessively high proportion of debt financing; 3. the strength of liquid assets; 4. corporate credit than a major, accounts receivable shall lack of control; 5. business inventories stock structure is irrational, inventory turnover rate is not high; 6. capital movement unreasonable; 7. foreign investment policy mistakes led to heavy investment losses; 8. dividends distributed. third, corporate finance risk prevention and control the so-called financial risk prevention and control, is the business by identifying financial risk, financial risk measure and analysis of financial risk, and on this basis, effective control of financial risks, with the most economical way to financial risks that could cause adverse consequences to a minimum scientific management methods. the causes for the financial risk, i offer the following prevention and control measures: (a) from the enterprise point of view of the strategic management of financial risk prevention measures 1. to establish and constantly improve the financial management system (1) the enterprise must pay attention to the macroeconomic environment, the changing macro-environment for the financial management of serious analysis and study, grasp the changing trends and rules and to develop a variety of contingency measures, timely adjustments to the financial management policies and change management methods to enhance business financial management of environmental change on the resilience and adaptability, to prevent corporate financial management system adapt to the environment due to changes resulting from financial risk. (2) equipped with high-quality financial management personnel, and continuously improve the financial management personnel, the level of risk awareness and quality. (3) improvement of financial decision-making and scientific level, and prevent poor decisions arising from the financial risk. the right financial decisions whether or not directly related to the success of financial management in the decision-making process, we should give full consideration to various factors that influence decisions, maximize the use of quantitative calculation and analysis methods and the use of scientific decision-making model of decision-making. (4) increase the quality of accounting information. high-quality accounting information to fully reflect the operating conditions of production as a basis for making the daily production and business decision-making and investment, financing and other major policy decisions of the enterprises to effectively circumvent the financial risk, and the smooth realization of great significance to business objectives. 2. improve the internal control system internal control system is a top priority in enterprise management a regular management system. particularly dominant in the market economy, the increasingly fierce competition among enterprises of today, the internal control system has become the companys survival and development of an effective management tool. (1) well-designed incentive and restraint mechanisms. enterprises must improve the incentive and restraint mechanisms, so that managers and staff efforts in the interests of business goals and objectives as uniform as possible. through the different levels of managers with different incentives for different situations using a variety of evaluation criteria, form a rational and effective mechanism of competition, and thus bound the managers adverse selection acts to reduce the risk from occurring. (2) streamlining of the various financial relationships. first of all, we must clear the financial management of various departments in the companys status, role, and should bear responsibility, and give it the necessary powers, and truly done clearly defining responsibilities and duties, the establishment of enterprise financial risk monitoring mechanism to track, for every major corporate financing, investing activities and cash flow, and other types of financial risk level of risk to continuously track, monitor, ensure that at any time to understand and master; risk of each financial activities of the implementation of accountability, that is, first of all clear the main stakeholders; secondly, to give the financial activities of the corresponding rights; once again, in the clear understanding of their responsibility to bear the risk of the risk reward rigorous examination cash. this is one that every business should be valued and implemented. in addition, the distribution of benefits, the company should take into account interests of all parties to mobilize participation in all aspects of corporate financial management, enthusiasm, and truly done responsibilities, rights, and interests of unity, so that a variety of financial relationships within the enterprise clarity. reposted elsewhere in the paper for free download http:/ (3) strengthen internal auditing supervision. internal audit is internal accounting controls to control, through the evaluation of accounting controls to monitor the accounting department to continually refine and improve the accounting controls, which seeks to reflect the enterprises financial situation would be to reduce errors to a minimum. 3. increase the intensity of implementation of the system to make the implementation of the system on the one hand from the small start. success must be done in the thin. u.s. management expert fees laerkaipu saying do not neglect details, the details of the gap from the start: 1% error could lead to 100% of the failure. system management is a kind of scientific management mode, the system is to manage the establishment of the primary basis. on the other hand from the strict implementation. national laws, regulations, company rules and regulations of all the implementation of an enterprises basis and the criteria, finance, and auditing departments of the long-term supervision and management of risk, strict examination and approval procedures for the authorization, effective implementation of the system of incentives, both will be so that implementation of the system is more refined, more exacting. issue instead of people management systems, once established, will be bound by all the people to form the system is the foundation of the building, it is important in the work system will be implemented in every detail of the implementation of the system. 4. the establishment of efficient financial risk early warning system the face of complex and volatile business environment and operational risks, and only strengthen the financial risk management and monitoring, can we defend the efficient operation of enterprises. financial risk early warning mechanism is the core of early-warning indicators, early warning indicators are multi-faceted. enterprises should establish a sound according to their own needs of the enterprises financial risk control indicators. 5. to enhance the risk of ex post control of financial risk after controlling financial risk, also known as feedback control, for the risk has occurred to the financial risk analysis is based on the establishment of corporate financial risk files, summing up the experiences and lessons of risk management to guide future financial risk prevention. including its two major aspects: first, who can not evade financial risks and has taken place; two to guard against the risk of a very good response, to conduct evaluation and summary, which will result into the history of corporate databases, in order to better guard against future financial the risk of an appropriate strategy. the same time, financial risk early warning system to adjust its risk to prevent a similar occurrence in the future reference and learn from. (b) micro-technology management from the enterprise point of view of financial risk prevention measures 1. to maintain a good reputation and corporate image and smooth channels for raising funds enterprises should maintain the smooth flow of funding sources, at least 2-3 financial institutions to maintain smooth business dealings, let know their integrity and competitiveness, in their daily operations to establish a good reputation with the relationship so that there is a corresponding difficulty sources of financing. when firms do not need to borrow money, it should allow banks and creditors to understand their own financial situation and position and cash flows for their own to establish a foundation for future borrowing. 2. dynamically balance the companys cash flow and asset-liability ratio enterprise survival and development is inseparable from a certain cash flow and asset-liability ratio is constraining the size and structure of the development of enterprises, such as to enhance the market competitiveness of enterprises should be improved companys balance sheet structure, optimize cash flow. 3. to select the best capital structure capital financing ways: commercial credit, bank loans, issuing corporate bonds, issuance of shares. the choice should be based on different stages of enterprise development, fully take into account the sales of its growth, operating leverage, financial leverage, profitability and financial market conditions, choose the lowest cost of capital to finance a comprehensive portfolio of enterprise value maximization, to reduce the financial risks to a minimum. 4. to strengthen foreign exchange management and control exchange rate risk (1) from the start the trend of exchange rate changes predicted for the development of foreign exchange risk management strategies, to take effective preventive measures to provide basic protection. changes in fundamental factors affecting the exchange rate is mainly represented by the magnitude of value of currency changes and changes in money supply and demand conditions. we can, through its internal rules to identify the trend of exchange rate movements. (2) in predicting exchange rate movements should be accompanied by the fund-raising strategy and in the course of specific funding to prevent the risk of making arrangements to ensure that saved the day. (3) the use of financial instruments has brought financing to prevent the risk of exchange rate changes. at present, the international financial instruments commonly used are mainly three types: currency swaps, forward foreign exchange contracts and currency futures. 5. reasonable arrangements for investment activities (1) be prudent investment in a well-functioning capit