Risk management mechanism after the investment and innovation analysis

[Abstract] mechanism of risk Investment management elaborates the meaning and content analysis of the risk, portfolio management motivation, risk, portfolio management mechanism innovation is analyzed, some conclusions in order to promote risk Investment management Mechanism good run.

[Keywords:] venture capital management
venture capital is the potential for growth through unlisted companies in emerging equity capital or quasi-equity capital Investment and by providing management services to participate in the development process, after the success of the enterprise venture capital through the equity transfer, to achieve high capital appreciation returns A special type of financial capital works. From the point of view the operation of venture capital, venture capital is a financing, Investment, Investment management and exit of a cycle of four major aspects of the operation process. Therefore, micro-run venture capital mechanism for venture capital funding mechanisms, Investment mechanism, after the Investment management and exit mechanisms constitute, the formation of microscopic mechanism of risk Investment cycle. As the growth of venture firms high degree of uncertainty and risk between the investor and Entrepreneur high degree of asymmetry of information, any risk of Investment activity can be said to be incomplete, the risk can not foresee all possible future business events, including venture capitalists and entrepreneurs in the future differences and conflicts may occur. Therefore , venture capitalists involved in risk management after the Investment than the pre-investment risk assessment and the design of the contract is more important. Kaplan and Stromberg (2001) that due diligence before investing, after the signing of investment agreements and investment management venture capitalists to reduce agent the cost of the three major initiatives. So, after the investment in risk management mechanisms and characteristics of the content on the basis of risk analysis, portfolio management mechanism innovation of great significance.

First, venture capital, after the meaning and content management system
"Mechanism" is very broad use of the word, its meaning has a different understanding. "Mechanism" can be used to describe not only constitute a state of things, will describe the object as a large system, and determine its composition and the relationship between subsystems; " mechanism "can also be used to describe the laws governing the operation of things, will describe the internal mechanism of the object, including macro and micro theoretical explanation and analysis; In addition, more of a" mechanism "can be used to describe the people running things, the institutional arrangements and thus the formation of a variety of functions, which reflect the people running things, understanding and application of objective law. and investment management is a venture capitalist control of investment risk, an important part of investment income. in investment, in order to encourage venture business success in whatever venture capitalists invested in all aspects of fostering and nurturing enterprise. venture capitalists to provide the services include the following aspects.

1, the conventional management. Mainly refers to the risk of venture capital in the ordinary course of business, through a variety of means to grasp the routine operation of the dynamic enterprise, and in accordance with legal procedures and powers, and solve various problems exist. Conventional management essence is to be voted according to dynamic business information, feedback, monitoring and management of its processes.

2, the decision-making management. Is the risk investors are to vote by sending persons to serve corporate directors, supervisors or other senior management, improve corporate governance structure, to participate in the decision-making management process. Because the risk characteristics of enterprises, decision management process is usually is made in the context of asymmetric information, so qualified candidates must send the entire decision-making process in the most important responsibility is to provide reasonable and practical policy recommendations to facilitate risk investors make the right decisions.

3, the value-added services. Purpose is to maximize the value added venture. Value-added services throughout the routine management of the entire management and decision-making process, which includes helping set up the management team, providing financial and financing services, to provide information support services, providing legal advisory services and so on. Thus, the value-added services has become a venture capitalist investment follow-up management of the most important work, which is not only a value of the discovery process, it is a value creation process.

Second, risk, portfolio management motives
The power of any investment activity comes from the pursuit of profit. However, due to investment in the uncertain process of the objective existence of risk investment both possible and profitable value-added, they may suffer a loss. So, the maximization of value added , risk prevention and the full application of human capital investment is risk management mechanism after the generation and development of the main driving forces.

1, to maximize the value added requirements. Risk, portfolio management aims to maximize the value added venture. Venture capitalists in venture capital management can create value added from three aspects: for entrepreneurs to provide appropriate investment opportunities; to determine the best strategy for the venture, or how best to implement strategies; to provide valuable risk information sources.

When the venture firms in the venture capitalist with the help of investment opportunities and resolve business risk and reduce uncertainty and make the best decisions, the enterprise to create the greatest value added.

2, risk prevention requirements. Venture capital was mainly targeted at high-tech industry, venture capitalists, Technology development and not only to bear the commercial risk of market development, as well as the special nature of venture capital, bear the risk and information asymmetry proxy risk. Business risk is risk-based competitive environment, risks arising from uncertainty. As business risks not fully predict the risk venture capitalist business only with the situation occurred during the follow-up to adjust their management. General cases, risk, portfolio management level and business risk was positively correlated with the risk of corporate value added of the expected negative correlation, but when the risk, portfolio management strength and level exceeds a certain limit, venture capitalists may change mind and the withdrawal of investment.

In the principal-agent framework, the risk between entrepreneurs and venture capitalists, asymmetric information, not only in signing pre-investment project evaluation stage, but also in subsequent investment phases. Asymmetric information in advance before signing the main problems caused adverse selection, information asymmetry after the investment is the main problem caused by moral hazard. Therefore, when the agent the higher the risk, venture capitalists, portfolio management for the degree of risk the more. venture capitalists, investment management identified by agency risk, collection of information, strengthen the supervision of funds for investment to increase communication with the management team the opportunity to help companies realize the value added venture capital and risk prevention.

3, the full application of human capital requirements. In venture capital, human capital in two ways, first, the Experience of venture capitalists, entrepreneurs, the second is the quality of risk, both extremely important and are interrelated with each other affected. First of all, the Experience of venture capitalists is to determine the risk management after the investment amount of value added generated by the effectiveness of risk prevention and the most decisive factor. Second, the risk of investment management for the risks of entrepreneurship provides a good play incentive and restraint mechanisms. risk venture entrepreneurs have a special importance. Compared with the mature companies, venture enterprises are faced with extreme uncertainty of the market, with minimal business resources and face high risks. Entrepreneur must rely on their insight, innovation, execution capability in case of incomplete information to make decisions. However, in the principal-agent and information asymmetry, the risk of the important role of entrepreneur human capital must rely on sound management mechanism is can fully play out, therefore, after the investment through risk control, risk incentives and constraints on entrepreneurs is significant.

Third, the risk management mechanism after the investment of innovative
1, the management of the deepening of the object: Entrepreneur human capital as the core. Entrepreneur human capital not only has the general characteristics of human capital, more specific, this is after the investment risk involved in the core regulatory mechanism. Generally speaking, risk entrepreneur-specific human capital include: entrepreneurs, guarantees of low human capital; entrepreneurs, the high specificity of human capital; entrepreneurs strong display of human capital; Entrepreneur of human capital can be secured. As Entrepreneur human capital characteristics and the special nature of venture, risk, portfolio management mechanism designed not only to consider incentives for entrepreneurs to risk, but also to its strict constraints and monitoring.

After the investment in risk management should be based on different stages of development ventures, risk-based venture capitalists and entrepreneurs in both human capital and non-human capital considerations, to the mechanism design. On the risk of early stage companies, on the one hand If you have a relatively large entrepreneur equity, the marginal effort to produce a larger portion of the marginal revenue would go to all his, it will be enough incentive; the other hand, the risk of early stage entrepreneurs, the relative lack of security capabilities venture capitalists in order to reduce investment risks and losses, must have ultimate control over the larger, and the company's interests above top entrepreneurs, and even necessary, have the right to fire entrepreneurs. With the risk of development of enterprises, increasing corporate value and risk the ability of entrepreneurs to gradually appear, the reputation of rising risk with entrepreneurs and value of the non-human assets also increased, making the risk of entrepreneurship will continue to be enhanced security capabilities, and risk the uncertainty of business and risks may be reduced accordingly. Correspondingly, entrepreneurs ultimate control of the enterprise should be increased. Therefore, the risk of corporate governance mechanism should have a certain dynamic scalability, that is, according to the actual conditions and business development and operations whether the ability of home requirements to adapt to the development of enterprise configuration control, that is, the ability of entrepreneurs and business performance and potential to a large extent determined and risk their bargaining power between investors. Risk of Corporate Governance is the core mechanism for good entrepreneurs incentives, constraints and strict monitoring, and reflect the dynamic scalability.

Links to Research Papers Download http://www.hi138.com 2, the innovation management tools: control of the business of risk allocation and transfer arrangements. Risk management mechanism after the investment of human resources management in the venture is essentially Allocation and Transfer of control of the governance mechanism is between venture capitalists and entrepreneurs, long-term repeated game after the final game will be the formation of an optimal result. Therefore, the risk control of the business is risk allocation and transfer arrangements after the investment management in the core means. Kapla and Stromberg (2000) Empirical Research shows that venture capitalists will be residual claim by the contract, voting rights, liquidation rights and other separately control the distribution, which depends on the distribution of power in one company phase can be observed or measured indicator shows business conditions, and thus control the camera transfer is also gradual, multi-level.

To address the risk of investment risk in the venture capitalists and entrepreneurs in all stages of business development of the appropriate allocation of risk control of the business and transfer arrangements, the risk of human capital investment incentive and restraint mechanisms were a lot of innovation, specifically including the means the following points.

(1) convertible preferred stock financing tool for the control of the main constraints and incentives. Convertible preferred stock based on risk financing structure is essentially a control over the entrepreneurs incentives to promote venture entrepreneurs to maximize human capital to go into the enterprise, and strive to business success and achieve maximum return on investment risk and maximize the effectiveness of risk of individual entrepreneurs.

(2) staging investment and reserves the right to suspend investment. Once the venture capitalists find any negative information about future returns, the next stage of financing may be terminated, the risk of human capital value of the entrepreneur will not be realized, this approach also reduces the risk of entrepreneurs trying to renegotiate the residual claim on the company's opportunistic behavior.

(3) stock grants and stock options as the main form of incentive compensation plan. By the way, the risk of future entrepreneurs and business situation of enterprises closely linked to the interests of venture capitalists and entrepreneurs to achieve a high degree of convergence and reduce agency relationship in the moral hazard.

(4) the right of investors to exit the binding. When the risk is lower than expected corporate performance goals, the venture capitalists to reduce the loss of its initial investment in a pre-determined price sold back to the invested enterprises. This behavior not only causes the operation of venture capital in real terms reduction in the number, but also the transmission of information through the capital market effect of the follow-up phase of entrepreneurial risk financing, thereby enhancing the degree of risk the efforts of entrepreneurs.

3, a combination of incentives: incentives for risk dominant entrepreneur combined with the implicit incentives. In venture capital, entrepreneurial risk implicit explicit incentives and the use of incentives, but also the human and Entrepreneur closely linked to capital property. However, due to asymmetric information and incomplete contracts, corporate internal coordination is always limited, need to push the market from the outside for this competition generated by an external incentive for entrepreneurs called the hidden of incentives. simple explicit or implicit incentive incentives for risk entrepreneurs are not able to produce the most effective incentive, a combination of both designs will achieve greater incentive effects, of which the key is information asymmetry and uncertainty level.

Dominant in the venture capital incentive mechanisms, risk control and the remaining companies the right to obtain and pay structure is the most important aspects. The risk of investment in innovative compensation contract is paid in accordance with the operating results of the risk of entrepreneurs pay row , rather than venture out completely when the centralized payment. This continuous incentive to pay the incentive effects of risk entrepreneurs can increase the level of risk the efforts of entrepreneurs, as venture capitalists and entrepreneurs, both result in a higher risk benefits can also encourage venture capitalists and entrepreneurs to provide more regulatory risk means. However, due to the high risk investment in information asymmetry and the high degree of risk the uncertainty of business growth, and the dominant special incentive model of human capital for entrepreneurs incentive has certain limitations. recessive venture capital incentives can solve this problem. implicit incentive mechanism includes the relative risk of corporate reputation for performance incentive mechanism and incentive mechanism. in the relative performance incentive mechanism, the venture capital home entrepreneurs are concerned about the risk level of effort, intelligence because of cable, honesty and innovation can not easily be observed, so the entrepreneur's return can not be directly linked to these factors, you must pay and linked to measurable performance. the use of relative Performance comparison of entrepreneurs, venture capital can not controllable impact of changes in Economic conditions to filter, evaluate the level of business performance, enabling entrepreneurs to level close to the optimal. the reputation incentive, because of the risk of human Entrepreneur capital has gradually become apparent, risk entrepreneurs through its own efforts to tap the potential of its human capital, and constantly improve the value of their human capital and improve its reputation, so the next round of venture financing, you can have a more favorable competitive stronger bargaining position and power. So the reputation of incentives for entrepreneurs to provide a better human capital implicit incentives. This fact and the two are closely related. the reputation of relative performance incentives are more conducive to address venture capitalists and risk problem of asymmetric information between entrepreneurs on improving the investment contract with a positive guidance role.

IV, Conclusion
Risk management is a venture capital after the investment cycle in the core areas, with the development of mature venture capital industry, venture capital management support after more and more important, for the value added venture capital, risk prevention and the full application of human capital extremely important role. At the same time, risk, portfolio management is a complex system Engineering, in order to meet the particular mode of operation of venture capital and management needs, we must risk, portfolio management mechanism innovation. risk, portfolio management mechanism innovation in the core Human Capital is a risk for the management of the core, the risk control of the business as a means of distribution and transfer arrangements, the risk entrepreneurs through explicit incentives and implicit incentives combination, after the investment of risk management mechanisms good run.



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