On the corporate financial risk on the prevention and control

Abstract: Financial risk is the financial management of enterprises in the process must face a real problem, there is an objective of financial risk, financial risk only for business managers to take effective measures to reduce risk, but can not completely eliminate the risk. Based on the specific types of corporate financial risk analysis, financial risk from a number of aspects of the formation of the reasons to make the appropriate prevention and control.

Keywords: financial risk, types, causes, prevention and control
Today's global economic integration, each firm faces everywhere, the ever-present risk, financial risk as an objective of the economic risks of the various financial sectors throughout the enterprise, is a variety of risk factors in corporate finance embodied.

In a narrow sense of financial risk is the uncertainty of loss, but also the risk of decision theory have argued that not only refers to the uncertainty of loss, but also the uncertainty of profitability.

First, the type of financial risk
Financing risks, including general financial risk, Investment risk, operational risk, inventory risk and liquidity risk management.

Financing risk refers to the borrowing of funds to increase the possibility of insolvency; is due to capital market supply and demand, changes in the macroeconomic environment, companies raise funds to bring the uncertainty of financial results
Investment risk is due to uncertainties in Investment projects can not achieve the expected benefits, which affect profitability and solvency risk;
Operational risks, also known as business risk, is in production and operations process, supply, production, and marketing all aspects of the impact of uncertainties caused by movement of the hysteresis enterprise funds, resulting in changes in corporate value
Inventory management risks for enterprises to maintain a certain amount of inventory is critical for normal production, the optimal allocation of a reasonable inventory directly affect the production and reputation.

Liquidity risk is the uncertainty of corporate assets and can not properly transferred and the payment of cash or corporate debt obligations are not properly fulfill the possibility.

Second, the causes of financial risk
Business causes a lot of financial risk, both reasons outside the enterprise, but also their own internal reasons, and different specific reasons for the formation of financial risk are not the same, companies generally have financial risk for the following reasons:
Financial management of the macro environment, complex, and complex enterprise management system can not adapt to the macro environment. Corporate financial management is the complexity of the macro business environment, financial risk resulting from external causes. The financial management of the macro environment, including economic, legal environment, market environment, social and cultural environment, resources, environment and other factors that exist outside the firm, but the financial management of enterprises have a significant impact on the macro business environment changes is difficult to accurately foresee and can not be changed, the macro-environment adverse changes necessary for enterprises to financial risk. the financial management of environmental complexity and variability, diversification of the external environment may bring some opportunities for the enterprise, the enterprise may face a threat, and bring to the enterprise financial management difficult at present, many companies establish a financial management system, as the institutional setting is not entirely reasonable, is not high quality management personnel, financial management rules and regulations are inadequate, inadequate management infrastructure work and other reasons, resulting in a lack of enterprise financial management system on the external environment adaptability and resilience, in particular in adverse changes in the external environment can not be scientifically predicted, response lag, inadequate measures, the resulting financial risk.

Corporate financial managers lack of knowledge the objectivity of the financial risk Financial risk is an objective reality, as long as financial activities, financial risk is bound to exist, but in the real work, many companies lack the financial management of risk awareness. Risk awareness The weak financial risk arising from important reasons.

Financial decision-making has led to a lack of scientific decision-making errors. Financial decision-making mistakes is to generate financial risk is another main reason. To avoid financial decision-making mistakes on the premise that financial decision-making more scientific. Currently, many companies experience financial decision-making there is the phenomenon of decision-making and subjective decision-making , patriarchy, one-man style of work in the enterprise management remains widespread. which led to the decision-making mistakes often occur, resulting in financial risk.

4 internal financial relationship is unknown, which is the company produces is another important reason for financial risk, enterprises and various departments within and between enterprises and between enterprises superiors, management and use of funds, distribution of benefits in areas such as unclear responsibilities, the phenomenon of weak management, resulting in inefficient use of funds, a serious loss of capital, capital security, integrity can not be guaranteed, which mainly exists in the financial relationship of some listed companies, many Group, a subsidiary of parent company's financial relationship with a very confusion, the use of funds there is no effective supervision and control. Links to free download http://www.hi138.com Third, prevention and control of financial risks
Corporate financial risk is an objective reality, so security is not possible to eliminate the financial risk, it is unrealistic for corporate financial risk management of financial risk must firmly establish the awareness of potential risks and crises should be a clear understanding and vigilance, the use of science identification, analysis and control methods, as much as possible to take measures to minimize its impact on the extent to proceed from the following considerations:
1. The financial restructuring and optimization, financial analysis indicators to establish the financial risk of the occurrence is predictable. Companies should be based on their need to establish a sound financial risk early warning system, and to take effective risk into risk prevention methods to reduce losses occur probability, the risk may result in the loss to a minimum. For businesses, profit is the ultimate goal of business is business survival and a prerequisite for development. to establish long-term financial early warning system, including profitability, solvency, economic efficiency, development potential and other indicators are most representative.

2. With reality, to take appropriate risk strategy of modern companies face financial risk is the inevitable outcome of market competition, especially in China's market economy development is not perfect conditions, it is inevitable. Produce the root causes of the financial crisis is financial risk management properly, so the financial risks, enterprises should take to avoid according to their risk, control risk, risk transfer and risk diversification strategies such as prevention of financial risks, which reduce and defuse financial risks, improve the economic efficiency of enterprises is important.

3. To strengthen risk management corporate finance activities
(1 financing risk control. The main purpose of raising funds for enterprises to expand production scale, improve economic efficiency, Investment projects, if not achieve the desired benefits, thus affecting the level of corporate profitability and solvency risks. If the right business decisions, effectively managed, it can achieve its business objectives in the funding process, the business managers to expand Investment channels, care must be taken, should focus on the control and analysis of foreign Investment decisions on major Investment projects, feasibility studies. blind Investment, without the prior thorough financial analysis and market research are caused by errors of reasons, from the economic interests of enterprises, the correctness of economic activity, rationality, legality and effectiveness of comprehensive monitoring and analysis of different channels, the cost of capital and the company impact.

(2 Investment risk control business access to capital through financing activities, Investment types, there are three: First, invest in production projects, and second, investment securities, the third is investment business activities in decision-making in the pursuit of profitability, risk, the best combination of robustness, or in the middle reflects the benefits and risks of the principle of sound balancer role.

(3 risk control recovery of funds for a good financial position and credit status of customers, a way to take credit, some credit control, to take installment, commercial bills and other less risky method of settlement. Secondly, for possible bad account losses, bad debts should be extracted to reduce the current inflated profits and guard against risk of capital recovery. allocation of risk prevention and control companies need to develop a reasonable income distribution policy, convey a positive benefit to the investor information, establish a good corporate image, build investor confidence, in order to facilitate improved business value. foreign exchange risk prevention and control including financial aspects, aspects of import and export trade settlement currency risk management. to import, for example, when the dollar is expected to continue in a certain period devalued the dollar payment for long-term business to take credit risk exposure measures to fully enjoy the depreciation of the dollar as the settlement currency in U.S. dollars in import procurement costs.

(4 earnings allocation of risk control the distribution of income is corporate financial cycle of the last link. Income distribution, including retained earnings and dividends. Retained earnings to expand the scale of the source of shareholder dividends is a property of increased demand, both interrelated and contradictory. If companies to expand fast, the rapid development of sales and production scale, the need to purchase a large number of assets, the majority of after-tax profits should be retained, but if the profit margin is high, but below a certain level of dividend distribution, it may affect the stock price , the resulting distribution of corporate earnings risk.

In short, if you do not take effective measures to prevent and control the financial risks attendant will produce a series of financial leverage, will directly affect the interests of shareholders and the dividend distribution of decline, the stock investment business interests like the one pair of financial risk edged sword for the survival of enterprises is closely related.

References:
[1] Hu every before, corporate financial control, Jinan University Press, 2004, (12).

[2] Hou Wanxia. Talking about the financial risk control, knowledge-based economy, 2008.

[3] Wang Yuxin, Gu life instrument. Talking about the financial risk. Accounting magazine, 1998 (12) Links to free download http://www.hi138.com