What Are the Best Tips for Corporate Risk Analysis?

From the perspective of the root cause of risks, corporate operating risks can be divided into controllable risks and uncontrollable risks. Controllable refers to whether the control is artificially controllable. So what are the human factors in controllable risk? Because of different interest preferences, different people's awareness of risk and attitude towards risk are different. For example, internal control sometimes conflicts with corporate strategy. The reason is that CEOs and CFOs have different interest preferences. CEOs need to expand, invest, and acquire. CFOs pay more attention to a series of risk issues.

Business risk

From the perspective of the root cause of risks, corporate operating risks can be divided into controllable risks and uncontrollable risks. Controllable refers to whether the control is artificially controllable. So what are the human factors in controllable risk? Because of different interest preferences, different people's awareness of risk and attitude towards risk are different. such as

Every business operates at risk, and small businesses are no exception. The economic loss caused by risk is huge, but relatively speaking, the risk is far greater for small enterprises than for large enterprises. Although a small company "turns around a small boat," because of its "small foundation," it can only "run the water", not "backwater", and cannot control the occurrence of risks. From the actual situation, the ability of small enterprises to absorb losses is very limited. Therefore, small businesses should be more aware of the risks they may encounter in their operations in order to

For the various risk problems and related treatment methods in the business process of the enterprise, the corporate training lecturer Wang Junheng made the following summary

Clear responsibility and improvement of business operation risks

The essence of corporate governance is based on a legal contractual relationship of fiduciary duties, which is used to regulate the rights and obligations of various stakeholders and allow them to give full play to their respective functions. Based on the perfect corporate governance structure under fiduciary responsibility-namely, the legal confirmation and effective implementation of the rights and responsibilities of the company's shareholders' meeting, the company's board of directors, the company's management and the company's supervisory board that supervises the performance of fiduciary duties Effective corporate governance is an organizational guarantee to prevent business risks and increase company value.

On the surface, the collapse of Enron and WorldCom was caused by financial fraud. But in essence, these two companies have serious flaws in corporate governance, which has made it possible for companies to make financial fraud. The root cause of corporate failures lies in corporate governance. The scientific nature of corporate governance in the United States is respected by many countries in the world, and it is also the main reference for our country. The most typical feature of the establishment of the board of directors in American corporate governance is the independent director system. Many of the independent directors of large companies are well-known scholars and professors. Independent directors have a majority of the company's board of directors. Their role is mainly to stand in a fair position. , Representing the interests of small and medium shareholders. However, according to the investigation, the independent directors of Enron and WorldCom were independent directors of the company and did not play their due role in the company's board of directors, which led to the failure of corporate governance and the failure to implement the internal control system, which caused the company's operating risks.

While drawing on the independent director system of corporate governance in the United States, China has also borrowed from the supervisory board system of German corporate governance. The board of supervisors plays a key role in corporate governance in Germany, but in China, the board of supervisors of the company has not really played a role.

Therefore, to control business risks, we must not only have a complete corporate governance structure, but also more importantly, the effective fulfillment of the legal responsibilities of each responsible subject of corporate governance based on fiduciary responsibilities.

Internal control of business risk

The so-called internal control is a process that provides reasonable assurance to achieve organizational goals such as operating efficiency and effectiveness, credibility of financial reporting, and compliance with relevant laws. It is implemented by the company's board of directors, managers and other employees. Internal control is an internal institutional arrangement designed by an enterprise to effectively achieve its goals. It is a system designed for the entire enterprise. No one should be able to operate freely without the control of the system.

The fundamental of the company's internal control system is authorization and supervision. The rights of the company's owners are granted in this organization and are effectively monitored.

The mistake that Worldcom made was that the company held power in the hands of individual people. The chief executive officer and chief financial officer of the company exerted absolute influence in the resolutions of the company's board of directors, and the chief financial officer broke the internal control system and ordered relevant departments to adjust accounting treatment in violation of industry practices and accounting standards. The company outsourced the key business of internal audit with supervision function in the implementation of internal control system to the accounting firm, which seriously violated the principle of internal control. The failure of the internal control system makes the individual's rights not subject to the internal control system of the enterprise, which makes the company's financial fraud possible, and eventually the company's destruction. China Aviation Oil Singapore Company is even lack of internal control system. The two financial managers sent by China Aviation Oil Group to the company have been dropped by the company chairman for various reasons, and the party secretary sent by the group has been in Singapore for more than two years. I don't know that the company's chairman is engaged in speculative trading of OTC oil options. The company "sings alone", the internal control system did not play any role here, eventually leading to the company's huge losses and bankruptcy.

It is precisely because of the lack of internal control system that enterprises will cause significant risks to the company. In July 2002, the United States issued the "Sarbans-Oxley" (sox) bill. The Sox404 clause requires the company to evaluate the company's internal control structure and its effectiveness in the financial report submitted. The internal control system of all listed companies must meet the standard requirements specified in the Sox404 clause. It is obvious that the internal control system is important to prevent corporate risks.

Business risk management

To be able to prevent corporate operational risks well, an effective corporate risk prevention system must be established. Corporate governance and the company's internal control system are designed to control the company's operating risks caused by internal management errors from the corporate organizational structure. And for the various specific risks that may be encountered in the course of business operation, corresponding specific risk prevention systems must be established to prevent them. Such as enterprise market risk, credit risk, capital flow risk, operational risk, legal risk, accounting risk, information risk, strategic risk, etc. In the CAO incident, a report from PricewaterhouseCoopers argued that there was no risk management regulation for options transactions regarding the misjudgment of oil price trends. The board of directors of the company, especially the audit committee, managed and controlled the risks of speculative derivatives transactions of the company. Failure to perform due diligence is the main reason for the huge loss of CAO Singapore. The collapse of Bahrain Bank should also be attributed to the absence of a sound risk management system. Too much trust in its employees caused one person to both conduct transactions and manage risk, which is tantamount to no risk management.

Audit and Evaluation of Enterprise Operational Risks

Business risk-oriented auditing is called business risk auditing. It uses special auditing methods to assess the risks of an enterprise, which is different from traditional financial auditing. The focus of the audit is not only on corporate financial misstatement, but on assessing the company's operating risks through tests on the company's corporate governance, internal control systems, business strategies, and corporate legal environment. Audits guided by corporate operating risks are increasingly valued by many countries. Section 404 of the US sox Act requires the company's management to make a statement on the internal control of the company when submitting its financial report, and an accounting firm will assess the business risk of the company. With the development of new audit methods oriented by business risks in the study of auditing theory and practical application, auditing standards setting bodies of the International Auditing and Assurance Standards Board (IAASB), the United States, the United Kingdom, Canada and other countries have all Developed and revised a series of related standards, referred to as "risk audit standards." China is also drawing on the experience of international auditing standards and the auditing standards of other countries to actively formulate "risk auditing" related standards that are suitable for China's national conditions.