What Is Financial Risk Management?

Financial risk management is a branch of risk management and a special management function. It is a new management science developed on the basis of previous risk management experience and modern scientific and technological achievements. Financial risk management refers to the identification, measurement, analysis and evaluation of various risks existing in the financial management process by business entities. And timely and effective methods to prevent and control in a timely manner, and economically reasonable and feasible methods to deal with, to ensure the safe and normal development of financial management activities, to ensure that its economic benefits from loss management process.

Financial risk management

Financial risk management is a branch of risk management and is a special

The definition of risk management is the same as the definition of risk, and there are different views in academic circles at home and abroad. The traditional view is that risk management is the top six enterprises

Financial risk management is a branch of risk management. It is a special management function.

Financial risk management is a continuous, cyclic, and dynamic process. At the American Association of Risk and Insurance Management in 1983, risk management experts from various countries around the world discussed and adopted the "101 Risk Management Guidelines", which serve as a reference for companies around the world in all aspects of risk management in various countries. General risk management is divided into three phases:

background

Generally speaking, high risk corresponds to high return, and low risk corresponds to low return, but for credit business, risk and return are highly unequal.
Banks operate one of the most special assets, the time value of money. How to ensure the safety and effectiveness of assets is the first thing every client manager must face.
In the process of business, companies often adopt credit sales policies to expand business performance. How to control business risks, is it important to control ex-ante or ex-post?
The financial statement of an enterprise is a "business language". It provides users of financial statements with financial information such as the company's financial status, operating results, and cash flow. From the perspective of creditors, how to ensure the security of creditor's rights is in front of credit business personnel An important subject.

income

Master corporate financial analysis methods based on credit risk management

Learn to combine the analysis of corporate financial analysis with the analysis of the macroeconomic environment and the competitive environment of the industry

Identify dangerous signals from statements and make forward-looking analysis

Analyze creditor's ability to source first repayment from financial statements

Understand the purpose and method of whitewashing financial statements, squeeze out moisture in financial statements

Advantage

Change perspective, review financial reports from a risk control perspective

Make good use of "doubt", "criticism" and "vigilance"

The theory is deeply integrated with reality, and it is highly operable

Highlights

Risk control framework for credit business An important way to understand the risk prevention of an enterprise's financial statements-how financial statement analysis can make credit assets safer and more effective

Source of risk

The first is debt service risk. due to

After an enterprise obtains funds through financing activities, there are two types of investment: project investment and securities investment. Regardless of project investment or securities investment, the expected return cannot be guaranteed, and the actual use effect of such investment funds deviates.

1.Identify the risk of capital recovery

The risk of capital recovery mainly refers to

Revenue distribution is

I. Improving the Adaptability and Resilience of Enterprises to Financial Management

Build and keep improving

Financial risk management is a process that deals with uncertainties that originate in financial markets. Benefits of managing risk in finance include:

(1) Improve

Financing risk

Financing risk refers to the uncertainty caused by the financing of an enterprise to financial results due to changes in the capital supply and demand market and changes in the macroeconomic environment. Funding risks mainly include interest rate risk, refinancing risk, financial leverage effects, exchange rate risk, and purchasing power risk. Interest rate risk refers to changes in financing costs due to fluctuations in financial assets in financial markets; refinancing risks refer to the uncertainty of refinancing caused by changes in the types of financial instruments and financing methods in the financial market, or the financing structure of the enterprise itself Unreasonable results in difficulties in refinancing; financial leverage effect refers to the uncertainty caused by the use of leveraged financing to the interests of stakeholders; exchange rate risk refers to the uncertainty of corporate foreign exchange business results due to exchange rate changes; purchasing power Risk refers to the effect of changes in currency value on financing.

investment risk

Investment risk refers to the risk that, after a company invests a certain amount of capital, the final return deviates from the expected return due to changes in market demand. There are two main forms of foreign investment by enterprises: direct investment and securities investment. In China, according to the provisions of the Company Law, shareholders holding more than 25% of a company's equity should be regarded as direct investment. Securities investment mainly has two forms of stock investment and bond investment. Stock investment is a form of investment where risks are shared and benefits are shared; bond investment has no direct relationship with the financial activities of the investee enterprise, but only receives fixed interest on a regular basis. The risk is that the investor is unable to repay the debt. Investment risks mainly include interest rate risk, reinvestment risk, exchange rate risk, inflation risk, financial derivative risk, moral risk, and default risk.

Operating risk

Operating risk, also known as operating risk, refers to the delay in the movement of corporate funds caused by the influence of uncertain factors in the supply, production and sales of the enterprise during the production and operation of the enterprise, resulting in changes in corporate value. Operating risks mainly include procurement risk, production risk, inventory realization risk, and accounts receivable realization risk. Purchasing risk refers to the possibility of insufficient supply due to changes in suppliers in the raw material market, and deviations between the actual payment period and the average payment period due to changes in credit conditions and payment methods; production risk refers to information, energy, technology Changes in production processes caused by changes in personnel and personnel, and the possibility of shutdowns or delayed sales due to insufficient inventory; the realization risk of inventory refers to the possibility of product sales being blocked due to changes in the product market; the receivables are realized Risk refers to the possibility of increasing the management cost of accounts receivable due to excessive credit sales, and the deviation of the actual recovery period from the expected recovery due to changes in credit sales policies.

Inventory risk

It is very important for a company to maintain a certain amount of inventory for its normal production, but how to determine the optimal inventory is a tricky issue. Too much inventory will lead to product backlogs, occupying corporate funds, and higher risks. Too little may lead to untimely supply of raw materials and affect the normal production of the enterprise. In serious cases, it may cause default to customers and affect the reputation of the enterprise.

Liquidity risk

Liquidity risk refers to the possibility that corporate assets cannot transfer cash or corporate debts and payment obligations in a normal and deterministic manner. In this sense, the liquidity risk of an enterprise can be analyzed and evaluated from the two aspects of the company's liquidity and solvency. Problems due to the company's ability to pay and solvency are called insufficient cash and the risk of cash being unable to pay off. Problems that occur because corporate assets cannot be transferred to cash with certainty are called liquidity risks.