What Is Risk Averse?

The expression of risk aversion means that when considering the possibility of risk loss of an activity, it is necessary to take the initiative to abandon or change it to avoid the risks associated with the activity.

Basic Information

Chinese name

Risk Aversion

Foreign name

risk averse

Purpose

Eliminate risks or conditions under which they occur

Method

risk control

First, completely

Risk aversion financing

Financial risks can usually be avoided by means of intentional avoidance, implementation of controls, and diversified transfers. Different technical approaches can be applied at various stages of financial activities.

Technical methods for financing risk aversion

First, make full use of your own funds, strengthen the control of your own funds, and strictly review and collect all kinds of borrowings and payments in a timely manner. Second, choose a reasonable capital structure, that is, the ratio of debt capital to own capital should be appropriate, make full use of the financial leverage of debt capital, and choose the best financing portfolio with low total risk. Third, pay attention to the mix of long-term and short-term debt capital, and avoid over-concentration of debt capital's repayment period. Fourth, choose multiple financing channels. Such as issuing stocks, bonds, borrowing from banks or non-financial institutions, making full use of commercial credits such as accounts payable, bills payable, and advance receipts. Fifth, improve the use of funds. No matter whether it is self-owned funds or debt funds, only by improving the efficiency of capital use, can the company's solvency and profitability be guaranteed.

Risk aversion investment

Technical methods for investment risk aversion

First of all, we must invest cautiously, and only consider foreign investment to obtain additional compensation when the funds are operating well or there is surplus funds. Second, if investment is a necessary part of production and operation or risky investment, a rigorous investment plan must be drawn up, scientific investment recovery assessment and demonstration must be conducted, and the best time for capital investment must be selected to avoid causing shortage of funds or malfunction spirit. Third, make a reasonable investment portfolio. The investment portfolio includes the combination of different investment varieties, the investment projects of different industries or sectors, and the investment portfolios with different long and short term periods, etc., in order to pursue an optimal combination of profitability, riskiness and robustness. Fourth, strengthen the research on the systematic and non-systematic risks of securities investment to mitigate and offset the impact on securities investment returns.

Risk aversion funds

Technical methods for risk recovery of capital recovery

The risk of capital recovery refers to the risk that the funds cannot be turned over in a timely manner or cannot be recovered in a timely manner after the outflow of funds. To avoid the risk of capital recovery, we must do a good job of measuring and balancing the source of funds, capital occupation, distribution of funds, and recovery of funds to ensure the safety, efficiency, and liquidity of funds. Receivables collection control risk can be avoided by the following methods: First, scientific evaluation of customers using the "Five C" system, giving different customers different credit periods, credit limits and different cash discounts, and formulating reasonable credit information Rating and credit policy. The second is a trade-off between current sales and credit sales. Only when the increased profit from credit sales exceeds the increased costs, credit sales of receivables should be implemented. The third is to periodically prepare an aging analysis table to determine a reasonable proportion of receivables, monitor the recovery of receivables, and prepare for the loss of bad debts in advance. The fourth is to adopt different collection policies for different customers and different stages. It is necessary to ensure the effective recovery of the account and pay attention to avoid hurting the relationship between the customer and the customer. The size of the loss. The risk of inventory circulation control usually refers to the risk of realizing the timely sale of inventory. The scientific storage and change of inventory can now be guaranteed and controlled by formulating reasonable safety reserves, order quantities and purchase time.

Technical methods for risk aversion of income distribution

To avoid the risk of profit distribution, we must start with cash inflows and cash outflows. On the one hand, we need to control cash inflows, and on the other hand, we need to consider income distribution policies. According to the needs of enterprise development, formulate reasonable income retention and profit distribution policies, and adopt appropriate methods of profit and cash distribution to ensure the mutual coordination and coordination of cash inflows and outflows in order to reduce the risk.