Analysis of Enterprise Financial Risk and Preventive Measures

Analysis of Enterprise Financial Risk and Preventive Measures

How to optimize the internal financial management of enterprises, improve the level of financial management, and prevent and reduce the financial risks of enterprises is a major issue affecting the survival and development of enterprises, and it is also the key to the development of enterprises. Then, here are the financial risk analysis and preventive measures I have compiled for you. Welcome to read and browse.

First, the performance of corporate financial risks

The capital movement includes several links, such as capital raising, use, consumption, recovery and distribution. Generally speaking, financing, investment and profit distribution constitute the financial structure of an enterprise. According to the process of capital movement, the financial risk of an enterprise arises from the following links:

(1) financing link

Different sources of funds and different financing methods will have different capital costs and corresponding risks. When raising funds, companies must weigh risks and costs in order to choose the best financing method. The ratio of debt to equity reflects the degree of financial leverage. The greater the financial leverage, the higher the return on net assets, but the greater the corresponding financial risks. The optimal capital structure is the capital structure suitable for the characteristics of the company after weighing the benefits and risks. In addition, strengthening the management of current liabilities can improve the efficiency of the use of short-term funds, reduce costs and ensure the daily production and operation needs. With the complex development of financial market, the constant change of financing decision-making environment and the more and more extensive application of financial derivatives, it will bring financial risks to enterprises.

(2) Investment link

The Company's investable current assets include cash, trading financial assets, accounts receivable and inventory. So we need to make the best choice between liquidity and profitability. Excessive investment in current assets can improve the liquidity of funds, thus increasing the company's liquidity and solvency, but it will reduce the company's profitability and affect the capital turnover. Companies can also invest in long-term assets, such as fixed assets and long-term securities. Large capital investment projects usually take years or even decades to plan and implement. Because of the large amount of funds and the long time span, the future return of investment projects is uncertain, and there are great risks and uncertainties.

(3) Capital operation link

At present, among the current assets of enterprises in China, inventory accounts for a relatively large proportion, and many of them are overstocked. Poor inventory liquidity, on the one hand, takes up a lot of funds of enterprises, on the other hand, enterprises have to pay a lot of storage costs for keeping these inventories, which leads to an increase in enterprise expenses and a decrease in profits. Long-term inventory, enterprises have to bear the losses caused by falling market prices and improper storage, which leads to financial risks. In the management of accounts receivable, enterprises generally only pay attention to sales performance, but ignore the control of accounts receivable. In order to increase sales and expand market share, some enterprises sell products on credit, resulting in a large increase in accounts receivable. At the same time, due to the lack of understanding of customers' credit rating and blind credit sales, accounts receivable are out of control, and a considerable proportion of accounts receivable cannot be recovered for a long time until they become bad debts. Assets have been occupied by debtors for a long time without compensation, which seriously affects the liquidity and security of enterprise assets.

(D) Profit distribution link

Under the premise of the relevant laws and regulations, the company can independently arrange how much of the profits are used to pay dividends to shareholders and how much is used to retain the surplus as the capital for the company's further development, which forms the company's dividend distribution policy. The dividend distribution level is too low, and the short-term interests of shareholders can not be met; However, the dividend distribution level is too high, although it meets the recent wishes of shareholders, but it is not conducive to the long-term development of enterprises.

Second, the reasons for the formation of corporate financial risks

Financial risk exists objectively, and it is impossible for enterprises to eliminate it, so they can only take measures to minimize the harm of financial risk to enterprises. Fully understanding the causes of financial risks is the premise of taking effective measures.

(2) External causes

The external environment of enterprise management is the external cause of enterprise financial risk, which mainly includes the influence of macroeconomic environment, policies and industry background.

1. Macroeconomic environment and policy analysis

Whether in the long-term or short-term, the macroeconomic environment is the most basic factor affecting the company's survival and development. The economic benefits of the company will change with the changes of macroeconomic factors such as macroeconomic operation cycle, macroeconomic policy, interest rate level and price level. The macro-economy is running well, the overall profit level of the enterprise is improved, the financial situation is improved, and the financial risk is reduced; If the macroeconomic operation is not optimistic, the investment and operation of enterprises will be affected, profits will drop, and they may face financial risks.

When the national economic policy changes, such as adjusting the interest rate level, implementing the consumer credit policy, collecting interest tax, etc., the capital holding cost of enterprises will also change accordingly, thus bringing uncertainty to the financial situation of enterprises. If the interest rate level is raised, the enterprise may pay too much interest or fail to fulfill its debt service obligations, thus causing financial risks.

2. Industry background analysis

Industry background analysis is a bridge between macroeconomic analysis and company analysis, and it is also an important link to analyze the financial situation of enterprises. The position of the industry itself in the national economy and the different development stages of its life cycle make the investment value of the industry different and the investment risk different.

(2) Internal reasons

The external cause is the condition and the internal cause is the root. Although external reasons will bring financial risks to enterprises, internal reasons are the fundamental reasons for the formation of financial risks.

1. Unreasonable capital structure

When the proportion of self-owned funds and borrowed funds in enterprise funds is not appropriate, it will cause unreasonable capital structure of enterprises, which will lead to financial risks. If the loan scale is too large, it will increase the burden of paying interest, affect the solvency of enterprises, and easily lead to financial risks. If the enterprise does not borrow money, or the debt ratio is very small, resulting in insufficient operating funds, it will affect the profitability of the enterprise.

2. Unreasonable investment decisions

Investment decision plays a vital role in the future development of enterprises. Correct investment decision can reduce enterprise risks and increase enterprise profits. Wrong investment decisions may bring disastrous losses to enterprises. Wrong investment decisions often fail to fully realize the risks of investment, and at the same time make mistakes in predicting the ability of enterprises to take risks.

3. The financial management system is not perfect

The content of enterprise financial management covers all aspects of enterprise basic activities, generally including fund-raising, investment and working capital management. The financial management system should further refine the content of financial management, including financial decision-making, formulation of budget and standards, recording of actual data, comparison between standards and reality, evaluation and assessment. If the financial management system can not cover all departments and all operational links of the enterprise, it will easily cause financial loopholes and bring financial risks to the enterprise.

4. Financial personnel have a weak sense of risk

In practical work, enterprise financial personnel lack risk awareness, have insufficient understanding of the objectivity of financial risks, and ignore the prediction and early warning of enterprise financial risks, which leads to the lack of contingency ability in the event of unexpected events and is easy to bring financial risks.

5. The income distribution policy is unscientific

Dividend distribution policy has a great influence on the future development of enterprises. The choice of distribution mode will affect the reputation of enterprises, investors' judgment on the future development of enterprises, and then affect investors' investment decisions. If the distribution of enterprise profits is divorced from the actual situation of enterprises and lacks a reasonable control system, it will inevitably affect the financial structure of enterprises, which may lead to financial risks.

Third, measures to guard against corporate financial risks

Plan ahead, plan ahead. In the face of financial risks, business operators should give full play to their subjective initiative, establish a sense of financial risks, analyze and study the external environment and their own financial situation in time, and take effective measures to prevent financial risks. The prevention of financial risks is a management method for enterprises to fully foresee and effectively control risks on the basis of identifying risks, estimating risks and analyzing risks, and to minimize the possible adverse consequences of financial risks with the most economical method.

(A) improve corporate financial risk awareness

The objective existence of financial risks and all aspects of financial management should improve the risk awareness of financial personnel, cultivate their ability to judge and deal with risks, and accurately and timely discover potential financial risks.

(B) the establishment of financial risk early warning system

Set some financial indicators with high sensitivity and reliability, and build an index system. By observing the changes of these financial indicators, enterprises can predict and forecast the financial crisis they will face. Financial early warning system is based on enterprise informatization, which monitors the potential risks in enterprise management activities in real time and runs through the whole process of enterprise management activities. Early warning system relies on comprehensive and accurate collection of enterprise information, including financial statements, business plans and related financial data. Using the theories of accounting, enterprise management and finance, and adopting the method of mathematical model, we can find out the potential financial risks of enterprises and warn the operators.

(C) improve the financial risk management system

Management functions are divided into decision-making, planning and control, while financial management functions include financial decision-making, financial planning and financial control. In the various functions of financial management, we must identify, analyze and test financial risks in time, adopt scientific methods to prevent and resolve risks, and make an objective evaluation of the effect of financial management.

(D) to strengthen the internal audit system of enterprises

The perfection of internal audit system is conducive to the realization of good internal control. By strengthening audit supervision, we can find and improve the problems existing in the accounting system in time, and then put forward measures to improve the accounting control system, and report the audit results to the top management of the company. Under a good internal control system, we can ensure the comprehensiveness, accuracy and timeliness of financial information and create favorable conditions for making correct financial decisions and identifying risks.

(E) Establish a reasonable capital structure

Enterprises should determine a reasonable debt scale according to the actual situation, assess the situation, grasp the opportunity of borrowing, predict the use effect of debt financing, and weigh the cost of income. For debts with different maturities, they should be reasonably matched to reduce the pressure of debt repayment. Enterprises should also improve their capital accumulation ability and constantly enrich their capital.

(6) Establish a scientific investment decision-making mechanism.

When making long-term investment decisions, it is necessary to compare and evaluate the future benefits of investment projects. At the same time, in order to ensure the correctness of capital investment decisions, risk factors must be carefully analyzed and reflected in the evaluation of projects. The premise of investment decision-making is the investment goal of the enterprise. After the investment goal is determined, we can draw up the specific investment direction, formulate multiple investment plans, evaluate the investment plans, and finally choose the best investment project. When evaluating an enterprise's investment plan, we should use some quantitative evaluation indicators, such as net present value and internal rate of return, to avoid subjective assumptions.

(7) Improve the corporate governance structure.

Shareholders provide financial resources for the enterprise, but they are outside the enterprise, and the operators, that is, the management authorities, directly engage in management work in the enterprise. An enterprise is an enterprise whose owner is a shareholder, and the goal of financial management is also the goal of shareholders. Shareholders entrust managers to manage enterprises on their behalf and strive to achieve their goals, but the goals of managers and shareholders are not exactly the same, which leads to the principal-agent problem. In order to prevent operators from deviating from shareholders' goals, an incentive mechanism can be established, in which operators share the increased wealth of enterprises and encourage them to take actions that are in line with the maximization of shareholders' interests. For example, giving stock options to operators.

(8) Formulate strategies according to actual risks.

When there are some potential risks in the enterprise, such as product backlog, increased accounts receivable, rising costs, etc. , it is necessary to analyze the reasons in time, formulate corresponding risk strategies, and reduce the degree of harm to enterprises.

Four. conclusion

Under the condition of modern market economy, financial risks exist objectively, and it is of great significance for enterprises to actively avoid financial risks for their survival and development. Enterprises should have a clear understanding of financial risks and take effective measures to prevent and resolve them. Only in this way can enterprises be unique in the fierce competition.

References:

1. Fu Liling. On enterprise financial risk and its prevention [J]. Social Science Review, 20 10(4).

2. Tang Jun. Enterprise financial risks and prevention methods [J]. Vitality, 20 10(5).

3. Shu Weian. On the financial risk control of transnational mergers and acquisitions in the post-financial crisis period [J]. Sino-foreign joint ventures, 20 1 1(3).

4. Zhou Yuanming Discussion on the causes and preventive measures of enterprise financial risk [J]. Journal of Liaoning Administration College. 2008 (5)。

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