The Cause Analysis and Prevention of Enterprise Financial Risk
Under the conditions of a market economy, the scale and scope of an enterprises international operations will be further expanded, which will not only bring new opportunities and challenges to the enterprise, but also give new meaning to its financial management, from simple business management to decision-making support. Risk investment and management also become the objective demand of our countrys social and economic development, and its researchability and operability play an important role in enterprise management practice.
Overview of financial risks
(1) the meaning and performance of the financial risk of the enterprise
Financial risk refers to the risk that the companys financial structure is improper and the improper financing makes the company unable to pay its debts and causes investors to reduce their expected earnings. It is mainly manifested in: low profitability, poor economic benefits; Insufficient funding; Lack of solvency; Irrational debt structure; Weak business ability and many bad assets; The ability to develop is weak, and the development of enterprises is not moving forward.
(2) characteristics of the financial risk of the enterprise
First of all, financial risk exists objectively, and it will appear in various financial activities. It does not depend on the will of people. Secondly, there is uncertainty, because of the existence of risks, the results of financial activities of enterprises are difficult to grasp accurately in advance, and the resulting uncertainty; Third, with loss or profitability, risk can not only bring losses but also bring benefits. There are disadvantages and advantages. Then, the risk is also systematic. Financial risk runs through the entire financial system of the company and is manifested in various financial relations. It is an overall reflection of various contradictions in the financial system. Finally, it is incentive, because the risk is objective, which urges the enterprise to strengthen financial management, increase the use rate of funds, actively take measures to avoid risks, strengthen the internal control of the enterprise, in order to improve economic efficiency.
(3) classification of financial risks of an enterprise
According to the reasons for the formation of financial risk, it is divided into political risk, legal risk, interest rate risk, market competition risk, and business risk; According to the process of capital movement, it is divided into financing risk, investment risk, capital recovery risk and income distribution risk; According to different levels, the risks faced by different departments can be divided into strategic financial risks, overall financial risks and sectoral financial risks; According to the frequency of financial activity, it is divided into ordinary period financial risk and special period financial risk.
Causes of financial risk in enterprises
(I) External causes of financial risk
1. Financial management of enterprises does not adapt to changes in the National macro environment
The external environment of the enterprise includes factors such as economic environment, legal environment, market environment, social and cultural environment, and natural environment. These factors can not be accurately predicted and changed by the enterprise. These changes will certainly impact the original financial environment and financial management methods, and then trigger financial risks.
2. Impact of interest rate levels
Financial risk is affected from two aspects: the first is the impact of interest rates on enterprise financing, and the increase of real interest rates will increase the enterprises financing costs. The second is the impact on corporate investment. When interest rates rise, companies will reduce foreign investment.
3. Effect of foreign exchange rate levels
As one of the important economic levers, the impact of financial risk is manifested in two aspects: economic risk and accounting risk. In terms of economic risk, the continuous appreciation of the local currency will weaken the price competitiveness of export products in the international market, inhibit exports, and cause business difficulties. At the same time, the irrational investment behavior of the enterprise will increase the financial risk of the enterprise. In the area of accounting risk, inconsistent accounting items in exchange rates and credit have resulted in currency conversion gains and losses due to changes in exchange rates.
(II) Internal causes of financial risk
1. Irrational financial structure of enterprises
The capital structure of an enterprise consists of debt and equity capital. Due to various reasons, Chinese companies generally have improper capital structure, mainly reflected in two extremes: conservative and risk structure types. The financial risk of conservative enterprises is usually less, but it exposes the shortcomings such as stagnation and lack of confidence. Risk structure refers to the large proportion of corporate debt, which often leads to financial risk or even crisis.
2. Weaknesses in risk awareness among corporate finance staff
In the past, traditional financial personnel believe that as long as the accounts are well managed, there will be no financial risk, and do not know that financial risk is objective. Therefore, the comprehensive quality and business quality of financial personnel should be improved. They should have the ability to adapt to the macro environment and be able to make correct decisions and judgments to reduce financial risks.
3. Moral hazard of operators
In the modern enterprise system
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