Risk Identification And Control Of Finance Companies

Since 1987, a number of large enterprise groups in China have started running financial enterprises, and have explored the Combination of industry's capital and financial capital with Chinese characteristics off into practice. After more than 10 years of development, finance companies have become an important component of China's financial system, and their distinctive financial services play an irreplaceable role in supporting groups to develop. But in the process of our economic and financial systems towards market economy, along with the development and expansion of state-owned enterprise groups, finance companies'development-model errors and shortcomings are gradually appearing, in which the potential risks are more prominent. In recent years, a series of serious violations drew much concern on the controlling of their risks. Moreover, "Measures for Managing Finance Companies of Enterprise Groups" issued by CBRC in August 2004 set higher risk control requirements for finance companies. How to build a Chinese financial company's risk identification and control framework? We need to learn from the relevant theories and actual cases.On the basis of drawing lessons from predecessors studying finance companies'risk management, the author organize the paper on the basis of ERM, and build a versatile finance companies'risk control system according to COSO, drawing lessons from the domestic and foreign finance companies'successful experience.This paper consists of 5 parts. The first part is the foreword. It brings out the research background and purposes, then gives a detailed description of financial companies'risk identification and control research. Part II consists of the theoretical foundation of financial companies to identify and control risks, analyzing its operation mechanisms and the need to control risk, and introducing the innovative point and reference for financial companies from ERM. Part III is the analysis of the risk control cases, and it introduces three finance companies'operations and risk control activities, noting that there are many differences between them. Part IV is the core of this paper. The paper builds the frame on the company, trade, and IT levels, based on the logic of ERM perspective. On the basis of improved control environment, the paper firstly identifies what risks might prevent finance companies'targets from being achieved, then resigns the control system according to these risks. And integrates the objectives, risks, control through information exchange and communication. Part V summed up the core content of the paper. It notes that the most important thing for finance companies is to control risks and good control environment is the foundation for effective risk control. And we need to improve the frame constantly.