Military Listed Company's Financial Risk Control

Risk is a reality and objective phenomenon which happens often along with the development of human society. It is originated from the uncertainty of and human limited knowledge about the real world. The close connection between risks and loss makes people realize the existence of risks. Risk, which may happen, is an objective reality, as well as indeterminacy, resulting in disaster and loss in the Nature and human society. As one of the main bodies of human activity, corporations especially face risks at all times. It is the objective existence of risks that impels people to study risks. Along with the growing development of market economy and the establishment of corporation system, the rights of management and property are separated. The corporation will find itself confronted by various risks, among which the financial risk is the main risk. Financial risk is all kinds of uncertainties in financial activity which make the financial profit deviate from the expected goal, therefore bringing the corporation the occurrence and probability of loss.The worldwide financial crisis brings huge challenges to the operation of listing corporations in China. As a military manufacturing listing company, our corporation was inevitably hit by this crisis storm. As a typical representative of national defense and science and technology industry, military listing corporations seek the development through capital market and achieve the organic integration of government will and civil capital, as well as the national need and corporation development. How to acquire the awareness of risks, how to build and improve the control system of financial risks of military listing corporations, and how to efficiently control the financial risks are the purposes of this thesis. Currently, from the point of risks control, studying financial risks control issues of military listing corporations is of obvious actual meaning and certain academic value for the promotion of establishment and improvement of modern corporation system in China, guaranteeing the existence and better development of national defense and science & technology industry, as well as accelerating the healthy and sustainable development of national economy.This thesis will study 45 military listing corporations, which have a military background from nine national defense and science & technology industry groups and their affiliates. Firstly, through the analysis of their capital liability tables of December 31st,2009, profit tables in 2009 and cash flow tables, the financial risks hidden in these reports will appear and be materialized, therefore revealing the root cause leading to issues. This thesis will use system analysis method, combination method of qualitative and quantitative analysis and comparison analysis to generalize the 4 major following exhibitions of financial risks in military listing corporations: relatively high debt ratio, large amount of receivable account, excessive storage and low cycling rate of capital, low rate of net income. Secondly, analysis the root cause of financial risks:manager's weak sense to financial risks, incomplete setting of financial management organization and insufficient control of financial risks, relatively poor professional capability of financial managerial staff and so on. Consequently, it is necessary to use financial risks control theory to improve the design of risks preventing goal, which could start from the principles such as predictability, sensibility, coordination, stability of risks index, and establish a systemic and complete financial risks index system improved in traditional operation capability index and taking the cash flow analysis as the core. On the basis of financial report sheet, operation plan and other relevant financial data, improve the evaluation and pre-warning system of financial risks. By the use of theories such as finance, economy, corporation management, marketing, etc., and mathematical model, determine the pre-warning index and corresponding standards of it, in order to discover existent risks of company, remind the decision-maker of using efficient preventative method in time to resolve the financial risks. Meanwhile, it is necessary to identify the management and controlling responsibilities, for example:account method, financial method and audit supervision of financial risks. From the view of information supply control of financial risks, the goal of entire company's financial risks shall be managed and controlled against the financial management objects, such as financing, investment and so on, so that the account error and corrupt practices would decrease in internal company. As a group having advantages for development in the economy oper ation of national defense and science & technology industry, military Listing Corporation is a source of investment value in capital market. Military Listing Corporation shall be administered in the following five aspects to increase the level of operation management and standard operation:complete the corporation administering structure, establish sound internal control system, increase the transparency level of corporation operation, enhance the encouragement and control of senior managerial staff and all employees, and optimize the product structure and improve innovation ability.In sum, military corporation shall enhance the control ability to financial risks in financial management, use financial risks controlling theory to improve the design of risks index, risks evaluation, as well as responsibility system and corporation administration of pre-warning mechanism and risks management and control, establ ish financial risks controlling system, predict and evaluate financial risks correctly when combining with the real situation in order to keep the whole risks at the lowest level, ultimately achieve the goal of maximized beneficial result and sustainable development of corporation.