Comprehensive Financial Risk Management Studies

In a market economy, enterprises are constantly challenged by financial risks. Competition is becoming more intense as China entered WTO. The decision-making involves not only economy and profit, but also risks. This paper is based on comprehensive risk management theories and attempts to study financial risk warning, management and reversion. To identify potential risks, an early warning system needs to be set up to monitor the index of financial risk. Then, measures can be taken in light of the risk index to manage and control the financial risks in a timely fashion. Once financial risks do take place, preparatory strategies will take effect to bring about reversion.The paper has the following five parts:The first part defines the categories and characteristics of financial risk, summarizes the theories of risk management, and introduces comprehensive risk management theories that are the basis of this paper.The second part deals with the key to financial risk warning and measurement, vital to effective risk management. Risk measurement is based on the warning model of financial index and financial risk. In this paper a typical risk index is selected and with a multivariable warning model is applied for the analysis of the financing in the major automobile company Xiali Co. Ltd.The third part lists the prerequisite and procedure of financial risk management and proposes that creative instrument and strategies could be applied in financial risk management.The fourth part offers causes of the financial risks and possible reversion strategies on a long-term, intermediate-term and short-term bases in combination with the strategic planning of the enterprises.The fifth part summarizes the whole paper.