A Study On Risk Management In Chinese Enterprise Group Finance Companies

Since China’s first enterprise group finance company (hereinafter referred to as "Group Finance Company")-Dongfeng Automotive finance company was approved by the People’s Bank of China, the group finance company in China has made considerable contribution to the development of enterprise groups. Until the end of2011, the Central Bank had approved the establishments of105Group finance companies, which provide service for enterprise groups such as Sinopec, China Power and other groups. Those groups have covered all basic and important industries such as energy, transportation, national defense and so on. The group finance companies has become an important part of the economy, greatly promoted China’s economy and financial system reformation.However, with the continuous development of the Group finance companies, the defects have become increasingly prominent. Operating in this particular institutional and regulatory environment in China, coupled with a series of problems existing in the enterprise group and group finance companies’ development model, as a result, many risk management issues of the group’s finance company have frequently occurred. Especially, the defects of the board governance may affect the normal operation of group finance companies, prevent them from providing good services to the groups, or even cause an immeasurable loss. Therefore, in recent years, the risk management issues of group finance companies have been widespread concerned.Based on the background, the author planned to study the risk management issues of group finance companies from the perspective of the board governance. The framework of the article is as follows:The first part is the background and meanings of this study, and a detailed review of the achievements of the relative research.The second part describes the Board governance, the connotation of risk management at first, and then provides a systematic review of the role of board governance in risk management, its operational mechanism, and how the Board governance influences the effect of risk management. The third part is about the background of the financial company, the model and the current situation of the board governance and risk management in finance companies. By summarizing the survey of124Group, this study shows the status of the board governance and risk management of the finance companies. After taking legal and institutional environment into consideration, the author summarizes the main problems arising in the board governance and risk management of the Group finance companies.The fourth part is a case study based on China Southern Air Group Finance Company, by description and analysis of the case, the author aimed to summarize to the shortcomings of the risk management activities of the board governance, and to further validate the theories.Part5is the summary and Outlook section, provides suggestions for the problems of the board governance in risk management of the Group finance companies in China, also pointed out the shortcomings of the article, and future research directions.The author hopes that the research could provide an objective and comprehensive overview of the board governance and risk management of the Group finance companies in China and some recommendations for improvement. So that the finance companies can really play an important function in risk management, thereby enhancing the Group’s finance companies’ability to prevent risks and cope with risks, and promoting the development of enterprise groups, thus corresponding to promote the development of the national economy. In short, the author hopes to provide some reference for the Board governance and risk management issues of the group finance companies.