Study On Enterprise Risk Management Issues And Implication Of Suntech Bankruptcy

Currently, we are in the period of social and economic system transformation from planned economy to market economy, from agricultural society to industrial society. During the period of transformation, there appears plenty of opportunities then many new strategic industries and enterprises also emerge constantly. We can see many economic activities which are driven by the selfishness. Whether it is a natural person or enterprise there is a tendency to ignore the risk. Then it is very necessary to explore how to strengthen enterprise risk management under the background of economic growth and transformation.Enron-Andersen event, WorldCom company bankruptcy, Guangxia fraud and other similar events often emerge in these days. Regardless of any country, any social economic system and any economic development level, insufficient risk estimates for the future often lead to enterprise bankruptcy events repeatedly. In recent years, the domestic enterprises’ major crises which were characterized by diversified investment failure, speculative financial instruments, production safety accidents and so on occurred successively. This reveals the lack of the consciousness and ability of enterprise risk management. Now there is need to focus on that why it is hard to put an end to such events and there is a tendency to escalate in a better system. Is failure the failure of the system design or implementation? How on earth can we strengthen the enterprise risk management in a rapidly changing market environment?On March20,2013according to "Bankruptcy Law", Wuxi intermediate people’s court announced that Wuxi Suntech Power co., LTD., should be reorganized. Former strategic industry leading enterprise collapses suddenly. What is the logic behind this? This article will base on the theory of internal control, corporate governance and enterprise risk management. By carding, analyzing the reason of its failure about Wuxi Suntech case, we can unearth something to enhance the enterprise management in China and realize enterprises’ultimate goal.This paper mainly adopts literature research and case study method. Firstly, we comb some relevant literature and sort out the theoretical basis for this article. Secondly, the paper will describe the reaction of the stakeholders faced with Suntech bankruptcy reorganization. Then combined with the "enterprise risk management-integrated framework", the paper analyzes the reasons of Suntech bankruptcy. At last the paper will extract the suggestions of strengthening enterprise risk management. The arrangement of each part and content summary are as follows.The first part is the introduction. In this part, we will introduce risk management problems based on domestic and foreign enterprise bankruptcy events. Then a brief overview of the current economic situation at home and abroad where the enterprises are will also be introduced. At the same time, this part will tell you the research method, innovation and flaws of the paper.In the second part, by analyzing the theory of internal control, corporate governance and enterprise risk management, we review and raise the internal relationship among them which lay the theoretical foundation for later analysis.The third part mainly introduces the history of Wuxi Suntech development and the situation that Wuxi Suntech is confronted with. This will be analyzed from five perspectives, that’s to say, the investment decision-making errors leading to tight financial funds, European and American market demand leading to overcapacity, frequent associated trade leading to Suntech hollowed-out, internal power struggling causing Shi Zhengrong losing the control of Suntech, debt default leading bankruptcy reorganization. The essay also includes the reactions of all the stakeholders of Suntech when they are faced with bankruptcy reorganization. The stakeholders are mainly including Wuxi government, nine creditor banks, foreign bond holders, overseas equity investors, Shi Zhengrong, etc. The analysis of this part will focus on the changes of financial indicators of Suntech.The fourth part focuses on COSO risk management integration framework. Then the paper will analyze Suntech the causes of bankruptcy reorganization from eight elements of internal environment, goal setting, event identification, risk assessment, risk response, control activities, information and communication, monitoring. This part will also analyze how the local government’s excessive intervention affects photovoltaic industry.The fifth part extracts the method of how to strengthen our country’s enterprise risk management. In order to reduce the probability of Suntech bankruptcy and similar events happening again, this part focuses mainly on perfecting corporate governance, balancing the relationship between growth speed, scale and risk, emphasizing management rules other than leaders’ personal style and incorporating the ethical and moral factors in the risk management framework. Finally the paper discusses the limitations of the enterprise risk management in improving the business. The sixth part is the conclusion of the essay and will summarize the content of the article and point out flaws.