Research On Enterprise Risk Management Of Hedging

Since China’s accession to the WTO, more and more enterprises use the financial derivative instruments for hedging purposes. But the enterprises are not good at hedging, so the results of hedging are not satisfactory. The problem of how to deal with the enterprises’ hedging risks and then improve the effects of hedging is to be resolved. Risk management is the core of corporate hedging business, related to the success or failure and the effect of hedging. In the related research on hedging, most of the studies are focused on the hedging techniques, especially the optimal hedge ratios. However, in the actual hedging practice, enterprises are usually more in face of non-technical risks. In most cases, reducing the non-technical risks is more productive than improving hedging techniques. Based on the circumstance, this literature tries to analyze the problems of enterprises’ hedging risk management from the theory and practice, and propose the design and application of hedging risk management framework. This literature can provide a theoretical and practical guidance for Chinese enterprises to enhance their risk management of hedging.Firstly, it introduces the research background, makes the literature reviews and analyses the related theory. Secondly, it defines the hedging risks and classifies the hedging risks. Thirdly, it builds an enterprise hedging risk management framework based on the ERM-IF. In the end, it makes a case study to explain how to implement this framework, and it also makes conclusion and prospection.The contribution as follows:the research systematically studies the hedging practice, analyses the hedging risks, builds an enterprise hedging risk management framework, and implements the hedging risk management framework in an enterprise. This literature has significance to build our enterprises’ hedging risk management system and improve the hedging level.