Research On Group Risk Management Based On System Dynamics

Crowdfunding refers to the actions of charitable or profit-making groups or individual entrepreneurs access to small venture capital through the Internet rather than traditional financing channels. Since laws and regulations are incomplete, there are many blind spots with crowdfunding regulation. Once risk happened, crowdfunding participants may face immeasurable losses. Therefore, it is urgent to clarify crowdfunding risks and provide pointed regulatory measures for regulators of crowdfunding industry. In order to study crowdfunding risk management, this paper made efforts in the following three aspects. First, risk identification. Through relevant literature, summed up existing crowdfunding risks which are systematic or idiosyncratic according to the System Theory. Specifically, legal risk is a kind of systematic risk. As to idiosyncratic risk, financiers face technical risk and managing risk; investors face risk of default, time, privacy and rights; crowdfunding platforms face reputational risk and liquidity risk. Combined with crowdfunding risks and by using System Dynamics, analyzed the mechanism of interaction of crowdfunding risks during investment process, and drew the causal loop diagram of crowdfunding risk by using Vensim, a kind of simulation software of System Dynamics. Second, risk measurement. Based on the fist part, added the stock-flow array and rate variable intree into the progress of modeling crowdfunding system, and drew a stock-flow diagram of crowdfunding risks. Used Comprehensive Integration Granting Weight to deal with statistics which get through from questionnaire and related literature, and established system dynamics equations based on the stock-flow figure. Put equations into the simulation model of crowdfunding risks through Vensim, and before simulation, debugged the simulation model with susceptibility testing. The simulation results show that these risks, including the risk of default, reputation, liquidity and technology, have exponentially growing trend, which means regulators must focus on these risks when they are managing crowdfunding risk. Third, risk monitoring. Elaborated requirements of crowdfunding risks checking, and described how vital it is to make the checking and reporting system of crowdfunding risks. In addition, tried to apply the five risk management strategies of banking industry to crowdfunding risk management. Finally, combined with simulation results and risk management strategies, made some suggestions and countermeasures respectively from the financiers, investors, crowdfunding platform and regulators.