Supply Chain Finance Risk Management Of Pingan Bank

In order to solve the problem of financing of small and medium-sized enterprises, as wellas the demand for the bank’s own business development, Ping An Bank (former ShenzhenDevelopment Bank) first develop the supply chain finance business in China. The idea ofsupply chain finance business is to rely on the good credit of the core enterprise in supplychain, lending to the upstream and downstream enterprises. Thus improving the stability ofthe whole supply chain as well as bringing profit for the bank. The main risk in traditionalfinancial focuses on the credit risk of the enterprise, however the supply chain finance caneffectively reduce the credit risk through credit binding with the core enterprise, and the mainrisk focuses on the operational risk.Therefore, this essay first introduces the specific business model of SCF in Ping An Bank,including accounts receivable, inventory, prepaid financing. And then make a comparisonamong these three kinds of business model, after that analyzing the risk causes and identify ofthe three kinds of business models. The essence of these three modes is movable propertypledge loans, so the quality of the property is the first risk point. At the same time, inventoryand prepaid financing will involve real property, which always needs the third party logisticssupervision for real-time monitoring, thus regulation risk becomes the second risk points. Soin the last part, the research on risk management aims at these key risk points, putting forwardthe management strategy, which stressing strict specifications from the four aspects of accessmanagement, real estate guarantee, regulators, early warning system, for the effective controlof credit risk. In the end of this paper, we discuss how to evaluate the risk with an example inreal life.The biggest risk of supply chain finance is not their fiduciary assets and financialsituation of enterprises, due to its characteristics of self-liquidating, the bank at the time ofscreening fiduciary companies, should focus on a review of its authenticity as well as therelationship between trade and core businesses. Supply chain finance by way of creditbundled fiduciary risks associated with the company’s own core business bundled together,usually a very small core of corporate credit risk, it can effectively shield the trustedenterprise’s own credit risk. Therefore, in risk management, focusing on control of the accessmanagement system, Secured Transaction Law, co-regulators, early warning systems in these areas.