The Research Of China Shipping Group’s Financial Risk Management

In recent years, the prices of crude oil and oil related products have been continuously booming. Major central banks have to hike their interest rate in order to control the potential inflation. China has taken actions to reform its currency policy steadily. Therefore, commodity risk, interest rate risk and FX risk lead to unprecedented challenges for China Shipping Group, a giant global shipping company. China Shipping Group needs to improve its financial risk management and establish an effective system.The author firstly introduces the concept of financial risk and corporate risk management, and analyzes the importance of corporate financial risk management. Then the successful practices of some famous international corporations are introduced, such as VaR and EaR analysis. There are detailed discussions of what famous international and domestic shipping/air line companies do with their financial risk management. The essay emphasizes on how to establish the framework of China Shipping Group’s financial risk management, set up the financial risk management goal and analyze the bunker oil price risk, FX risk and interest rate risk. The author uses EaR to quantify the risk valuation, then suggests the financial risk management strategy and proposes some solutions. At last, the essay analyzes the related market and introduces some popular structures, discusses how to adopt derivative products to manage financial risks and how to optimize the hedging ratio. There is also a real case about how to combine the derivative product with corporate financing.With the globalization of Chinese corporations and the development of Chinese financial markets, financial risk management shows unprecedented importance for Chinese companies. This essay makes use of some global company’s successful experiences, analyzes in detail about how to carry out the financial risk management of China Shipping Group. Hope it would be a reference for other Chinese companies.