A Research On Financial Risk Management Of V V Food & Beverage Under Diversification Strategy

An appropriate diversification strategy helps companies break through development bottlenecks and enhance corporate value,which in turn brings companies more challenges in business decision-making and risk management.Listed on the Shanghai A-share market as early as 2000,V V Food & Beverage Co.,Ltd.(hereinafter referred to as VVFB),in the following 18 years,tried to follow through the path of diversified business.However,in the case of repeated losses in related investment projects,VVFB is under tremendous pressure from problems such as the financial downturn and growing risks in the process of the implementation of the strategy,which makes it difficult to get business operation back on track.With the extensive discussion about the dilemma of VVFB,which is the opposite of the advertisement---“Soy milk,happy”,this paper will give a careful analysis of financial risk management in VVFB.This paper explores the review of relevant literature about the diversification strategy and financial risk management through the documentation method(literature research method),the clarification of some theoretical concepts involved,as well as the analysis of financial risk management system in VVFB based on the mixed ownership by case study method.It is generally believed that diversification strategy is conducive to the expansion of business scale and risk diversification;while on the contrary,it has increased its financial risks.The increased financial risk puts higher demands on the job of risk management,and requires management staff to be aware of the importance of improving the FRM system.In this case,there are still some loopholes and deficiencies needed to handle,mainly as follows:(1)Insufficient capability in financial risk early-warning(2)Inaccuracy in financial risks identification and assessment(3)Simplified measures for financial risk.The superficial analysis of reasons for above three problems is easy to give the false understanding that only the specific risk management process is needed in the improvement of the FRM system.In fact,rooted causes for the current situation of VVFB should be explored,therefore,in terms of internal and external factors,reasons for this situation are listed in five aspects,from the industrial management environment to the internal information communication.In order to propose suggestions systematically and comprehensively,following “COSO Enterprise Risk Management: Integrating with Strategy and Performance”(COSO ERM for short)which is composed of five interrelated components,including Governance & Culture,Strategy & Objective-Setting,Performance,Review & Revision,Information Communication & Reporting,some suggestions are proposed in this paper:(1)Establishing positive risk management system.(2)Considering risk preferences and diversified business environment.(3)Improving measures for risk management.(4)Sticking to the principle of review and revision.(5)Setting up information report systems.The proposal not only refers to the improvement of the specific risk management process and the supervision and management mechanism,but also involves the organizational structure and risk culture,which are easily overlooked by the management but emphasized by the new COSO ERM framework.Hence,this paper has important significance for reference to the improvement of the FRM system in VVFB and the establishment of an effective FRM system for other diversified enterprises as well.