Research On The Identification And Prevention Of Financial Risks Under The Diversification Strategy Of X Company

Under the background of China’s economy entering the ‘new normal’ and the country vigorously pursuing supply-side structural reforms,many traditional companies are facing difficulties in survival and development due to problems such as overcapacity and low added value of products.In order to get rid of the shackles of development,many companies have implemented the diversification strategy to promote industrial transformation and upgrading in order to improve their operating conditions and performance.However,in the process of implementing the diversification strategy,many companies have blindly diversified,lacked diversification management capabilities,and lacked awareness of financial risk prevention,etc.,resulting in diversification failures and heavy losses.In this work,this article adopts the method of case study to explore the impact of diversification strategy on financial risk,and to study the important factors of diversification strategy affecting financial risk.On the basis of consulting and sorting out the existing literature,this paper uses X company as a case to study the above issues.First,analyzing the motives for implementing the diversification strategy by combing through information related to X company’s traditional business operations and combining the market and policy conditions of the diversification project.Then,in the process of observing the implementation of the diversification strategy and the process of qualitatively and quantitatively identifying the company’s financial risks,obtain the important factors that affect the financial risk of the diversification strategy.Using the entropy weight method and the efficiency coefficient method to determine the level of financial risk of X company.Based on the level of financial risk,analyzing its impact on financial risk.Finally,based on the results of the previous analysis,combined with related theories,the measures against financial risks are put forward in a targeted manner.This paper draws the following four conclusions: First,the diversification strategy leads to a greater financial risk.Among them,the financial risk caused by investment activities is the most obvious.In the quantitative identification of financial risk,the index value is lower than the poor value,and it is rated as having a significant risk.Second,the selection of X company’s diversified projects is blind.Among them,the determination of lithium battery and mobile game projects is the result of policy and market promotion.X company itself does not have the advantages of resources,management and technology,which leads to the failure of the project.Third,the implementation of X company’s diversification strategy is too radical.The company’s lack of cautious attitude towards the project’s early-stage feasibility analysis,poor dynamic capabilities,insufficient R&D capabilities,and lack of awareness of risk prevention have caused diversified projects to be put into operation repeatedly,unable to form effective production capacity,and ultimately resulting in poor performance of the company and larger financials risk.Fourth,X company has certain risks in the four aspects of financing risk,investment risk,capital recovery risk,and profit distribution risk.Financial risk prevention should be carried out in all aspects from these four aspects,mainly including that X company should establish risk prevention awareness,improve dynamic capabilities,cultivate core competitiveness,and increase the intensity of talent team building.