A Study On Cash Flow Risk Management In Orient Landscape

Due to the destruction of the ecological environment,China has been calling for the protection of the environment,the environmental protection tax law came into effect in 2018,and the government has also vigorously supported the environmental protection industry,which has thus achieved tremendous development and become a strategic emerging industry in China.Most environmental protection companies have chosen to invest in project construction for profit-making purposes.However,due to the impact of the PPP policy and "deleveraging" in recent years,there is a high debt burden and significant cash flow risk.Therefore,it is necessary to pay attention to and study this risk.This paper takes Orient Landscape as a case study and follows the "risk identification-assessment-response" approach to study its cash flow risk.Risk identification is the first step in risk management.Through specific analysis of the structure of the cash flow statement and operating activities,investing activities and financing activities,this paper initially finds that Orient Landscape has certain cash flow risks.On this basis,this paper analyzes the causes of its risks,which are considered to be mainly caused by the factors of slow inventory turnover,delayed project settlement,low quality of sales revenue,long collection period of accounts receivable,and heavy and unreasonable structure of debt burden.Risk assessment is an important part of risk management and can quantify cash flow risk.In this paper,we collected relevant index data of 20 companies in the comprehensive environmental management industry and historical index data of Orient Landscape for the period 2016-2020,and used the entropy-weighted TOPSIS method to assess its cash flow risk from two dimensions of horizontal comparison and vertical comparison.The results of the analysis indicated that Orient Landscape ’s cash flow position was at the bottom of the industry,with a significant gap to the industry average.Orient Landscape ’s cash inflow from operating activities has also become difficult to meet its daily funding needs and is at risk of liquidity difficulties,in addition to confirming its weak solvency and poor earnings quality,in line with the results obtained during the risk identification phase.Risk response is the final step in risk management.Based on the previous analysis of the industry and the company itself,this paper accordingly proposes some recommendations for managing cash flow risk to help the company appropriately reduce its existing cash flow risk,and also expects to provide some reference for other companies in the same industry.