Research On Preventing Financial Risks Under S Group’s Diversification Strategy

After the reform and opening up,China’s economy has developed rapidly,and various large state-owned enterprises are actively undergoing transformation and upgrading,expanding in scale,and improving the living standards of the people.At the same time,the market in some industries is gradually saturated.Now,if only trying to rely on a single industry to obtain profits,it is unable to meet the vision of the enterprise’s future development.To maintain its original advantageous position,some large enterprises have to explore highly leveraged diversification strategies abroad,Marching into other industries.However,diversification strategy has gradually proven to be a "double-edged sword",and more and more companies’practices have proven that diversification strategy is not as reasonable and effective as an ideal plan to avoid financial risks.S Group is a large state-owned enterprise mainly engaged in the household appliance manufacturing industry.Although S Group began to implement a diversification strategy in the last century,there are certain problems in its development model,resulting in that the diversification strategy did not bring the desired effect to S Group.On the contrary,the diversification strategy has led to some problems in S Group.Therefore,it is of certain significance to study the case of S Group’s financial risks in the context of diversification strategy,which can help similar large enterprises to prevent financial risks underdiversification strategy.Based on the existing relevant theories,this article uses literature research and case study methods to analyze and study cases.This article briefly summarizes the basic situation of S Group,introduces the motivation for enterprises to implement diversification,and measures the degree of diversification reasonably through the specialization ratio and Herfindahl index.Through understanding and studying the basic situation of S Group’s financial statements,this article first summarizes the financial situation of S Group through indicator analysis,and quantifies the degree of financial risk through Zscore model.After determining the degree of financial risk,it explores the impact of S Group’s diversification strategy on it from financingrisk,investment risk,and operational risk,and finds out the specific reasons.Finally,Proposein-depth preventive countermeasures from these three perspectives,and provide reasonable suggestions for the rational operation of S Group’s diversification strategy.Through the analysis of cases,this article summarizes the issues that enterprises should pay attention to when implementing diversification strategies,providing reference significance for other enterprises in the industry to conduct diversification development in the future,and avoidingsome misunderstandings of diversification strategy ideas...