Research On The Risk Management Of Goodwill Impairment In Mergers And Acquisitions Under The New Risk Management Framework

At present,the market competition is increasingly intensified,and mergers and acquisitions have become the main way for listed companies to achieve scale expansion and market share expansion.Business activities of mergers and acquisitions will generate goodwill,and most listed companies will tend to withhold or withhold less goodwill impairment.However,if there are adverse changes in the future or business performance fails to achieve expected earnings,Then the company would be exposed to the risk of goodwill impairment,the amount of goodwill accumulated in the listed company,and the scale is much larger than the revenue.When an impairment occurs,it has a huge impact on the profit statement.In recent years,goodwill thunder often occurs in A stock market.Therefore,it is very important to rationally understand its formation and manage the risk of goodwill impairment with scientific methods.In this context,Zotye Automobile,which had the largest goodwill impairment in the automotive industry in 2019,was selected as the research object,and combined with the five elements and twenty principles of the new risk management framework,the management of goodwill impairment risk was deeply studied.This paper first expounds the research background and significance,and reviews the research achievements of domestic and foreign scholars related to the research direction.Then,it puts forward the concept of risk and goodwill impairment risk and the theoretical basis of this paper,including the relevant theories for identifying,evaluating and managing M&A risks,the new risk management framework theory and the requirements for the control of goodwill impairment risk.Secondly,it introduces the basic situation of both sides of the M&A transaction in the case,analyzes the purpose of M&A,introduces the scheme and process of M&A,summarizes the formation of M&A goodwill and the subsequent impairment of goodwill,and specifically describes the negative impact of goodwill impairment on Zotye Automobile from two aspects of market reaction and financial performance.Finally,from the perspective of the five elements of the new risk management framework,the reasons for the formation of huge goodwill impairment are studied.First,in terms of governance and culture,the absence of the board of directors leads to the failure to effectively implement risk supervision,and the unclear definition of risk culture ignores the risk of goodwill impairment.Second,in the aspect of strategy and goal setting,the failure to fully analyze the business environment and the lack of definition of risk tolerance leads to the oversetting of performance commitment;Third,in terms of performance,it failed to timely identify potential risks caused by unfulfilled performance commitments,chose improper value assessment methods,and failed to correctly deal with the risk of goodwill impairment.Fourth,in the aspect of review and revision,the evaluation of major changes,such as the change of consumer concept,the lack of internal supervision,and the major defects of internal control environment are ignored.Fifth,in terms of information,communication and reporting,risk information communication with the board of directors and stakeholders is insufficient.After a detailed analysis of the reasons,this paper puts forward the following suggestions on risk management of goodwill impairment: First,in terms of governance and culture,the board of directors should strictly implement risk supervision,rationally select the acquired party and determine the appropriate transaction price.Clearly define the risk culture to enhance employees’ sensitivity to potential risks;Second,in terms of strategy and goal setting,scientific prediction of the development trend of the whole industry.Risk tolerance should be defined while establishing goals;Third,in terms of performance,timely identification,assessment and correct response to risks.When evaluating the value of the target company,the M&A party should not only fully understand the situation of both parties,but also adopt appropriate valuation methods to reasonably determine the transaction price,so as to cope with the risk of goodwill impairment.Fourth,review and revision,should always pay attention to major changes,timely adjust the company’s development strategy.The company’s risk management should be constantly improved based on feedback;Fifth,in the aspect of information,communication and report,the communication and report of risk information should be smooth up and down,and the risk information should be communicated with the board of directors and stakeholders in a timely manner.The disclosure of goodwill information should be improved by standardizing merger and acquisition behaviors to effectively prevent the risk of goodwill impairment.By exploring the performance and reasons of the large amount of goodwill impairment of the case company,specific suggestions are put forward for the improvement of the goodwill impairment risk management of Zotye Automobile.At the same time,it provides a reference for the application of the new risk management framework in the management of business goodwill impairment risk.