Financial risk refers to any risk that may cause financial losses to an enterprise or institution. It is the uncertainty or possibility of economic entities suffering losses in financial activities. For the development of the financial industry, financial risk management is essential few. The following is a paper on financial risk management that I compiled. I hope you can gain insights from it!
Financial risk management paper Part 1
A brief analysis of financial risk management
Summary :In the context of the international financial crisis, people have paid more and more attention to financial risk management. This article briefly explains financial risk management from the aspects of classification, goals, current situation, and countermeasures.
Keywords: classification; goal; current situation; countermeasures
1. Risk management connotation
Risk refers to the uncertainty of future results. Financial risk refers to any risk that may cause financial losses to an enterprise or institution, and is the uncertainty or possibility of economic entities suffering losses in financial activities. Risk management involves activities at all levels within the organization, from the overall activities of the enterprise to the activities of each business department, to individual business processes, etc., all risk management is involved.
Financial risk management refers to the identification, measurement and analysis of financial risks in the process of raising and operating funds by financial institutions, and on this basis, effective control and disposal of financial risks at the lowest cost. , that is, the most economical and reasonable method to achieve maximum security, avoid and resolve risks, and obtain the best benefits from financial activities.
2. Classification of financial risk management
Divided according to the object of financial risk, it includes bank credit risk management, foreign exchange risk management, securities investment risk management, futures investment risk management, etc. wait. According to the causes of financial risks, there are objective financial risk management and subjective financial risk management. According to the scope of financial risk spread, there are macro-financial risk management and micro-financial risk management. Divided according to the main body of financial risks, it includes national financial risk management and economic entity financial risk management.
3. Objectives of financial risk management
On the basis of identifying and measuring financial risks, control possible financial risks and prepare disposal plans to prevent and reduce losses. Ensure the smooth progress of monetary fund raising and operating activities. This is the primary goal of financial risk management.
IV. Current situation of financial risk management in my country
(1) Capital market information is not transparent
If the information is not transparent enough, it will cause financial information and major events of listed companies to Seriously distorted information and frequent insider trading, along with the uncertainty of macro information, cause market chaos and may cause sharp market shocks.
(2) The capital market is not fully standardized and the speculative atmosphere is strong
Since non-circulating state shares and legal person shares have a holding nature, they can easily control the supply and demand relationship in the stock market. , coupled with the lack of effective supervision of the market operation process and serious speculative psychology of institutions or individuals, these fundamentally determine that the prices of the capital market are relatively arbitrary, so that large fluctuations and violent shocks in the entire market are inevitable.
(3) The asset quality of financial institutions continues to deteriorate
According to relevant statistics, the non-performing assets of my country’s four major banks alone are as high as approximately 2 trillion yuan, and the proportion of non-performing loans Reaching 20%, although the growth trend of the proportion of non-performing loans of some banks has slowed down in recent years (some have shown a downward trend), due to the long-term accumulation of financial repression, the proportion of non-performing loans of banks is still large and shows a trend of increasing year by year. In the context of economic globalization, these non-performing loans may trigger further panic and bring unimaginable turbulence to the already severely damaged system.
(4) The lagging development of financial products has restricted the development of the real economy
At present, my country’s financial products are of a single variety, investors have narrow investment channels to choose from, and they cannot fully enjoy the benefits of financial institutions. The various financial services provided severely restrict the healthy and stable development of the real economy.
5. Several countermeasures to prevent financial risks
(1) Strengthen the financial supervision of government departments and give certain powers to risk management departments
Regulatory departments It is necessary to actively encourage and support the innovation of banking financial institutions, improve the level of risk supervision, simplify the access approval procedures and approval links on the premise of controlling risks, and further formulate and improve a series of laws and regulations and departmental rules to create a conducive The legal environment for innovative development promotes new businesses to embark on a virtuous cycle. Establish a risk management organization and management system with rights, responsibilities and interests that match each other, and give certain powers and bear corresponding responsibilities to obtain considerable benefits. Without a strict and powerful risk management organization, discontinuous and one-sided management will result in risk managers being unable to accurately understand and further control risks as a whole. Therefore, the risk management organizational structure framework should have integrity and coherence to ensure that there are no omissions in management and that it can be implemented.
(2) Actively build trading markets and deepen the market-oriented reform of trading mechanisms to create a good financial environment for financial innovation
my country’s market entities are not mature enough and the legal system is not sound enough. Therefore, we should actively explore and learn from international experience, build trading markets, deepen the market-oriented reform of trading mechanisms, and gradually establish an all-round and efficient financial supervision system.
(3) Strengthen the supervision of banking industry assets and prepare sufficient margins and reserves for financial institutions
In recent years, the non-performing loan ratio of the domestic banking industry has remained high. , In recent years, the state has intensified financial supervision, and through measures such as collection, stripping, revitalization and loan verification, the non-performing loan rate has been significantly reduced, to less than 10% currently, laying a solid foundation for Chinese banks to integrate with international finance. , creating better conditions for financial innovation. From the current point of view, although financial supervision has achieved certain results, state-owned banks are still burdened with a heavy package of non-performing loans, which greatly hinders their integration with international finance and the realization of global economic development strategies. Therefore, the supervision of bank assets is a long-term task. Only by achieving effective supervision can we reduce the non-performing loan ratio and prepare sufficient margins and reserves for financial institutions to realize their global strategies.
(4) Strengthen information technology risk management and formulate practical investment strategies
With the rapid development of information technology, information technology is playing an increasingly important role in the development of the banking industry. role, which puts forward higher requirements for the effectiveness and security of information technology means. This is also the key to the safety, stability and healthy development of the banking industry. At the same time, we should also strengthen our awareness of risk prevention. Utilize existing scientific and technological means to improve risk prevention. Financial institutions should determine long-term investment goals and seek investment opportunities based on future returns. And integrate with international finance to create a good domestic and international environment. In short, under the financial crisis situation, the government and financial regulatory authorities should strengthen the supervision of government functional departments, deepen the reform of the financial system, implement effective supervision of bank assets, especially understand the returns and risk profiles of innovative products, and improve risk prevention awareness and risk tolerance to create a good domestic and international environment for my country's financial industry.
References:
[1] Wang Hao. Four tactics to control financial risks [J]. New Financial Management, 2010, (2).
[2] Liu Mingwei. Analysis of financial risk management under the financial crisis [J]. China Business, 2009, (12).
[3] Liu Yao. A brief discussion of my country's financial risks in the post-financial crisis era Management [J]. Financial Management, 2009, (11).
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[5]Wu Xiaoqiu. Six major chaos currently exist in China’s capital market[J]. Securities Daily, 2003, (10). Financial Risk Management Paper Part 2
Risk Management in Financial Innovation
Abstract Financial innovation is an important means to promote financial development, and it provides fresh blood for financial development. However, with the gradual opening up of the financial industry, innovative activities are increasing day by day, and with it, financial risks have become more prominent.
This article analyzes financial risks in financial innovation and proposes strategies to deal with financial risks, laying a theoretical foundation for future risk management research.
Keywords financial innovation, financial risk, risk management
In the profit-oriented financial industry, financial innovation is an important tool to explore potential profits. However, due to the impact of the international financial crisis in recent years, the financial industry has begun to pay attention to the relationship between financial innovation and risk management. In order to ensure the sustainable effects of financial innovation, it is necessary to strengthen the risk management of financial innovation.
1. The concept of financial innovation
The issue of financial innovation was first raised by the Austrian political economist Joseph. In "The Theory of Economic Development" written by Schumpeter. Chinese economists generally believe that financial innovation refers to the recombination of various internal financial elements and the creation of new things through innovative changes in each element. From previous research on financial innovation, it can be found that the understanding of financial innovation mainly focuses on three levels: macro level, meso level and micro level. At the macro level, major changes in the historical development of the financial industry are regarded as financial innovations one after another. Financial innovation is a true reflection of the development history of the financial industry. Without financial innovation, there would be no continuous development of the financial industry. The meso level refers to the process in which the government or financial institutions create a highly efficient capital operation system with liquidity, security and profitability by changing the function of financial intermediaries in order to transfer operating risks, reduce operating costs, and adapt to the economic environment. The micro level refers to the innovation of financial instruments. Innovations in financial instruments can be mainly divided into credit innovations, risk transfer innovations, liquidity-increasing innovations and equity creation innovations.
From this, we can think of financial innovation as a process of reforming the existing financial system and creating new financial instruments to obtain potential profits that are currently unobtainable. It is a slow and slow process driven by profit motives. An ongoing, ongoing process of development.
2. Risk performance in the process of financial innovation
Any innovative activity will be accompanied by risks, and some of these risks are predictable and some are unpredictable. Financial innovation activities are bound to be unable to escape the shackles of financial risks. With the comprehensive development of financial innovation, financial risks will also intensify, followed by high risks of complexity and concentration. The specific manifestations are as follows:
First, financial innovation has led to increased financial market risks. Financial innovation continues to promote the development of the financial market, but at the same time it also brings huge risks to the financial market. This risk is a common risk faced by financial intermediary organizations. Whether it is the capital market or the currency market, it will be affected by financial risks. The risks faced by the capital market are mainly reflected in insufficient capital, small asset scale and prominent business risks. The main risks faced by the money market are mainly reflected in the decline in profitability and the increase in the proportion of non-performing assets. The financial market continues to win potential profits through innovation. However, due to defects in the basic market conditions, innovation risks have increased, which requires continuous improvement of the financial market to make up for the hidden dangers caused by risks.
Secondly, financial innovation has led to increased risks in the financial system. The financial system is an organism composed of financial intermediaries and financial markets. Market funds move through the system from the direction of capital surplus to the direction of capital shortage. This system based on the flow of funds allows financial institutions to maintain close exchanges and form a cooperative relationship with funds as the link. This correlation also causes the risks brought by individual financial innovations to directly affect the system. Other financial institutions within the country, this kind of financial risk has the characteristics of rapid expansion, thus directly affecting the stability of the financial system.
Finally, financial innovation has led to deepening financial operating risks. Financial innovation promotes constant competition among financial institutions, and this competition leads to the behavior of financial institutions seeking only high returns. This behavior is bound to be accompanied by high risks, which leads to a decline in the credibility of financial institutions. This directly deepens the operating risks in the financial industry. Once potential operating risks become reality, they will definitely bring huge losses to financial institutions.
3. Countermeasures to prevent financial innovation risks
While financial innovation brings potential profits to the financial industry, it also exposes the financial industry to unprecedented risks. Therefore, while financial intermediaries carry out financial innovation, they need to prevent the occurrence of financial risks.
With the continuous development of my country’s financial market, financial market risks have become the main risks faced by financial intermediary structures. At this stage, the financial instruments innovated by my country's financial institutions have low risk pricing and weak risk transfer capabilities. Therefore, improving market risk management and control capabilities is an urgent issue for financial institutions and government regulatory authorities. Driven by financial innovation, financial supervision by government departments must also be improved. Financial supervision is a process in which a country's government, through certain financial authorities and in accordance with laws, regulations and certain procedures, inspects, organizes and coordinates various financial institutions and financial markets in order to ensure the smooth and orderly progress of the macro-economy and achieve macro-economic goals. . Government regulatory authorities must not only actively encourage innovation in financial institutions, standardize innovative behavior, and improve supervision and management levels, but also improve relevant financial policies and regulations to establish a reasonable, orderly, and sustainable financial innovation environment.
The internationalization of the financial market is an inevitable trend in the development of the financial industry, and this trend is bound to strengthen international financial cooperation. Strengthening cooperation in the international financial industry can help us understand advanced international financial concepts, and sharing financial market information can provide valuable knowledge-based experience for financial innovation. Not only that, our country's regulatory organizations can also participate in international regulatory organizations and formulate relevant rules for our country's financial business with reference to international standards to achieve comprehensive financial cooperation.
IV. Conclusion
Financial innovation is still in its infancy in our country, and its growth requires the joint promotion of financial institutions, investors and government regulatory agencies. Government regulatory authorities should put public interests first and supervise financial intermediaries to inform financial investors of risk information so that the interests of financial investors can be protected. Government regulatory authorities must also work with financial institutions to fulfill their responsibilities for educating financial investors and popularize financial knowledge to financial investors free of charge. Financial institutions must fully analyze the financial market conditions while carrying out financial innovation, and the research and development of financial products must be based on the current financial market. Only in this way can financial risks be more effectively reduced in the process of financial innovation.
References
[1] Zheng Mingchuan, Bao Wangen, Jiang Jianhua. On my country’s financial innovation and risk management [J]. Business Research, 2003(20).
[2]Zhang Xiaoqin, Feng Li. On financial innovation and financial risk management[J]. Business Research, 2005(02).
[3]Que Xinhua, Chen Minghe. A brief discussion on finance Innovation and Financial Risk Management[J]. Economic Research Guide, 2007 (07). >>>More exciting financial risk management papers on the next page?