Enterprise financial risk exists in all aspects of enterprise financial management, and almost all enterprise financial decisions are made under the conditions of risk and uncertainty, especially under the imperfect market economy in China. Enterprise financial risk refers to the uncertainty of financial situation caused by various unpredictable or uncontrollable factors in the process of financial activities, which makes the enterprise have the possibility of suffering losses. Therefore, it is of great significance to discuss the present situation, causes and preventive measures of financial risks in Chinese enterprises for reducing risks and improving efficiency. 1 current situation of financial risks of Chinese enterprises. The financial risks of an enterprise include financing risk, investment risk, capital operation risk and income distribution risk. Specifically, the financial risks of China enterprises are mainly manifested in the following aspects. 1. 1 Unreasonable capital structure refers to the long-term capital composition of an enterprise and its proportional relationship. Unreasonable capital structure will make enterprises have a heavy financial burden and a serious shortage of solvency, which will lead to financial risks. According to the information released by the State-owned Assets Supervision and Administration Commission of the State Council, in the first half of 2005, among 169 central enterprises, the net assets increased less than 1% or decreased, and the capital accumulation was seriously insufficient. Fifty-two companies are over-indebted, and many companies' liquidity ratio is lower than the international warning standard (200%). The asset-liability ratio of some enterprises exceeds 80%, and some even exceed 100%. From the perspective of corporate debt structure, there are less long-term liabilities and too many short-term liabilities, and enterprises are highly dependent on banks. Enterprises rely too much on banks, and when there is a payment crisis, on the one hand, breaking promises increases financial risks, and on the other hand, loans overdue increases financing costs. It can be seen that there are big problems in the capital structure of Chinese enterprises. 1.2 Investment is unscientific. Enterprise investment includes domestic investment and foreign investment. In terms of foreign investment, investment decision makers of many enterprises have insufficient understanding of investment risks and blindly invest, which leads to huge investment losses and constant financial risks. Internal investment of enterprises is mainly fixed assets investment. In the process of fixed assets investment decision-making, many enterprises lack detailed and systematic analysis and research on the feasibility of investment projects. In addition, the decision-making is based on incomplete and untrue economic information, and the decision-making ability of decision-makers is low, which makes investment decision-making mistakes happen frequently, investment projects can not get expected returns, and investment can not be recovered on time, which also brings huge financial risks to enterprises. 1.3 improper capital recovery strategy commercial credit widely exists among enterprises in modern society. In order to increase sales and expand market share, some enterprises sell products on credit. On the other hand, among the current assets of Chinese enterprises, inventory accounts for a relatively large proportion, and many of them are backlogs. In the first half of 2005, the accounts receivable and inventory of central enterprises occupied 1.42 trillion yuan, accounting for 36% of the working capital. In all central enterprises, accounts receivable and inventory account for more than 50% of working capital. Assets are occupied by debtors and inventories for a long time, which makes enterprises lack sufficient liquidity to reinvest or repay debts due, which seriously affects the liquidity and security of enterprise assets. 2 Analysis of the causes of financial risks of Chinese enterprises There are many causes of financial risks of Chinese enterprises, both external and internal. 2. 1 The financial activities of enterprises have not adapted to the ever-changing external economic environment. The financial activities of enterprises are carried out in a certain environment, and are restricted by these environments, including the overall situation of the national economy and the prosperity of the industry, the adjustment of national credit and foreign exchange policies, the fluctuation of bank interest rates and exchange rates, and the degree of inflation. Most enterprises in our country have weak financial management foundation, lack market concept and adaptability to changes in external environment. In the face of adverse changes in the external environment, they can't make scientific predictions, react slowly and take ineffective measures, which will inevitably lead to financial risks. 2.2 Enterprise internal financial relationship confusion, lack of scientific decision-making internal financial relationship confusion is also an important reason for China's enterprises to produce financial risks. In China, between enterprises and internal departments, between enterprises and superior enterprises, there are problems of unclear rights and responsibilities and chaotic management in fund management, use and benefit distribution, which leads to inefficient use of funds and serious capital loss, and cannot guarantee the safety and integrity of funds. 2.3 Internal financial monitoring mechanism is not perfect. Internal financial monitoring is a very important and unique system in enterprise financial management system. Only by establishing a relatively complete, systematic and powerful internal financial monitoring system can we ensure the efficient operation of the internal financial monitoring system of enterprises. However, most enterprises in China have not established internal financial monitoring mechanism. 2.4 The quality of corporate financial personnel is not high, and they lack risk awareness. People are a very important condition for the operation of any system, and high-quality financial personnel are a rare asset for enterprises. As far as the present situation is concerned, the financial managers of Chinese enterprises are influenced by the traditional planned economy and limited by the professional education level, and their comprehensive quality and professional quality need to be improved. Their financial management concepts and methods, especially their professional ethics and professional judgment ability, can not meet the requirements of the market economy environment to a greater extent. How to prevent and resolve financial risks in order to achieve financial management objectives is the focus of enterprise financial management. The author believes that the following work should be done to prevent financial risks of enterprises. 3. 1 to establish an enterprise financial risk identification system, we must first identify the financial risks of enterprises accurately and timely. Generally speaking, the following methods can be used to identify the financial risks of enterprises. 3. 1. 1 Establish an early warning system with "arman" model. This method is a financial early warning system based on multivariate discriminant model proposed by Edward arman in 1960s. 3. 1.2 Forecast and monitor with the deterioration of a single financial risk indicator. Usually, according to the nature of financial ratio indicators and the ability to comprehensively reflect the financial situation of enterprises, the ratios of financial risk early warning of enterprises mainly include: ① the ratio of total cash liabilities. It is equal to net operating cash flow divided by total liabilities. The higher the ratio, the stronger the ability of enterprises to bear debts. ② Current ratio. It is the ratio of current assets to current liabilities. It is generally believed that the current ratio should be above 2, but the minimum should not be lower than 1. ③ Net interest rate of assets. Equal to net profit divided by total assets. The higher the index, the better the efficiency of asset utilization, indicating that enterprises have achieved good results in increasing income and reducing expenditure. Otherwise, the situation is just the opposite. ④ Asset-liability ratio. It is the ratio of total liabilities to total assets. It is mainly used to measure the ability of enterprises to use liabilities for business activities and reflect the degree of protection of enterprises to creditors' capital investment. 3. 1.3 Prepare the cash flow budget. The preparation of enterprise cash flow budget is a particularly important part of financial management. As the object of corporate finance is cash and its flow, in the short term, whether an enterprise can survive depends not entirely on whether it is profitable, but on whether it has enough cash for various expenses. Accurate cash flow budget can provide early warning signals for enterprises and enable operators to take measures as soon as possible. 3.2 Establish an effective risk handling mechanism to enhance the ability to resist risks. In order to effectively prevent possible financial risks, enterprises must set out from the long-term interests and establish and improve the financial risk prevention mechanism. ① Some or all financial risks can be transferred to others in some way (such as participating in social insurance), and a sound enterprise risk transfer mechanism can be established. ② Through joint venture, diversified management and diversification of foreign investment among enterprises, the financial risks of enterprises can be dispersed and resolved in time, and the risk dispersion mechanism of enterprises can be established and improved. (3) When we choose the financial plan, we can comprehensively evaluate the possible financial risks of various plans, and establish and improve the risk avoidance mechanism on the premise of ensuring the realization of financial goals. (4) We can establish and improve the enterprise's risk fund and accumulation and distribution mechanism, timely and fully supplement the enterprise's own funds, enhance the enterprise's economic strength, and improve the enterprise's ability to resist financial risks. 3.3 Improve the risk management institutions and improve the internal control system. The complexity and diversity of enterprise financial risk management require enterprises to establish and improve corresponding organizations and implement timely and effective risk management. Only by organizing the financial risks of enterprises well can the financial risk management of enterprises get enough attention and run on a real scale. 3.4 Straighten out the internal financial relations of the enterprise and realize the unity of responsibility, right and benefit. In order to guard against financial risks, enterprises must also straighten out various internal financial relations. All departments should make clear their position, role, responsibility and corresponding power in enterprise financial management, so as to make clear the rights and responsibilities. In addition, in the distribution of benefits, enterprises should give consideration to the interests of all parties in order to mobilize the enthusiasm of all departments to participate in enterprise financial management and truly achieve the unity of responsibility, right and benefit.