Financial Risk and Management Paper 1 Analysis of Internet Financial Risk Management Strategy
Abstract: With the development of Internet technology, Internet finance has become an inevitable trend of contemporary social development. With the rapid development of internet finance, the requirements for risk management are getting higher and higher. Risk is an unavoidable problem in the development of financial industry. Under the background of Internet, it is of great significance to do a good job in financial risk management. This paper analyzes the risk management strategy of Internet finance.
Keywords: Internet finance; Risk management; tactics
Introduction to 0
In China's financial industry, the emergence of the Internet not only promotes the development of the financial industry, but also increases financial risks. In recent years, there have been many frauds using the Internet in our society, which have had a great impact on our contemporary society. In order to promote the stable development of China's modern social economy, our government and relevant departments must strengthen financial risk management to ensure the healthy development of China's financial market economy.
1 Overview of Internet Finance
Internet finance refers to a new financial business model in which traditional financial institutions and Internet enterprises use Internet technology and information communication technology to realize financing, investment payment and information intermediary services. It is a brand-new financial business model. In internet finance, it is not a simple combination of internet and finance, but the financial business is realized through internet technology. With the development of information and communication technology and the Internet, people rely more and more on the Internet, and the openness of the Internet makes Internet finance risky. Therefore, risk management is of great significance.
2 the importance of Internet financial risk management
As the inevitable result of the development of modern society, Internet finance greatly facilitates people's needs in life and work. With the development of Internet technology, Internet finance has extended to self-service transfer, third-party payment, online financial e-commerce and other modes. In this society with rapid economic development, Internet finance is playing an increasingly important role. People conduct financial activities through the Internet, involving more and more money, which makes China's financial market increasingly prosperous. However, as a non-tool, the Internet itself is open. When people use internet finance, they need to bear greater internet financial risks, such as competition risk, reputation risk, business risk and so on. Once the risk occurs, it will not only affect the development of the financial market, but also affect the social and economic development of China. Faced with this increasingly competitive market environment, Internet finance must pay attention to risk management if it wants to develop better. Only by doing a good job in risk management can internet finance develop healthily and better serve social development [1].
3 the risks of Internet finance
(A) network security risks
Internet finance is based on the Internet. People need to rely on computers or mobile devices to complete financial activities. However, the Internet is open. In this era of continuous development of technology, when people use internet finance, they are easily attacked by network hackers. If the network system is attacked, it will cause important information leakage and serious economic losses.
Competitive risk
The emergence of internet finance has expanded the financial transaction mode, and more and more financial products have appeared in front of people. In the internet financial environment, the prices of traditional banks in China are facing greater competitive risks. Compared with internet finance, the business of traditional banks will be greatly impacted.
Reputation risk
Reputation risk refers to the failure of the subjects involved in trading activities to perform their corresponding duties within the agreed time limit. Internet finance realizes transactions through the Internet, which is virtual. For enterprises, when applying for loans from banks, they will fabricate their own financial information. When repaying loans, enterprises often take the means of poor management and never return them within the specified date. In addition, in the third-party payment platform in e-commerce, common reputation risks include seller reputation risk, buyer reputation risk and third-party payment platform reputation risk. If the buyer pays the money but fails to deliver the goods on time, this is a typical seller's lack of credibility.
legal risk
Despite the rapid development of internet finance, China's legislation on internet finance is not clear. The existing laws and regulations are only aimed at traditional financial business, but not suitable for Internet finance, which makes people controversial in the market when developing Internet finance business, and even leads to online fraud, which is not conducive to the healthy development of Internet finance.
4. Strengthen the Internet financial risk management strategy.
(A) increase the application of Internet technology
As the development trend of modern society in China, Internet finance is increasingly dependent on people. As an important factor threatening the healthy development of internet finance, network security risk must attach importance to the application of internet technology to promote the healthy development of internet finance [2]. Such as firewall technology, encryption technology and identity authentication technology. , which can effectively protect people's safety in the process of Internet financial activities.
(B) change the business philosophy and mode of operation
With the emergence of Internet finance, traditional banks in China are facing opportunities and challenges. Facing the opportunity, banks should seize the opportunity to provide guarantee for their own development. In the face of challenges, banks should keep a clear head, deeply understand the disadvantages of internet finance, and be good at fostering strengths and avoiding weaknesses. In the process of bank development, we should actively change the management mode and management concept, strengthen the combination of assets and liabilities, and optimize the bank's asset structure. At the same time, in the interest rate market environment, reduce financing costs, improve debt controllability and promote the development of financial business [3].
(C) to strengthen the construction of social credit system
Internet finance is a part of China's social economy. Strengthening the construction of social credit system and establishing a perfect social credit system can effectively reduce financial risks and promote the healthy development of the financial industry. Our government and relevant departments must improve the credit evaluation system of enterprises and individuals and make objective credit evaluation of enterprises and individuals; Secondly, improve Internet identity authentication to ensure the transparency of Internet finance [4].
Improve financial laws and regulations.
In the increasingly competitive market environment in this country, the development of Internet finance needs the protection and reliance of laws, and only a sound legal system can promote the development of China's financial industry. First of all, the China Municipal Government and relevant departments should introduce the corresponding legal system of financial supervision as soon as possible to ensure that there are laws to follow in financial supervision. Secondly, it is necessary to improve financial legislation, make laws effectively applicable to financial and economic activities, standardize financial arbitrage, and ensure the safety of funds. In addition, financial regulators can also use some existing systems to establish effective feedback mechanisms, improve their sensitivity to financial activities, gradually reduce existing financial controls, actively promote the process of financial liberalization under the premise of ensuring China's financial stability, and realize the free flow of funds within and between markets, so that market mechanisms can really play a role and reduce the overall market operating costs [5].
(V) Raising awareness of risk management With the development of the Internet, China's financial industry has ushered in a new period of development, and there are more and more financial products based on the Internet. Although the emergence of internet finance has enlivened the financial market, there are still great risks. Therefore, for individuals, when using the Internet to carry out financial business, they should fully realize the risks of Internet finance, do a good job in risk management and reduce unnecessary losses. For banks, we must attach importance to risk management. On the road of developing credit business, we should constantly improve our understanding of risk management, always maintain a high degree of risk awareness, improve the internal risk management system of banks, and then improve the risk management awareness of employees, thus promoting the healthy development of bank credit business [6].
(6) Strengthen the training of professional financial talents.
Credit business plays an irreplaceable role in banks. However, with the intensification of market competition, the risk of bank credit business is also increasing. In order to ensure the stable development of bank credit business, it is of great significance to increase the training of professional internal control risk managers. Financial managers should not only have good financial professional knowledge, financial management knowledge and superb communication skills, but also have good psychological quality, be able to maintain a good relationship between banks and enterprises in communication with customers, and have super risk awareness and risk management ability. Within the bank, the bank must increase the training of professional financial talents, especially CFP and AFP talents; Secondly, at the same time, we should liberalize policies, broaden the channels of talent recruitment, introduce high-quality talents at home and abroad, and pay attention to the cultivation and training of professional skills and knowledge. In addition, in order to stabilize talents, commercial banks should provide good policy treatment and income treatment for professionals, thus providing guarantee for the development of banks.
5 conclusion
With the development of internet finance, on the one hand, it promotes the social and economic development of our country, on the other hand, it also increases financial risks. Faced with this increasingly competitive market environment, China's financial industry must do a good job in risk management if it wants to develop steadily. Only by doing a good job in risk management can we better guard against risk laws, reduce the occurrence of risks, ensure the safety of financial activities, and then promote the healthy development of China's social economy.
References:
[1] Wu Peng. Research on the Coping Strategies of Commercial Banks under the Background of Internet Finance [D]. Graduate School of Chinese Academy of Social Sciences, 20 14.
[2] Kang Xinhua. Research on the influence of Internet finance on commercial banks and its enlightenment [D]. South China University of Technology, 20 14.
[3] Wu Zhao. Research on the development strategy of small and medium-sized commercial banks under the background of internet finance business model [D]. Southwestern University of Finance and Economics, 20 14.
[4] Wang. Research on Internet financial risk and risk management [D]. Henan University, 20 14.
[5] Wang Yaqi. Research on the development strategy of Internet finance and commercial banks [D]. Shandong University, 20 14.
[6] Tang. Internet financial risk factors and prevention mechanism [D]. Zhejiang University of Finance and Economics, 20 15.
Financial Risk and Management (Ⅱ) On Financial Risk Management System
Abstract: At present, China's economic level has entered a stage of rapid development, and China's financial market is also facing many new opportunities and challenges. Financial risk management has gradually become the focus of people's attention, and the corresponding financial risk management system should also be further recognized and valued. This paper discusses the connotation of financial risk management, the connotation and necessity of financial risk management system, and systematically introduces the effective steps of establishing financial risk management system.
[Keywords:] financial risk; Financial risk management system; Establishment step
1 the connotation of financial risk management
Financial risk is accompanied by financial activities, which mainly refers to the uncertainty of assets and income of capital market participants in financial activities, such as the uncertainty or fluctuation of assets or liabilities, future income and other values. [ 1]
Accordingly, financial risk management is for-profit organizations and non-profit organizations to measure and control the gains and losses between risks and benefits. One of the tasks of financial risk management is to effectively judge the possibility and degree of such fluctuations.
2 the connotation of financial risk management system
Usually, our so-called risk management system is to establish a series of effective mechanisms and means for different types of risks, and guide the market through the adjustment of means, so as to achieve the purpose of standardizing the market. In the face of the complex and uncontrollable financial market, investors' behaviors and purposes are very different, and it is difficult to investigate, monitor and grasp investors' investment behavior. A good financial risk management system is to guide the market on the premise of ensuring its steady operation, and to achieve the effect of controlling risks and guiding the market on the basis of giving full play to the role of the market.
3 the necessity of financial risk management system
With the deepening of economic globalization and financial integration, the financial risks faced by China's financial market are increasingly complex and diversified, and financial risk management has become increasingly important. Financial risks have a great negative impact on financial markets, national economy and even national security. Internationally, many financial institutions and organizations, large enterprises, governments and financial supervision departments are actively exploring financial risk management methods and technologies-financial risk management system, in order to effectively identify, accurately measure and strictly control financial risks.
Four steps of establishing financial risk management system
4. 1 Establish the objectives of financial risk management
4. 1. 1 financial risk management objectives
The goal of financial risk management is to obtain the maximum security with the minimum risk management cost, so as to maximize the economic unit value.
Claremont, a modern risk scholar, believes that the goal of risk management is to preserve the organization's viability and the ability to provide products and services to customers, thus protecting the company's human and material resources and ensuring the comprehensive profitability of enterprises. Harrington believes that the goal of risk management is to maximize the enterprise value by minimizing the risk cost. [2]
4. 1.2 Aspects included in financial risk management objectives
(1) The survival and development of enterprises, organizations and members. This is the basic goal of financial risk management. The risk management plan should enable enterprises and organizations to achieve sustainable development in the face of losses and survive in the face of accidents and risks. In order to achieve this goal, it means that through the operation of financial risk management, individuals, families, economic units and even society are protected from the heavy losses caused by risks.
(2) Ensure the normal operation of the enterprise. The occurrence of risk accidents will bring people different degrees of blows and losses, further affect or break the normal state of enterprises and people's normal life order, and may even make the organization desperate. Implementing risk management can help enterprises to resume normal operation quickly. At the same time, it will be restored to the level before the loss as soon as possible, so that enterprises can achieve stable income growth as soon as possible.
(3) Relieve negative emotions and provide a sense of security. On the one hand, the occurrence of risk accidents will lead to material losses, on the other hand, it will also bring serious negative emotions to people. Therefore, it is also an important goal of financial risk management to relieve people's psychological pressure caused by accidents through psychological counseling.
4.2 Financial Risk Assessment
Financial risk evaluation refers to the evaluation of financial risk identification, financial risk measurement, selection of various tools to deal with risks and financial risk management countermeasures.
4.2. 1 financial risk identification
Financial risk identification refers to the systematic distinction and comprehensive analysis of recessive and dominant risks by using various methods on the basis of field investigation and research.
Financial risk measurement
This refers to the prediction and estimation of the probability or degree of financial risk and the risk range, as well as the quantitative analysis of the probability and influence of different degrees of risk.
4.2.3 Selection of financial risk management countermeasures
This refers to optimizing the allocation of various financial risk management tools on the basis of the first two stages and according to the objectives of financial risk management, and putting forward targeted suggestions. This is the only way for financial risk assessment.
Risk assessment method
(1) Cost-volume-profit analysis method. Cost-volume-profit analysis, namely output-cost-profit analysis, is also called break-even analysis or break-even analysis. It refers to analyzing the relationship between production and sales, selling price, variable cost, fixed cost and profit of related products, so as to guide enterprises to choose products that produce the most at the lowest cost and make business decisions that maximize profits. [3]
Therefore, what kind of output level should an enterprise achieve to make up for the total cost of the enterprise, that is, break even. This is the break-even point analysis. It can be expressed as BE=FC/(SP-VC). Among them, BE represents the business volume of breakeven point; FC stands for fixed cost; SP stands for unit product price; VC stands for variable cost per unit product. If the business volume of the enterprise is lower than this point, there will be losses; On the other hand, it is profitable.
The activity rate at the break-even point indicates the minimum activity level required for an enterprise to achieve profitability. The formula is: the operating rate of breakeven point = the business volume of breakeven point/the business volume of normal startup.
Margin of safety: refers to the difference between actual or expected sales volume and guaranteed business volume. Economic significance means that the enterprise will not lose money if the sales volume drops. The formula is as follows:
Safety production business volume = estimated business volume-breakeven point business volume
Margin of safety = (margin of safety/actual business volume)? 100%
Sales profit rate = sales profit/sales revenue = safety profit rate * contribution gross profit rate.
It shows that only the contribution of the margin of safety (that is, the business volume beyond the critical point of profit and loss) constitutes the profit of the enterprise.
(2) Sensitivity analysis. Sensitivity analysis method refers to an uncertainty research method to find out the sensitive factors that have great influence on the benefit index of investment projects from many uncertain factors, analyze and estimate their influence and sensitivity on the benefit index of projects, and then judge the risk-taking ability of projects. ① Determine the sensitivity analysis index. The object of sensitivity analysis is the specific technical scheme and its economic benefits. Therefore, some economic benefit evaluation indexes of the scheme, such as net present value, investment return rate and investment payback period, can be used as sensitivity analysis indexes. ② Calculate the target value of the technical scheme. Generally, the numerical value of economic benefit evaluation index in normal state is taken as the target value. ③ Select uncertain factors. In the sensitivity analysis, the factors that may change in the scheme and have great influence on the benefit target value should be selected according to the actual situation. For example: changes in output scale, changes in product prices, changes in investment, etc. [4]④ Calculate the influence degree of uncertain factors on analysis indicators. When completing the single factor sensitivity analysis, it is necessary to change one of the uncertain factors while keeping the other factors unchanged. By analogy, we can get the influence degree of each uncertain factor itself on the target value of the scheme benefit index. ⑤ Find out the sensitive factors, actively analyze and deal with them, and improve the anti-risk ability of the technical scheme.
4.3 Risk control
Controlling and handling financial risks is the way to solve financial risks. Today, with the deepening of international exchanges and cooperation, we should actively learn from the advanced experience of international financial risk management and the paradigm and standards of the New Basel Accord, and implement eight measures of financial risk management in China's financial industry:
(1) risk prediction and control: financial institutions should predict the risks of short-term lending and long-term lending, and have timely and effective solutions in the face of emergencies.
(2) Cash-out ability: Under the premise of not losing money, financial institutions must maintain or increase their ability to convert assets into cash.
(3) Decentralization: Financial institutions should pay attention to the diversification of capital sources, loans and investment types to prevent excessive dependence on a single capital source or investment type.
(4) Operational control: Financial institutions need to strictly control the risky trading operations and cancel the transactions of partners with extremely low reputation in time to minimize losses.
(5) Transparency: Financial institutions should avoid their own risks through communication and publicity, and build the trust and confidence of investors.
(6) Asset quality: Adequate and high-quality capital preparation will improve its income level, and at the same time, it is necessary to ensure sufficient capital to cope with unknown risks.
(7) Financial informatization: This is the general trend of financial development. Financial institutions reduce transaction costs and accelerate financial innovation through the deepening of financial informatization.
(8) Intellectual property rights of financial technology: The government and financial institutions should attach importance to protecting intellectual property rights of financial technology, increase capital investment and research and development, and ensure financial security.
5 conclusion
Gold is not enough, no one is perfect. Similarly, with the continuous development and progress of the market, the financial risk management system also needs to be revised and improved. We should also treat its establishment with a rational attitude. Different from the construction of other systems, the financial risk management system needs to accumulate experience continuously to achieve immediate results. In a word, all indicators to measure risks are only methods to assist risk control, and the establishment of a scientific and effective risk management system depends on the research and understanding of risks and the whole market, so as to effectively control market fluctuations in the shortest time and maintain the stability of the whole system.
References:
[1] Shi Chunkui. On the Theory of Financial Risk Management [J]. Journal of Hotan Teachers College (Chinese Comprehensive Edition), 2007(3).
[2] (America) Scott E Harrington, Gregory R Niehaus. Risk Management and Insurance [M]. Beijing: Tsinghua University Publishing House, 200 1.
[3] Frederick? Mishkin. Monetary finance [M]. The ninth edition. Scene, translation. Beijing: Renmin University of China Press, 20 1 1.
[4] Wang Qing. Research on financial risk measurement method and its application [D]. Taiyuan: Shanxi University of Finance and Economics, 20 13.
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