1. Chapter 7 financial risk management
Brief contents：
Definition of financial risk
Evaluation of financial risk
Control of financial risk
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2. Definition of financial risk
Definition, features and types of risk
Components of corporate business risk
Influencing factors and types of financial risk
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3. Definition, features and types of risk
1.Risk refers to the possibility that the result of business activities varies from anticipated objectives.
2.Types of risk include:
（1）natural risk and artificial Risk
（2）wealth risk, human risk, responsibility risk and credit risk
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4. Definition, features and types of risk
2. Types of risk include:
（3）controllable risk and uncontrollable risk
（4）objective risk and subjective cost
（5）macro risk and micro risk
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5. Definition, features and types of risk
3.features of risk
（1）widely influences
（2）uncertainty
（3）disadvantageousness
（4）risk return trade-off
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6. Components of corporate business risk
1.resources flow risk
2.information flow risk
3.funds flow risk
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7. Influencing factors and types of financial risk
1.uncontrollable risk
2.controllable risk
Types：
1.financing risk
2.investment risk
3.earnings realization and distribution risk
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8. Evaluation of financial risk
Procedure of financial risk evaluation
Basic methods of financial risk identification
Methods of financial risk evaluation
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9. Procedure of financial risk evaluation
1.Risk identification
2.Risk evaluation
3.Risk trade-off
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10. 1. Risk identification
To identify where the risks exist,why the risk exists, and the extent of its influences.
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11. 2. Risk evaluation
The test and estimation of risk under certain financial conditions, in order to assess the risk level of the financial activities and thus provide necessary information and base for financial decision-making.
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12. 3. Risk trade-off
On the basis of risk identification and risk evaluation, analyze the risk-return relation, and compare the return with costs to control the risk, to determine the corporation’s risk attitudes and its risk control strategies.
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13. Basic methods of risk identification
1.Decomposition method
2.Experts investigation method
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14. 1. Decomposition method
Decompose a complicated system into several parts or subsystems, and analyze them one by one, to summarize all the varieties of risks influencing the system operations. This is a basic method to identify risk.
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15. 2. Expert investigation method
（1）brain storm method
（2）Delphy method
（3）on-spot investigation method
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16. Methods of financial risk evaluation
1.Probability analysis method
2.Financial ratios analysis method
3.A combined application of risk evaluation methods
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17. Control of financial risk
Definition of financial risk control
Objectives of financial risk control
Basic methods of financial risk control
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18. Definition of financial risk control
Risk control is the core of risk management, including：
1.risk decision
2.risk prevention
3.risk treatment
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19. 1. Risk decision
Risk decision refers to the choice of risk project and the decision on how much risk the corporation is willing to take, on the basis of risk evaluation.
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20. 2. Prevention of risk
Prevention of risk refers to taking ex-anti measures to reduce possibility of loss by reducing risk, under given risk conditions.
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21. 3. Treatment of risk
Treatment of risk refers to taking corresponding measures to increase the anti-risk ability, reduce negative influences on corporation by loss and guarantee the continuous operation of the corporation.
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22. Objective of financial risk control
The objective of financial risk control is to stabilize corporation’s future cash flow.
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23. Basic methods of financial risk control
1.Methods of risk prevention
2.Methods of risk treatment
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24. 1. Methods of risk prevention
（1）Risk avoidance method
（2）Risk reduction method
（3）Risk diversification method
（4）Risk transfer method
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25. 2. Methods of risk treatment
（1）Before the loss occurs, establish provisions of risk and loss, in the form of prepayment or others.
（2）When the loss occurs, take measures to stop loss.
（3）After the loss occurs,write off the loss in time.
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26. Thank You !
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