Risk Analysis And Decision-making Of Project Investment

With the fast development of merchandize economy and social subdivision caused by mass production, production chain has been prolonged, thus a small change in the process of production may cause intensive economic shock. The boosting of new technological revolution, frequent improvement of new products and rapid change of social demand structure make our social economic environment more complicated, and more uncertainty factors in economic activities. A lot of high risk factors exist in the process of enterprise investment, and the investment activities of enterprise are usually risky. The business investment involves mainly risk decision-making, and the process of decision-making is the process of the comparison between opportunities and risks by decision-maker. Whether decision-makers have a right risk attitude, capability and skills of dealing with risks is critical to the investment success. However, in our country many enterprise decision-makers are lack of knowledge in investment risks and they ignore those risks and pay little attention to this problem, investment decision-making mistakes happen frequently. Those mistakes bring losses of risk and opportunity to our businesses. Therefore, it is necessary to study investment risk of our businesses. This article adopt the method of combining theory and practice, that is, use the theories of several books I have learned ("Enterprise Finance" " Technology Economics", "Economics" etc.) and the real situation of my company project, " build 600,000 sets of new all-steel weight radial tires ", to discuss project investment risk issues.Investment is the action and process that investor put capital in certain areas and receive entity capital or finance capital income for making profits. Investment decision-making is the specific usage of decision-making theory. To achieve the goal of efficiency, investor use decision-making principles and methods to analyze objective and subjective conditions systematically, and choose the best solution from those available. Risk is the possibility of losses caused by uncertainty of subjective events and the limitation of human in realizing and dealing with those events. As for an investment project, its investment cycle is usually long, the invested capital is huge, and it takes years to profit from the investment. During this period, many uncertain factors may influence the predicted effect of the investment decision, and bring risk to the invested project. This require us to make correct prediction of the risk factors before any investment decision-making and take measures to those general predictedrisks. The decision-makers should have scientific knowledge of risk structure and its degree. Project investment decisions are mostly risk decisions. Risk decision-making is the choice between two or more solutions under the circumstance of many uncertain factors. Since uncertain factors exist, the profit loss in the process of action is unforeseeable. Risk decision-making can be divided into two types: Probability decision-making and uncertainty decision-making.