Enterprise Financial Risk Management

Financial risk is a special kind of risk, because it can not be controlled by the enterprises and it is companied with the operations no matter you want or not. When China enters into the World Trade Organization and our government carries out the market economic policy, the corporations will face more and more complex environment, both outside and inside. Because of these uncertain factors, how to manage financial risk comes to be the most important problem to every enterprise. This paper composed of five parts mainly deals with why and how the enterprises manage the financial risk. Part Ⅰcovers the accepted theory of financial risk. Its theme is an understanding of the definition of the risk and the financial risk. Part Ⅱ includes three topics which are the importance of financial risk management, inside and outside environments of corporations and the theoretical frame work of financial risk management. At the end of this part the author introduces the basic steps of managing the financial risk. Although there are many methods to measure financial risk, I prefer to the advice method. Part Ⅲ emphasizes the reason why that method plays an important role in the financial risk analysis. Part Ⅳ covers applied theory. It includes some methods to measure the financial risk such as theory of probability, mathematical statistics, regression analysis and other methods, etc. The last part expounds the necessity and urgency of the establishment of financial of financial early-warning system in according to the current situation of China enterprises. It also helps to set up short-term financial early-warning system in the view of cash flow control and long-term financial early-warning system in the view of comprehensive estimation of the profitability and solvency.