Study On The Framework And Practice Of ERM In Chinese Securities Companies

The securities market is a highly risky market. Securities companies have always been facing risks as the important medium and participant in the financial market. Based on the past experience of domestic and foreign securities companies, we have observed that the inadequate risk control will not only dampen the survival of the enterprise itself, but will also jeopardize the overall capital markets and financial systems. A case in point is the U.S. subprime mortgage crisis which led to the fiasco of five investment banks. This leads us to believe that the Chinese securities market will become increasingly risky when the market evolves and matures. The maturation of the market is evidenced by the expansion of the market, the emergence of the product types and the complexity of the measuring systems. Therefore, it is important to study international advanced risk management theories and experiences, to analyze the current situation of the risk management systems of the Chinese securities companies, to explore enterprise risk management systems which are applicable to the Chinese securities companies.This essay is based on the study results of the international and domestic risk management systems and experiences. Its main topic is the complete study of risk management systems of the securities companies. Emphasizing on the enterprise risk management framework and the comprehensive examples of DW Securities Company, the author conducts the study of the enterprise risk management theories and applications in the securities companies. First, the essay introduces the theoretical basis of the risk management system. The essay begins with the cause and formation of the securities company's risk management system, further explains the development and evolution of the system and analyzes the background of the securities company's risk management system. Second, the essay compares the current status of risk management systems, summarizes experiences and lessons learned, identify risk management gaps between the domestic and international securities companies under different eras and various regulatory and technical environments. Third, this essay describes the framework, implementation factors and corresponding effectiveness of the enterprise risk management systems. Forth, using DW Securities Company as an example, the essay has a detailed discussion of the enterprise risk management system under the premise of how to implement and apply and the evaluation of its associated results. Finally, the essay generates the conclusion of the study, points out the areas not covered and future research interests.This essay is a good guidance and future reference for domestic securities company's risk management practices.