A Study On The Risk Management Of Private Equity Investment In China

With the rapid development of Private Equity Fund, it has became influential force in the global capital market. In recent years, Chinese private equity market has gone through a prosperous development.Several well known private equity cases spring up in China, and private equity market has become a vigorous part of Chinese capital market, and private equity financing is one of today’s hot issues of financial innovation. However, the PE in China starts relatively late and is still in its infancy so that there are some practical problems and obstacles to development existing in actual operation processes of raising funds, selecting projects, follow-up management and exit mechanism, which greatly restricts the development of the PE in China. As a highly creative economic activity, its ideas, negotiating, signing and even withdraw from the entire process need to go through many areas. Almost every link has the possibility of failure, and the full process implies a great risk. Therefore, to broaden financing channels for enterprises, avoid the risk of private equity financing mode and achieve fine situation for the investors and financing enterprise, it is of great significance to strengthen the enterprise risk management research in the private equity model.To promote private equity investment in the further development in China, it is necessary to study the private equity investment risk, and risk assessment and avoidance method of depth profiling, based on the operational phase. This paper focuses on the risk categories and their assessment and control methods of the private equity investment. We start from the status quo analysis of corporate private equity investment, and then first from the perspective of both macroscopic and microscopic views, apply risk management procedures and methods on private equity investment risks which includes macro-risk such as policies and regulatory risk, market risk,economic risk and micro risk such as risk of moral hazard, operational risk and credit risk.Then systematically analysis the compositions of the risk and the adverse effects in the entire private equity investment from the three stage of choose, management, and exit, on the basis of risk identification, use risk identification methods to identify the risk in the process of private equity financing, draw the corresponding private equity investment evaluation index system weight. Based on the disciplines and characteristics of private equity financing model, we provide appropriate risk aversion and control methods, and put forward risk management system to reduce and prevent the risk of private equity financing.