The Financial Crisis Warning System Based On System Dynamics

Financial crisis of enterprise is a worldwide problem. The key point of avoid financialcrisis is identifying the financial crisis and warning it in advance. There are many methods towarning financial crisis, but mere are based on the study of inner mechanism of the financialcrisis. Hence, this paper will build a financial crisis system based on the inner mechanism ofthe financial crisis.This paper forms a theory of the financial crisis that classifies four statuses of thedevelopment of an enterprise. These statuses are “Robust”,“Beside robust”,“Must beintervened” and “Bankrupt”. This paper thinks that financial crisis is the consequence ofincorrect managing behavior and that an enterprise that executes correct managing behaviorcontinuously won’t face financial crisis. Hence, this paper holds the opinion that an enterprisethat does not execute correct managing behavior is in financial crisis. The key point ofidentifying financial crisis and coping with financial crisis is finding the perfect managingbehavior. Provided that the enterprise is not on the status of “Bankrupt”, the perfect managingbehavior will transfer the enterprise to the status of “Robust”. However, cognitive limitationsbring profound influence and the enterprise can only make decisions based on theinformations that have been gained. This paper will study the method that identifying andcopying with financial crisis in the condition that partial information is unknown, and explorethe method that how to find the perfect managing behavior.Based on the theory of the financial crisis, this paper constructs a model by the systemdynamics. This model takes the data of external environment, internal environment, resourcesand managing behavior of a manufacturing enterprise for inputs and takes the status ofvariables for outputs. After input the data of external environment, internal environment,resources and managing behavior of a manufacturing enterprise, the model is simulated toverify the feasibility of the theory of financial crisis and the effectiveness of the model. Theconclusion shows that the theory of financial crisis is feasible and this model realizes thefunctions as follow: judging the status of an enterprise, decision support and finding theperfect managing behavior.