The Risk Management Research Of Securities Companies In Financial Innovation

After more than two decades of development, the mechanisms of the Chinese stock market have become more mature. As essential financial intermediaries, securities companies play an important role in the market. With the innovation of financial industry, the competition among securities companies is extraordinarily intensive, and the operating risks on securities companies are much more complex. Therefore, a transformation from traditional compliance management to enterprise-wide risk management (EWRM) is imperative.This paper systematically reviews the developmental history of securities companies, deeply analyzing their business types in the backdrop of innovation and discussing main risks in securities companies with the correspondent risk management methods. Due to the particular role and extensive business scopes of securities companies, risk management capability has become the core competitiveness; in fact, it is no less significant than business capability. As a result, risk management is extremely critical for securities companies to thrive.Different types of risks must be tackled by different methods. It is necessary to utilize stress testing that can quantify risk to evaluate and control it accurately. The paper gives a detailed explanation of stress testing and takes XX Security Company as an example. According to the company’s real operation, the paper introduces theories and applications of integrated testing, specialized testing, and reverse testing, accompanied by the result of each test and a thorough analysis of problems that need to be solved when using stress testing. It makes some beneficial explorations for utilization of stress testing in securities companies’ risk management.Stress testing can assess risk tolerance of securities companies, which reflects the company’s performance under extreme environment. The paper takes stress testing based on XX Security Company, covering almost its entire business. The result of stress testing offers decision-making suggestions for the company’s strategies and operations.