A Tentative Case Study On Financial Risk Control And Management Of Shipping Company

Enterprise financial risk refers to the uncertainties from interaction and feedback during the communication with external system which may cause losses for the company especially the high asset-liability ratio and strained cash flow etc. In this aspect financial risk means unstability and uncertainty. Seen by industry, the financial risk of shipping companies is a double feature of passive and active risk, i.e., shipping companies could confront with external financial risks by the changes in the economic situation and trade volume, and internal financial risks by the company itself investment and expansion. China COSCO, a listed company both in A and H share markets, well embodies the two kinds of financial risks mentioned above. How to mitigate and control the financial risk, and achieve a sound and healthy financial status has become an urgent matter for the sustainable development of company.The paper aims to analyze and research on how to control the financial risk of China COSCO based on related literature review. The structure follows the classic paradigm: to analyze the formation, characteristics and causes of financial risk, then establish financial risk analysis framework based on financial data and non-financial data; to analyze performance characteristics, influence mechanism and evaluation method of financial risk using methodology of factor analysis and grey correlation based on quantitative and qualitative study; to provide solutions for the risk control from the perspective of industry and company.The main findings include: the financial risk of the China COSCO reflects in the financial figures like P&L and non-financial figures like freight rates and shipping volume. The source of financial risks for China COSCO could be traced back to the lower rate and descending demand, which is caused by the gloomy global shipping market and the ineffective measures the company tried to cope with the downturn. The risk evaluation indicates its cyclical feature which made the risk high after the year 2011 with high debt ratio and tighten cash flow.