The Risk Management Of P2P Network Lending Platform Based On Operating Process

With the sustained economic development, the increasingly robust legal system and more developed science and technology, the business of traditional financial industry expanded gradually. Their services tended to improve and a series of financial innovations had followed. Traditional financial industry played a role which linked all aspects of the national economy. It made contributes to the overall economic environment and kept human society stable and developed. But the micro-lending business which the traditional financial institutions provided for the general population has been unable to get a good development. Because the loan amount of ordinary people was much smaller, while the corresponding risk management work was more difficult to carry out. This problem was partly solved by private lending and small loan companies. Private lending and small loan companies partially filled the part of the market which the banks and other traditional financial institutions ignored. Due to the lack of supervision and inadequate regained money mechanisms, the actual effect of private lending and small loan companies were disappointed. There was not an easy way to get the private loan in society.Not only in China, had this problem appeared world widely. To solve this problem, in 1983 Dr. Yunus created the Grameen Bank in Bangladesh. It raised funds in country and provided the unsecured microfinance services to the poor in need. It not only brought the profits to the bank, but also helped thousands of poor people out of poverty, especially women. It made a win-win between the bank and the poor. The success of Grameen Bank was a classic representative that the private lending overcame its own shortcoming. The relevant researchers generally believed that this was the prototype of P2P loans.With the continuous development of information technology, the network came into all aspects of people’s lives. It narrowed the distance between each other and achieved the concept of "global village". It deeply impacted all aspects of society as a whole. As an ancient financial intermediation way, private lending had kept up with the pace of the times. It combined with the network, and a large number of P2P network loan platform emerged. Zopa, the world’s first network lending platform, was founded in Britain in 2005. And Prosper was founded in the United States in 2006.Chinese network platforms had developed rapidly, and there were several platforms were founded one by one. For example:Renren Loan, Paipai Loan, Yixin Loan and Lujin Loan. China also joined the wave of financial innovation.Compared to the Western world in developed countries, Chinese P2P network lending industry, started lately. But the size of the Chinese market came from behind and developed faster. In 2013 the scale of Chinese network lending market reached 92.76 billion yuan. And it had become the world’s largest P2P network lending market. In 2014, Chinese network lending market came into the outbreak. The total annual volume was more than 500 billion yuan, which is more than ten times the amount of American market. Chinese P2P network lending market would continue to accelerate expansion in the next five years. And the total deal size was expected to more than 5 trillion yuan. There would be several commercial financial giants, and China would form the world’s largest network financial market. However, along with the explosive growth in network lending market, a series of risk issues also would be exposed. As of February 2016, the cumulative number of Chinese P2P network lending problem platform reached 1425. Not long ago the collapse of "E Rent Treasure", "Zhongjin Clique" and other large-scale P2P platform pushed the entire industry to the public concern.The great development prospects and current risk management issues of P2P network lending industry status quo caused widespread concern of the author. There are several kinds of methods for risk management. And the operating process is the core of the company management, so I selected the operating process as an entry point for the systematic approach of risk management. I took a research in depth for the risk management status quo of Y platform operating process and identified the existent risks. Then I took the analysis and assessment of the risks. Finally, I proposed the appropriate solutions to make sure that the Y platform could have a healthful development.The paper is written with five chapters, the details are as follows. The first chapter introduced the research background, research significance, research status and research innovation. The second chapter describes the theoretical basis of this paper, including a total of four sections. The first section introduces the basic theory of risk management; the second section introduced the special requirements of risk management for the net loan platforms; the third section described three types of net loan platforms which were selected; the fourth section was a summary of this chapter. The third chapter introduced and analyzed the implemented background of Y Platform, it contained two sections. The first section described the basic situation, business models and organizational structure of Y platform; the second section described its current method of key risk indicators, and analyzed the existent problems. The fourth chapter proposed a risk management approach of "Five-Dimensional model". It included six sections. The first section analyzed the systematic design of risk management objectives and selection of the model. Then, it introduced the methodology and three steps for its specific application of Y platform. It also analyzed the advantages of "Five-Dimensional model". The fifth chapter was the conclusion of this paper, and it proposed the future research directions.There are two sides of innovation of this paper. On the one hand, this paper has a breakdown of the risks of Y platform. It combined with business process and drew a risk-tree of Y platform. And it filled the gaps in the research with the risk-tree of net loan companies. On the other hand, this paper started from the operating process which is the core of enterprise management. It proposed the establishment of systematic approach to risk management, which contained target dimension, risk dimension, business dimension, organizational dimension and control dimension. "Five-Dimension model" achieved correspondent relationship between the specific positions and five dimensions which contained target dimension, risk dimension, business dimension, organizational dimension and control dimension. It also established closely linked between multiple departments and business process. Besides, it formed a status of flexible management and easily adjustment in practical work. I hoped the "Five-Dimension model" might provide reference significance for other net loan companies.