Study On Integrated Risk Management Of M&A Of China’s Airlines Based On Entropy

Mergers & Acquisitions(M&A) is an important means for Chinese airlines to deal with the increasingly fierce competition of air transport market worldwide. M & A activity is a systematic project which contains a variety of risks. Improper implementation easily leads to the failure of mergers and acquisitions. Therefore, during the acquisition of the airlines the management should be fully aware of the various risks that may arise in M & A activity, and take actions accordingly.There are many limitations for traditional risk management. First, it copes with all departments and corporate risk management activities separately ignoring the interaction between the internal systems of various risks. Secondly, it defines risk management within the scope of their daily affairs and a single top-down management. Secondly, the purpose of the enterprise integrated risk management is to enable that enterprises of all risk management activities are consistent with the corporate strategy development goals. So the development of integrated risk management objectives must be carried out under the guidance of corporate strategy. Enterprise risk management, integrated fully into account the differences within the enterprise strategy, management objectives can be based on different strategies for different risks.Firstly, this paper studies risk management under the framework of M&A strategy, with the introduction of integrated risk management theory. Then an integrated risk management framework model is built accordingly. The object of the study is regarded as an organic whole consisted of many interrelated elements. Secondly, considering the risks faced by the airlines merger and acquisition, the paper divided them into such four levels as trading, decision-making, market and integration, the establishment of the acquisition risk index system, and established an entropy weight decision model to assess the impact on the business risk index. Then the importance of the risks was sorted to key risks, secondary key risks and least important risks. In the end adopting different management responses for different levels of risk to maximize the overall interests of the enterprise was suggested.Through the use of integrated risk management, the actual cost can be controlled within budget to achieve a cost-benefit maximization principle. In this method, the degree of impact of the risks associated with successful merger and acquisition was sorted and controlled comprehensively. Then dealing with key risks, monitoring secondary level risks was suggested accordingly to achieve a balance of losses and earnings. All facts indicate a scientific method. By using this method, it is possible to avoid the risk of mergers and acquisitions to achieve value creation objectives.