A Research On The Problem Of Risk Management Of P2P Platform Based On The Case Of Ezubao

2015 China’s economy continued to deteriorate, GDP growth rate has dropped to the lowest since 1990. The continued deterioration of the business environment and the fierce competition between banks lead to the rising NPL ratio. So that bank took conservative lending strategies, squeezing the financing channel of small and medium-sized enterprises. In addition, the real estate market and the stock market tend to slump. Capital market couldn’t find effective investment channels. In this context, P2P lending with characteristics of high efficiency, low cost, wide audience meet the needs of both the investment and financing. At the end of 2015, operating P2P platform number reached 2595. But the number of problem P2P platforms reached more than 800, receiving attention of industry and regulatory authorities.There are many scholars who have studied the theory, model and risk management of P2P lending. Xie Ping, Zou Chuanwei (2012) believes that internet finance can effectively solve the financing problems of small and medium enterprises. Ma Liang (2014) pointed out that the P2P platform has the characteristics of virtual, cross regional. The main risks of P2P platform are credit risk, operational risk, information disclosure and money laundering risk. Feng Guo, Jiang Shasha (2013) think that for the absence of regulation, P2P platform is constantly alienated, resulting in greater legal risk and moral hazard.Competition of P2P industry is becoming increasingly fierce which lead to various new business model with specific risks. By the end of 2015, Ezubao with the characteristics of financing lease and P2P was investigated for illegally absorbing public deposits, causing widespread concern in society. Comparing to the subjective issues of its management, We should put more attention on the cause of the incident and the company’s internal control defects. Until now, there is not much research on comprehensive risk management of P2P lending. This paper will focus on the following questions:P2P platform would face what kind of risk, what kind of questions Ezubao exposed during the operation, how to build a set of risk management system for the P2P lending platform to prevent Ezubao event replay again.This paper adopts the method of literature research, case analysis, qualitative analysis. First, get a better understanding of the current situation of China’s P2P lending industry and its risk management system through reading the relevant literature of domestic and foreign scholars. Then, analyze the risk of P2P lending industry with data and charts based on the case. Finally, construct a comprehensive risk management system based on the case. Conclusions are as follow:first, Ezubao in the process of operation faced a variety of risks business risk, credit risk, operational risk, liquidity risk, market risk, legal risk, reputation risk. Those are common risks of P2P industry. Secondly, the lack of institutional construction, internal control and risk management capabilities also cause the event. Finally, P2P platform could apply comprehensive risk management method to enhance internal control, effectively reducing the risks.This paper is divided into five parts. The first part is the introduction, which introduces the background and significance of this study, and explains the typical and representative of the case selected. In addition, this part also elaborates the innovation and research methods of this paper. At last, this paper makes a brief review of the previous studies, and points out the problems that need to be studied in the relevant fields, that is, the research topic of this paper. The second part is the background of this case. In this part the main products and business model are introduced. This part also lists the operations data of Ezubao. Finally, the policy environment of the P2P industry and the financing lease industry are briefly summarized.The third part is the risk analysis. Risk analysis is the foundation of this paper. Firstly, this part analyze the business risk, credit risk, operational risk, flow risk, market risk, legal risk and reputation risk. This part also analyze the sources and the influences of the risks, and extend to the industry.The fourth part is the construction of the P2P lending platform with comprehensive risk management and external regulation based on the case. From the aspect of internal control, this paper emphasizes the establishment of power restriction mechanism, risk management culture, strengthening risk assessment and information communication. For comprehensive risk management, the focus of the study is target setting based on risk preference and the implementation of comprehensive risk management process. Finally, internal management combined with external supervision could form a complete risk control mechanism. The fifth part is the conclusion of this paper, policy recommendations and research prospects.The innovation of this paper has three main points. First, this paper apply comprehensive risk management to P2P platform. Second, the case selected is creative. Third, policy recommendations from the point of view of regulators, P2P platform, investors. The author tries to make suggestions on the development of the industry. There are two deficiencies. First, the disagreement of statistical caliber influence the analysis to some degree. Second, because the case platform has stopped operating, data is not enough to do further analysis.