Risk Assessment And Management Of Private Equity

In 2015,the Chinese Prime Minister Li Keqiang proposed the policy of “mass entrepreneurship and innovation”,which encourages the development of small and medium-sized enterprises in our nation.Under this background,lots of people choose to start their own businesses.Because of financial discrimination,many of them cannot get sufficient loans supports from business banks to meet their financial demands.That's why Private Equity occurred and grew rapidly with the upsurge of starting businesses.From 2015 to 2017,the new funds of PE increased from 745 per year to 3574 per year,and the number of fundraising increased from 511.8 billion to 1.79 trillion.Nowadays,Private Equity has become the most important financing channels to small and medium-sized companies.However,Private Equity developed late in our country,so government do not have sufficient experience in relevant policy-making and supervision;meanwhile because of its own characteristics,for instance the investment period is long and investment object is often new company,there are lots of risks in every phase of Private Equity.In a word,how to measure and manage these risks is meaningful for improving the efficiency of Private Equity.In this paper,we start our study with the basic theory of PE and its risks;then we put up with a risk-measuring model based on the Fuzzy Comprehensive Evaluation Method and the Analytic Hierarchy Process.In addition,according to three level of the risks of PE: the Company Development,the Macro-environment,and the Investment Activity,we make a 48-indicators system of PE risks,by which we could offer analytic indicators for the risk-measuring model.Finally,we use a case of J Company to test the operability of the model and give some suggestions about risk management.