Financial Risk Management And Control Of Foreign Direct Investment For Chinese Electrical Companies

With the development of Chinese "Belt and Road" strategy and the shrinking domestic market share of the electrical industry,more and more electrical companies choose Greenfield investment to expand overseas market territory,hope to occupy market share in overseas developing countries with increasing demand for power infrastructure.There is a big difference in the risks faced by Greenfield investment and establish a subsidiary in china.Just like investment risk,political and legal risk,exchange rate risk,tax planning risk,accounting information distortion risk,multi-currency settlement risk,financing risk and so on.All kinds of risks will eventually be reflected through financial risks.How to manage financial risks will have a significant impact on the success of Greenfield investment and the survival and development of the entire company.The management of financial risks in the Greenfield investment in the electrical industry is the focus of this study.This article reviews domestic and overseas theoretical literature and identifies,evaluates and analyzes financial risks using the four Greenfield investment cases that the author personally participated in to find out the best method for the management and control of financial risks in Greenfield investment in the electrical industry.Using SWOT and Experts Grading Method,building FAHP model,combining qualitative analysis with quantitative analysis,the result of financial risk assessment shows that the host country's specific risk has the highest probability of occurrence,followed by management risk,and the default risk,tax risk,capital risk is relatively small.This can be used as a guide to the financial risk management of electrical industry and related industries.This article fills the vacancy of concern about the financial risk of Greenfield investment,combining overseas EPC project management with financial management of overseas subsidiaries.It has made up for the lack of practical cases of Greenfield investment in the electrical industry of traditional risk management literature.This article believes that if electrical industry companies want to succeed in Greenfield investment they must choose the right host country firstly.The political stability,cultural,economic and legal environment are very different in different countries.These factors will affect the financial risks of Greenfield investment.Secondly,they need to establish a good financial management team and project execution team.Greenfield investment needs to be implemented by teams from the beginning of the establishment of overseas subsidiaries to the actual operation of overseas projects.A good team will pay attention to the management of financial risks,and use risk management methods and tools to identify and assess risks,reduce the losses caused by financial risks,and help companies achieve success in Greenfield investment.The last but not the least,they need to focus on default risk,tax risk,capital risk and so on.