Research On The Financial Risk Under The Refocusing Strategic Transformation Of AVIC Heavy Machinery

With the deepening development of reform,and opening up and the establishment of the stock capital market,many enterprises in China have expanded their business scope through diversification in order to become bigger and stronger and find more profit growth points.Many enterprises have strengthened their overall business strength through diversified development,but some enterprises have fallen into the dilemma of excessive diversification.The problems of enterprise resource dispersion,management cost increase,weak main business and weak sideline business caused by excessive diversification increase the financial risk of the enterprise and affect the overall business performance of the enterprise.In recent years,as the state proposes that state-owned enterprises should speed up the disposal of inefficient assets,focus on their main businesses,improve their core competitiveness,and deepening of the adverse effects brought by excessive diversification,some enterprises have begun to re-examine their own development,try to transform to the refocusing strategy,peel off non-performing assets,focus on the development of main businesses,cultivate core competitiveness,and improve market competitive advantage.AVIC Heavy Machinery has implemented a diversification strategy since 2007.The diversified businesses involved include hydraulic,forging and casting,radiator,gas turbine,metal materials,new energy,high-end intelligent equipment and other industries.In 2016,AVIC Heavy Machinery transformed to the refocusing strategy,narrowed its business scope and focused on the two main businesses of aviation forging and casting and high-end hydraulic.In the process of transformation from diversification strategy to refocusing strategy,how has the financial risk changed,and whether refocusing strategy can improve the financial risk of the enterprise.In view of these problems,the paper takes AVIC Heavy Machinery as the case study object,analyzes the impact of AVIC Heavy Machinery’s transformation from diversification to refocusing on corporate financial risk,and draws conclusions and inspiration,hoping to provide reference and reference for other enterprises.The paper first adopts a case study method to sort out the business changes of AVIC Heavy Machinery from diversification to refocusing,and summarizes the motivations for implementing diversification and refocusing strategies respectively.Secondly,this article analyzes the operational effectiveness of AVIC Heavy Machinery under the transformation of its refocusing strategy,and concludes that the refocusing strategy can produce great operational results.Once again,the paper divides the financial risk into four dimensions:financing risk,investment risk,capital recovery risk and cash flow risk,and constructs the financial risk evaluation model of AVIC Heavy Machinery through the entropy weight topsis method.Then,based on the results of the financial risk evaluation model,and combined with the financial risk evaluation indicators,the paper makes a detailed analysis and evaluation of the changes in the financial risk of AVIC Heavy Machinery during the diversified operation period and the refocused operation period.It is found that the financing,investment,capital recovery and cash flow risks of AVIC Heavy Machinery have increased significantly in the middle and late stages of the diversified operation,which is mainly due to the excessive diversification,resulting in the decline of debt service level,overall profitability,asset turnover speed,cash flow stability;Through the implementation of the refocusing strategy,AVIC Heavy Machinery has optimized its capital structure,improved its solvency,strengthened its main business strength,and provided sufficient and stable cash flow.The financing,investment and cash flow risks of AVIC Heavy Machinery have been reduced during the in-depth development of refocusing,but the capital recovery risk has not been significantly reduced.In general,the aggressive diversification strategy of AVIC Heavy Machinery has affected the overall financial situation of the enterprise and increased financial risk,while the refocusing strategy can improve the overall financial situation of the enterprise and reduce financial risk.Finally,based on the above analysis results,the paper summarizes the corresponding financial risk control implications.It is hoped that the research in this paper can provide reference and reference for the practice of enterprise refocusing strategy,effectively control the higher financial risk under excessive diversification,and thus help the sustainable development of enterprises.