The Causes of Financial Risk in Enterprises and Its Precaution

Wenqin Fan, Weixian Dong, Jie Luo


With the rapid development of social economy, the increasingly complicated business practice, the increasingly diversified enterprise information users, China's corporate financial risk measurement and management is still lagging behind. Many companies only learn the failure and lessons after crisis. With the impact of the financial turmoil, some well-known enterprises face bankruptcy, and some companies have seized this opportunity to accelerate their transformation and thus took a different path, under this economic context, corporate financial management will be the core issue of business management. The neglect of financial risk and investment decision error is an important reason for the collapse of most companies. Therefore, the research on the understanding, prevention and control of financial risk has become an important subject for enterprises today. Therefore, in the real economic development, enterprises should establish financial risk awareness to effectively prevent financial risks, and actively promote the healthy development of enterprise financial system and economic efficiency. Financial risk is a major problem facing our current enterprises, which is related to the survival and development of enterprises and key to gain profits. Based on the analysis of the actual situation of the current enterprise, this paper starts from the reasons of the formation of financial risk, puts forward the countermeasures to prevent the financial risk, and discusses how to improve the financial risk for the business managers. Through research and building a scientific method of financial risk control, sets precautions to avoid risk, reduce unnecessary losses, so as to bring more benefits for the enterprise.

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