Month: September 2022

Discussion on the identification and prevention of financial risks in trade-based companies

  The State-owned Assets Supervision and Administration Commission (SASAC) issued the document “Comprehensive Risk Management Guidelines for Central Enterprises” as early as 2006, which provides guidance on risk management for large state-owned enterprise groups and gives most enterprises a better understanding of risks and preventive measures.

In the guidance document, SASAC divided the risks faced by enterprises in the current economic situation into five areas, namely market risk, legal risk, financial risk, operational risk and strategic risk. Since capital runs through the whole process of enterprise operation, each of these five risks is inextricably linked to financial risks. Only by starting from the root cause and strengthening the identification and prevention of financial risks can we essentially reduce the probability of occurrence of other kinds of risks.

The financial risk of trading companies is the uncertainty brought by debt operation to business operation, the unreasonable structure of capital sources and resource allocation. Therefore, financial risk control is essentially part of the enterprise’s internal control, and financial risk identification should be a systematic and continuous process of excavation and classification management of events that may generate financial risks.

  What are the characteristics of financial risks in trading companies?

  Trading companies are enterprises or organizations that mainly use the circulation of goods as a means of profit under the current market economy. Trade companies in the financial risk characteristics and other nature of enterprises have some commonalities, but also their own unique place, the characteristics of the risk from the following two aspects of performance.

  (A) subject to market influence

  The main mode of operation of trading companies is the circulation of goods, the enterprise itself is to provide channels and services for the circulation of goods, whether the purchase or sale of goods, inseparable from the market, often the changes in the market can make the enterprise into financial crisis, after a long-term investigation and from the experience of some bankrupt trading companies, many enterprises due to the long-term backlog of goods, there is a difficult situation of capital turnover. In order to protect the normal operation of the enterprise, often need to apply for high loans to the bank, the huge pressure of interest payments make the enterprise unable to make ends meet, into a financial crisis and can not be resolved in time, and finally fell into a dead-end cycle led to the bankruptcy of the enterprise. The problem of backlog of goods is how to generate it, on the one hand, the enterprise managers do not have accurate market positioning, the market situation is not deep enough to understand, in the case of inaccurate investigation to increase the amount of goods stored; secondly, the consumer market market fluctuations, the enterprise just invested in the market after a large change, due to the lack of risk management tools, the enterprise will gradually fall into a financial crisis, and ultimately forced to withdraw from the industry competition .

  (2) Poor ability to repair after the occurrence of risk

  Trading companies belong to the type of fully competitive market, the gross profit of goods is very low, the promotion means is also complex and diverse, the possibility of foreign investment is not large, which causes the trading company is essentially a single way of profit, due to the commodity trade capital flow is very large, once the operation is not careful to trigger the financial risk, the company for the risk occurred due to the lack of other sources of benefit, the ability to repair is very poor. Many trading companies have learned from the past that the lack of effective financial incentives after the occurrence of risk is precisely the reason for their failure or even closure. It can be seen that the financial risk of trading companies is a huge destructive force, the company only from the root of the hair, in order to inhibit the occurrence of risk from the source, to reduce the company’s losses.

  Analysis of the causes of financial risks of trading companies

  (A) The flow of capital and business flow do not achieve a good match

  In trading companies, most of them have certain problems with their marketing models and do not design their marketing plans with scientific and reasonable choices. The mismatch between capital flow and business flow is the primary problem that exists. Some accounts payable are paid and then accounts receivable are not collected up on time, which increases the debt ratio of the enterprise, and the financial risk is easily formed in this case. We take the steel trading enterprises in China as an example to explore. At present, steel trading enterprises in the sale of just now mainly in the form of agents and self-sales, those with large demand for products directly to the steel plant to pick up, while those retail customers are set up through the steel plant to sell on behalf of the point of transaction. Self-employed mode mostly adopts cash transactions, even if the credit mode is used, there is a contract for regular payment, while the agent operation, due to the large total amount of agents, mainly adopts the bank acceptance transaction mode in terms of financial transactions, compared with self-employed goods into cash is less capable, if the enterprise will use a large amount of goods to sell as an agent, it will inevitably lead to cash flow and business flow imbalance, most of the funds in the form of acceptances pressed in the bank Most of the funds in the form of acceptances in the bank can not be taken out, the capital turnover difficulties, and financial risks arise.

  (2) External financing is relatively difficult

  The author’s trading company belongs to a branch of the group enterprise, in addition to the causes of financial risk with the flow of funds is not reasonable, financing difficulties lead to the exercise of the capital chain is also the main reason for the occurrence of financial risk. At present, the company’s financing channels are limited, the first choice is to apply for a loan from the group company, but the amount is limited and cannot meet the company’s daily business development needs; the second is to apply for a loan from the bank, but due to the special risk of trade enterprises, banks are more scrutinized in terms of loans, the approval process is cumbersome, and banks are more willing to lend more money to manufacturing enterprises rather than trade enterprises. This factor of external financing difficulties leads to the lack of funds for trading enterprises, and the situation of broken capital chain is often issued, causing serious hidden dangers to financial management.

  (3) Lack of risk management professionals in enterprises and insufficient implementation

  Financial risk is a combination of internal and external factors, external factors we lack effective control means, but if we can strengthen the internal warning and control of risk, the chances of risk is also greatly reduced. Although the author’s company currently has a sound internal risk control system, but in the implementation of poor efforts, analysis of the reasons, mainly in the internal control of the lack of appropriate professional management personnel, many times the risk control are by the financial staff, this practice is not desirable. Although financial personnel have certain accounting work experience and ability, but financial management and risk control are two different things, risk control is a set of market analysis, financial management and internal control and other comprehensive disciplines, only with professional management personnel, risk control can be carried out smoothly, it is because of the lack of professional risk management personnel, which led to the current company in risk management is more It is the lack of professional risk management personnel that leads to the current company’s shallow risk management and poor implementation.

 The prevention of financial risks of trading companies

  (a) establish a good credit base and broaden financing channels   

Financial credit is the most valuable intangible cai property of trading companies, which is conducive to the credit settlement of enterprises, the purchase of raw materials on credit and financing, etc. Good financial credit is the guarantee of smooth corporate financing, and once the enterprise faces financial risks, it can rely on good financial credit to raise capital to resolve the risks.

First of all, the small company should maintain a good credit relationship with the higher group companies as well as the lower companies, the payment of goods should be paid on time, and the accounts receivable should also be collected in time, and the arrears of goods should be solved as quickly as possible.

On the other hand, it can share the company’s operation information to the lending bank under the condition of not violating the law, so that the bank can understand the current situation of the company’s capital management in time, thus gaining the bank’s trust. In addition to loans, the Company should strengthen financing innovation and actively broaden financing channels, which can make full use of social financing and other means, within the scope of the law, to grow the capital chain and lay the foundation for the healthy development of the enterprise.

  (2) Strengthen the training of risk control personnel and introduce professional talents

  In view of the current situation that the number of risk control professionals in the company is insufficient, it is suggested that the company should strengthen the training of human resources and allocate some funds for regular training of risk control personnel so as to enhance their professional ability and quality.

The company can also consider signing a talent training program with some universities and selecting some of the students from the economics and management majors as training targets, who can enter the company in advance for internship in order to accumulate work experience and be able to quickly integrate into the company’s operation after graduation, so that the recruited risk control personnel with professional knowledge and ability can become the leader of the department and develop a financial risk management system that is suitable for the current situation after fully analyzing the situation. The financial risk control plan suitable for the actual situation of the company, so that the perfect internal control system has a certain degree of operability.

  (iii) Focus on strengthening the management of current assets

  Current assets are the foundation of a trading company, and only with sufficient current assets can the company grow bigger and bigger. However, due to the small scale of the company, the lack of capital happens frequently. In this current situation, it is more important to strengthen the management of current assets, including bank deposits, inventory and the management of accounts receivable and pre-receivable, etc. The optimal amount of cash held by the company can be determined according to the advanced turnover speed, and the efficiency of cash use can be improved through reasonable use.

As long as the enterprise always maintains a sufficient amount of current assets and keeps a balanced relationship between inventory and assets, financial risks can be effectively suppressed and the probability of risk occurrence will be greatly reduced.

The connotation of cross-border e-commerce and the impact on international trade

With the improvement of technology and the continuous progress of society, cross-border e-commerce is becoming more and more important in people’s daily life, and people can get the cheaper products internationally through online channels with only simple operations, and now cross-border e-commerce has been paid attention to and loved by international people.

In addition, it has also brought convenience to most retailers, individual wholesalers and consumers, who do not need to use the traditional mode of foreign trade channels to purchase goods, but can directly use the platform of cross-border e-commerce to obtain their favorite items, thus reducing the tedious way of transaction and increasing the profit of enterprises.

  1 The connotation and characteristics of cross-border e-commerce

  The introduction of cross-border e-commerce has not only brought convenience to consumers, but also enriched their lives. Compared with the traditional trade methods in the past, the advantages of cross-border e-commerce are mainly reflected in the following three points.

Cross-border e-commerce fully reflects the characteristics of the information age. Cross-border e-commerce can use paperless transactions, i.e., only the completion of filling in electronic information is required in the process of transactions, which brings great convenience to the majority of consumers.
Cross-border e-commerce fully embodies the characteristics of the era of globalization. When conducting electronic transactions, the scope of transactions is unlimited, and consumers can conduct international transactions and purchase their favorite international goods, and this international trading environment fully demonstrates a global character.
Cross-border e-commerce fully embodies the characteristics of formless transactions. In the background of the modern era, the cross-border e-commerce transaction mode breaks the traditional transaction mode, that is, in the specific e-commerce transaction process, the country only needs to buy and use the right to read and use to enjoy the equivalent treatment, and this transaction mode without physical objects has been accepted and recognized.

  2 The current development of cross-border e-commerce in China

  Nowadays, the cross-border e-commerce trading platform has received more and more people’s attention, and people enjoy the convenience brought by cross-border e-commerce to themselves, and cross-border e-commerce has been progressing and developing in the recognition of people.

In the article “China E-commerce Market Data Monitoring Report” released, we find that the quality of China’s cross-border e-commerce transactions has become higher and higher in recent years, and the scale of international import and export goods transactions has become larger and larger. For this reason, the country is also constantly improving the relevant mechanisms of cross-border e-commerce, promulgating and implementing the relevant policies of cross-border e-commerce, so that cross-border e-commerce drives the synergistic development of various enterprises as far as possible, and makes the overall economic level of China Steadily forward.

  Among the cross-border e-commerce in China, the most famous ones are Made in China and Alibaba. Alibaba and Made in China bring trading platforms for the majority of consumers, provide information services and transaction services for the majority of consumers, and build a bridge for the majority of consumers to buy. Although Made in China and Alibaba have brought great convenience to people, there are still some drawbacks in the trading process.

For example, most companies cannot realize transactions on electronic platforms after constant consultation and taking offline transactions and exchanges; these early platforms cannot provide consumers with professional and reliable information; and the services of various industries are not enough in terms of capital flow and payment for goods.

  3 Research on the impact of cross-border e-commerce on international trade

  3.1 Improved the traditional market transaction model

  With the deepening trend of economic globalization and the introduction of cross-border e-commerce, the transaction mode of the international market has changed, and the transaction mode has become more and more modern and diversified. Coupled with the establishment of the global village, which makes the competition among various enterprises more and more fierce, the market transaction process will also face more competitors. In order to gain the recognition of consumers, enterprises must constantly improve their own mechanisms, improve their products and create high-quality products that satisfy consumers.

Enterprises on cross-border e-commerce platforms are constantly researching the appropriate network marketing model and drilling a marketing model that can be recognized by consumers. In order to improve the sales volume of enterprises, accelerate their modern sales and enhance their transaction efficiency, it is necessary to improve the market transaction model.

Internet marketing is a trading model that is both easy and efficient, which on the one hand enables the establishment of strong business relationships between companies and consumers; on the other hand, it also enables the efficient development of companies, while companies have to constantly get feedback from consumers and make improvements accordingly.

  3.2 Innovation in trading methods

  Some small-scale and talent-starved SMEs often face various difficulties in traditional international trade, and the traditional trading model only makes SMEs suffer, but cannot help them develop and progress rapidly.

But the introduction of cross-border e-commerce will increase the scale of trade of SMEs and help SMEs to take a place in international trade. Cross-border e-commerce is very beneficial to every enterprise, and cross-border e-commerce will prompt all enterprises to share a trading platform, and each enterprise will appreciate each other and find suitable sources of goods and opportunities for enterprises, which will eventually realize the common progress among enterprises and the overall enterprise Efficiency will gradually rise.

Cross-border e-commerce is a trading platform in the new era, cross-border e-commerce in the use of advanced network technology, can efficiently obtain accurate information, send a full range of information-based services, cumbersome transaction mode has been simplified, but also make most small and medium-sized enterprises can join the ranks of international trade, cross-border e-commerce is to change the traditional trading model, innovation and perfect the international trading methods.

  In order to realize the diversified needs of each enterprise, to achieve efficient services for enterprises, and to improve the quality of their products, it is necessary to use cross-border e-commerce trading platforms to obtain the items they want in international trade.

Cross-border e-commerce platform is essentially a network exchange platform, a large number of virtual enterprises joined, a large number of enterprises on the network to form a perfect system, in which enterprises can communicate with each other and find their own satisfactory goods quickly and easily.

Cross-border e-commerce enables the use of resource information in international enterprises, and also avoids the waste of enterprise resources, bringing benefits to international enterprises. The innovation for the traditional trading model is the creation of cross-border e-commerce platform, in which information is shared with each other and resources are obtained, which not only makes efficient use of the products of enterprises, but also promotes the progress and development of enterprises, and the cross-border e-commerce platform has made a non-negligible contribution to the world international trade.

  4 The situation of cross-border e-commerce development in China

  4.1 Establishing sound laws and regulations and creating a good development environment

  In order to create a good development environment for cross-border e-commerce, to promote the progress and development of cross-border e-commerce, and to meet the needs of the times, China must constantly establish and improve laws and regulations, specifically from the following three points.

First, to create a good internal environment, to create good opportunities for innovation in the international market trade model. Reduce the impact of traditional international trade methods to consumers, so that consumers more accept and love cross-border e-commerce trade platform.
Second, to create and improve each regulatory system, so that the cross-border e-commerce platform in a favorable direction, when conducting international trade, to ensure the safety of the transaction environment, to protect the security of each consumer’s information and product quality.
Third, we should pursue continuous innovation, innovate management system and improve laws and regulations to inspire each enterprise to achieve innovation, and then promote the innovative development of cross-border e-commerce.

  4.2 Strengthen the training of comprehensive talents and promote the transformation and development of international trade model

  The stronger the youth is, the stronger the country is, and the more innovative talents a country has, the stronger the country will be. In order to cultivate comprehensive talents, promote the transformation and development of international trade model, in order to increase the innovation of cross-border e-commerce, it is necessary to have the help of innovative talents, so that cultivating comprehensive talents is the most urgent problem of the country at present. The specific solutions are the following three points.

Strengthen the cultivation of talents in colleges and universities. When cultivating talents, colleges and universities should adapt to the trend of the development of the times and educate in an innovative and comprehensive manner.
Enterprises should strengthen the reception of comprehensive talents. In order to strengthen the excellent talent team of enterprises, it is necessary to strengthen the management education of enterprise employees.
Sound enterprise training mechanism, enterprises should strengthen the professional knowledge training and basic skills training for employees, so that enterprise employees can be competent for any job.

  5 Conclusion

  In order to follow the trend of the times, to meet the needs of the globalization of the economy and to strengthen the trade efficiency of enterprises, it is necessary to change the traditional international trade model in the past and introduce a cross-border e-commerce trade platform, with the help of which consumers can obtain their favorite products more easily and quickly, and enterprises can achieve synergistic development among themselves.

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