China Risk Control Management

There is such a rule in the market economy: high birthrate and high mortality of enterprises coexist. Some statistics from the Department of Trade and Industry of Britain are surprising: 7% of the newly established enterprises could not survive for 6 months after incorporation; 40% of such companies only lasted for 6 months to 3 years before bankruptcy. In other words, almost half of the newly established enterprises could not “live” longer than 3 years. Though the bankruptcy rate declined gradually after the first 3 years, only 35% of the enterprises had managed to exist for more than 6 years. The data provided by US Business Administration also showed the similar situation: only 40% of the enterprises succeeded in existing for more than 6 years. Risks are inevitable in company operation and management. But the situation is even more serious in China . In the process of reform, the enterprises of all types in China are dedicated to seek innovation and to be more internationally industrialized. As they are inexperienced, the enterprises in this stage are in the greatest risk, and their chief task is to implement effective risk management and risk control through corporate management consultation.

Under the circumstance of the market economy, every enterprise faces risks in its operation. As for entrepreneurs in China , most of them are novices and inexperienced; moreover, due to the small business scale, weak structure of enterprises and lack of risk prevention ability, they will face even more risks. So the importance of risk management and risk control is brought to focus in China .

The risks in the corporate management consultation mainly include the damages of corporate properties caused by natural disasters, political unrests, regional or world economic fluctuation and other external factors; the loss resulted from wrong decision-makings; the injury of employees in the process of fulfilling duties; the injury of customers’ in operation and business places; customers’ loss caused by defects of products; the bad debts resulted from management mistakes; loss of corporate properties led by improper security measures; the stock-in-trade devaluation due to the fall of market prices; the loss of large volume of product overstock resulted from the change of fashion trends and target consumer and so on.

As far as enterprises are concerned, to influence the external risks is very hard, and few effects can be achieved in the management consultation on risk management and risk control. Only by keeping a careful watch, considering the situation and making adjustments flexibly can they minimize the losses of risks. According to the investigation of a German institute, the major problem of the enterprises is that they cannot find out the internal risks in time. When they realize the risk, they hardly have time to adopt emergency measures. Two scholars from   London Business School also came to the similar conclusion in their investigation: the key of an enterprise’s growth is the risk management and risk control of the enterprise within the company instead of economic environment or market conditions. A report from the Department of Trade and Industry of Britain also stated that though there were so many risks, 2/3 of enterprises would avoid bankruptcy if they were proficient in adjusting their work in accordance with the changes of market trends and could often implement risk control through management consultation.

Risk control refers to the management methods of achieving the greatest safety guarantee at the minimum costs in enterprises’ daily operation through risk understanding, analysis and risk management. In the market economy, profits come together with risks. Risks exist objectively and cannot be utterly eliminated. Now that enterprises in China have to face great risks in market competition, to prevent risks through management consultation is becoming more and more important. There are many methods and skills of risk control, mainly including two categories: the management methods and technologies of control type and the management methods and technologies of finance type. The former stresses on lowering the frequency of losses, reducing the extent of losses; while the latter focuses on improving the function of capital and eliminating capital losses. But whatever method and technology the enterprises use, they should make examinations and adjustments regularly or irregularly according to the realities in using them. As the character and situation of risks change with the objective condition, the best management technologies and methods used in specific conditions have to be modified and adjusted as time goes, otherwise the expected effects can not be achieved.

As it was mentioned above that internal risk management and control of the enterprises is the key solution. The vast practices have proved that all problems would finally concentrate on the problems of people. It is the common situation that perfect management systems are not practiced well by executants in China , and thus they do not function normally. So the management of human resources is the most direct and effective measure for risk management and risk control.

The risk control in human resources management refers to the risk management in all links including the recruitment, work analysis, professional plan, performance examination and evaluation, work evaluation, compensation management, welfare and encouragement and staff training, etc, and through these work we can prevent the risks in human resources management. In the process of human resources management in China, most companies often attach importance to the specific operations like recruitment, training, examination, evaluation and compensation, etc, but neglect the risk management and risk control in it. In modern society, the human resource competition is furious in China . As a matter of fact, in the management of human resources every enterprise may encounter risks, such as the recruitment failure, staff’s dissatisfaction with new policies, and the sudden resignation of technological backbone, and so on. These risks may influence the normal operation of a company, or even result in a fatal  blow to it. Furthermore, the market economy in China is not mature. Therefore effective measures of risk control are quite necessary. The methods of risk management and risk control refer to the management work of preventing risks and filling up leaks through a series of activities like risk recognition, risk evaluation, risk management and risk monitoring, etc. 

The practical purpose of risk management and risk control in human resources management is to solve the problems, which are found in management and operation, and finally to avoid the risks. Based on rich experience in risk management and risk control, Steele has the following steps in its operation methods: 

1. Well communicate with client, and identify the potential risks by analyzing clients’ problems in their operation.

2. Organize a group of experts to go to the enterprise of clients, harmonize into the whole process of operation and management, and make further investigation and research.

3. Draft the project for risk elimination on the basis of investigation and research.

4. Discuss the project with the related staff, and make sure that the project is practical and highly effective.

5. Implement the perfected risk control project, and supplement it constantly according to the change of environment and conditions in the practical application process.

With the rapid development of economy in China , there are always new problems appearing as well as the risks. So an effective risk control system is very necessary and useful. We should keep on carrying out the risk recognition, evaluation and risk management and further form an effective monitoring system.

After a period of time, the risks should be reanalyzed so that the risk management and risk control project can be effectively carried out. In doing so, the new problems appearing in the implementation process will be reevaluated and the project will be perfected. At the same time, accumulation of experience will provide data for future risk control work.