In recent years, the domestic enterprises of major crises have occurred one after another, overall, highlighting three types of major risks: one is diversified investment, the second is the financial instruments speculation, and the third is the production safety accidents.
Leaving aside the production safety accidents, the first two types of risk has two obvious characteristics: First, the risk of loss caused by the enterprise is huge, at every turn will make the enterprise "bones"; Second, the same kind of accident in large state-owned enterprises occur from time to time.
In view of this, we call these two types of risk as the typical high-risk business of large state-owned enterprises.
We will analyze these two types of major risks in depth through case studies.
1. Diversified investment
(1) Sanjiu Group's financial crisis
Starting from 1992, Sanjiu Group, in just a few years, through acquisitions and mergers of enterprises, the formation of pharmaceuticals, automobiles, food, wine, restaurants, agriculture, real estate and other major industries and the pattern.
However, on April 14, 2004, Sanjiu Medicine (000999) issued a notice: due to the Industrial and Commercial Bank of China requires early repayment of 374 million yuan of loans, the company's major shareholders Sanjiu Pharmaceuticals and Sanjiu Group (Sanjiu Pharmaceuticals is Sanjiu Group's wholly owned companies) held by some of the company's equity has been frozen by the judiciary.
So far, the entire Sanjiu Group's financial crisis has fully erupted.
As of the crisis broke out before, Sanjiu Enterprise Group has about 400 companies, the implementation of the five-level company management system, the financial management of its three levels below has been seriously out of control; Sanjiu Department of Shenzhen, the local creditor bank loans have risen from 9.8 billion to 10.7 billion, and all over the country Sanjiu Department of subsidiaries and holding companies of the loans and loan guarantees of about 6 billion to 7 billion between the two together, the entire Sanjiu The balance of loans and loan guarantees for the whole Sanjiu system is about 18 billion yuan.
Zhao Xinxian, president of Sanjiu Group, once said to the public after the debt storm, "You (banks) all give me money, so that I am hot-headed, I blindly on the project."
Case Brief: The outbreak of Sanjiu Group's financial crisis can be summarized into several main reasons: (1) the group's financial management is out of control; (2) diversified investment (non-main business/non-relevant investment) expansion of strategic mistakes; (3) the group's over-investment caused by excessive indebtedness.
In addition, from the point of view of the development environment of China's state-owned listed companies, China's financial system has contributed to the blind investment and rapid expansion of state-owned listed companies.
(2) Huayuan Group's credit crisis
Huayuan Group was founded in 1992, under the leadership of President Zhou Yucheng, Huayuan Group's total assets surged to 56.7 billion yuan in 13 years, the assets doubled 404 times, with eight listed companies; the group's business jumped out of the textile industry, expanding to agricultural machinery, pharmaceuticals, and other brand new areas, and became a real "state-owned enterprises, big system". The group's business has expanded beyond the textile industry to new areas such as agricultural machinery and pharmaceuticals, making it a veritable "state-owned enterprise".
Into the 21st century, Hua Yuan more to "big life industry" show people, jumped to China's largest pharmaceutical group.
But in mid-September 2005, the Bank of Shanghai on the Huayuan a 180 million yuan loan expires; this loan is the year Huayuan for the acquisition of the Shanghai Pharmaceutical Group and loan, due to the beginning of the year the Ministry of Finance inspection events, coupled with the overall tightening of bank credit, as one of the largest loans Huayuan Bank of Shanghai for fear of Huayuan inability to repay the loan, and then stepped up to collect the loan; which triggered the Huayuan Group's credit crisis.
The State-owned Assets Supervision and Administration Commission appointed Deloitte & Touche to do a liquidation of Huayuan Group, and the liquidation report showed that: as of September 20, 2005, Huayuan Group consolidated financial statements of 2.5 billion yuan in net assets, bank liabilities as high as 25.114 billion yuan (of which subsidiaries for 20.986 billion yuan, the parent company for 4.128 billion yuan).
On the other hand, the accounts receivable, other receivables and prepayments of its eight listed companies totaled up to 7.336 billion yuan, which means that the net assets of these listed companies have almost been emptied.
According to the Ministry of Finance's 2005 Accounting Information Quality Inspection Bulletin, China Huayuan Group's financial management was chaotic, internal control was weak, and some of its subsidiaries, in order to achieve the purposes of financing and completing the assessment targets, used a large number of means of false accounting to falsify revenues, undercosting, and huge amounts of non-performing assets, resulting in a false profit and a real loss, and a serious distortion of the accounting information.
Case Brief: Huayuan Group 13 years of high dependence on bank loans to support, in its increasingly unfamiliar industry, constantly "mergers and acquisitions - reorganization - listing - integration", in fact, there are mergers and acquisitions without reorganization, there is a Listing without integration.
Huayuan Group has a long history of short-term loans and long-term investment to support its rapid expansion, which ultimately triggered a break in the capital chain of the entire group.
The core reason for the Huayuan Group incident: (1) over-investment triggered excessive indebtedness, investment projects with low yields and high indebtedness, indicating that the Huayuan Group's strategic decision-making mistakes; (2) mergers and acquisitions without reorganization, listing without integration, indicating that the Huayuan Group's investment management and control failures; (3) Huayuan Group's subsidiaries due to the pressure to raise funds and performance of the financial counterfeiting, which should be driven by the management.
(3) Aucma major shareholders funds occupation
April 14, 2006, G Aucma (600336.SH) issued a major announcement: the company received the Qingdao People's *** State-owned Assets Supervision and Administration Commission, "on the Qingdao Aucma Group Company occupies the funds of listed companies in the disposal of matters," Qingdao People's *** will take measures to resolve the difficulties faced by the Aucma Group. Qingdao People's *** will take measures to solve the difficulties faced by Aucma Group.
So far, Aucma crisis events publicized.
The most direct trigger of the Aucma crisis, is the parent company Aucma Group Inc. misappropriation of listed companies 1.947 billion yuan.
Aucma Group to take advantage of major shareholders, occupy the funds of listed subsidiaries, for non-related diversified investment (including household appliances, lithium batteries, electric bicycles, marine biology, real estate, financial investment, etc.), investment decision-making errors caused huge losses.
Broken capital chain, huge debts, high-level changes, investment mistakes, diversification predicament and many other factors, making the situation of Aucma exceptionally critical.
Aucma knot is not just diversified investment under the capital problem, the key problem and its own management model, is Lu Qunsheng nearly 17 years of paternalistic management model.
Lu Qunsheng entrepreneurial success in a particular environment, but in the expansion of the lack of due awareness of risk, Aucma inbreeding appointment of leadership phenomenon is the lack of due sensitivity to the market.
Case Brief: Expansion is the goal of almost every enterprise.
And the same in Qingdao's three home appliance group (are listed companies) but have different choices: Haier's expansion based on brand strategy; Hisense's expansion based on technological breakthroughs; and Aucma's expansion but chose not to relate to the diversification of the road.
"Diffuse diversification expansion, not only did not let Aucma bigger and stronger, and hair and make it a plate of scattered sand".
Aucma Group, a large amount of funds occupied by listed companies, used for its non-related diversified investment; and then frequent investment failures and mismanagement, resulting in the break of the capital chain, but also the group risk is also transferred to the listed companies.
It should be said that the root cause of the crisis of Aucma is the management of investment decision-making errors, investment supervision is not in place, the management capacity of a combination of factors.
(4) the above three cases of summary and analysis
The above case, simply summarized as follows: diversified investment triggered by the significant risk of capital chain breakage, the main reason for this is the decision-making mistakes, non-main business/non-relevant investment, rapid expansion, over-indebtedness and so on.
The above three large state-owned enterprises, are through diversified investment to achieve rapid expansion, and is highly dependent on borrowing to support its rapid expansion, and ultimately triggered the crisis of the entire group.
It should be said that this type of mode of operation and its risk cases are not uncommon both abroad and at home: for example, the Yohan bankruptcy case (the largest post-war corporate bankruptcy case in Japan) in Japan in 1997; and for example, the collapse of the Delong system in 2004 in China.
Enterprise diversified investment, including non-main business investment and non-relevant investment, is to enter a new industry field, enterprises often have a vague understanding of it, easy to trigger decision-making errors; in addition, a high degree of reliance on borrowing investment, is a major trigger for the occurrence of risk.
That is to say, diversified investment accompanied by operational and financial risks are very large, and therefore the probability of occurrence and loss will be large.
Particularly in China, the financial system's connivance with large state-owned enterprises and weak capital market regulation have increased the probability of such risks.
In addition, many of the risks of diversified investment are attributable to decision-making errors, especially when the top management of the enterprise appears to be a strong individual leader, especially vulnerable to the influence of the leadership's personal authority, so that the individual decision-making instead of, or overriding, the collective decision-making, which leads to "success is also Xiaoho, and failure is also Xiaoho".
2. Speculation on financial instruments
(1) Speculation on financial derivatives of CNOOC
China Aviation Oil (Singapore) Corporation Limited (AVIC) is the overseas holding company of the China Aviation Oil Group; it is a listed company on the main board of the Singapore Exchange.
CNOOC incurred a loss of US$554 million in 2004 due to oil derivatives trading; it was forced to apply to the Singapore High Court on November 30, 2004 for debt restructuring.
Previously, CNOOC had been recognized as the most transparent listed company in Singapore in 2004; it had a Risk Committee, and had engaged Ernst & Young to prepare the company's Risk Management Manual and Financial Management Manual; and the Risk Management Manual specified that losses in excess of US$5 million must be reported to the Board of Directors.
Approved by the relevant state departments, CNOOC began to do oil hedging business in 2003.
However, President Chen Jiulin expanded the scope of business without authorization and engaged in oil derivatives options trading; it has not been reported to CNOOC, and CNOOC did not find out.
Chen Jiulin has always been independent of the leadership of the group of companies in China Aviation Oil Corporation, the group sent the financial manager was replaced twice, but the group has no constraints.
Chen Jiulin and Japan's Mitsui Bank, France's Société Générale, Britain's Barclays Bank, Singapore's Development Bank and Singapore's McGraw-Hill Bank outside the futures trading floor, signed a contract.
Chen Jiulin bought "put" options, betting on $ 38 per barrel; but did not expect the international oil prices all the way up.
AVIC's oil options trading grew from 2 million barrels to 52 million barrels at the time of the accident, resulting in actual and potential losses totaling about $554 million when AVIC was liquidated.
On June 3, 2005, PricewaterhouseCoopers released its final report on its investigation into the huge losses incurred by CNOOC.
The report concluded that the following factors, individually or *** together, contributed to the company's losses on speculative trading in options: (1) what later proved to be a misjudgment of the movement of oil prices beginning in the March quarter of 2003; (2) an unwillingness to disclose the losses in 2004; (3) a failure to value option positions in accordance with industry standards; (4) a failure to properly record the option portfolio value; (5) lack of appropriate and stringent risk management requirements for options trading; (6) intentional violations by the company's management of the risk management requirements that should have been followed; and (7) failure of the board of directors as a whole, and the audit committee in particular, to fully fulfill their respective responsibilities with respect to the risk management and control of the company's speculative derivatives trading.
Case Summary: CNOOC's speculation in over-the-counter (OTC) oil options is expressly prohibited by China ***.
The State Council's Circular on Further Rectification and Standardization of the Futures Market, issued in August 1998, clearly stipulates that "Enterprises that have obtained licenses for overseas futures business are only allowed to engage in hedging in overseas futures markets, and are not allowed to engage in speculative transactions." In June 1999, Article 4 of the Interim Regulations on the Administration of Futures Trading, which was issued by a State Council decree, stipulated, "Futures trading must be conducted in futures exchanges.
Over-the-counter futures trading that does not pass through a futures exchange is prohibited." Article 48 states, "State-owned enterprises engaged in futures trading is limited to engaging in hedging business, and the total volume of futures trading should be commensurate with their total spot trading volume in the same period." In October 2001, the Securities and Futures Commission (SFC) issued the "Guidelines for the Management System of Overseas Futures Hedging Business of State-owned Enterprises," which stipulates in Article 2: "Enterprises licensed to engage in overseas futures business in overseas futures markets can only engage in hedging transactions, and are not allowed to engage in speculative transactions."
To engage in financial derivative business operations, AVIC Oil is still a novice in the international financial market; direct confrontation with large international funds, undoubtedly "to hit a stone with an egg".
The AVIC Oil incident is most notable for the "management override", which led to the failure of the monitoring mechanism; it directly contradicted the objectives of operational compliance and reporting reliability of internal control.
There are three points of violation: one is to do what the state expressly prohibited not to do; the second is over-the-counter transactions; and the third is to exceed the total amount of spot transactions.
The unreliability of its reporting is demonstrated by the fact that it did not disclose its OTC trading in options on its financial reports, nor did it report directly to its parent company.
(2) China Southern Airlines' entrusted finance
China Southern Airlines Group Company's huge entrusted finance investment losses exposed during July 2004; subsequently, the Guangzhou Special Office of the National Audit Office implemented a special audit on China Southern Airlines; Guangdong Securities Regulatory Bureau also conducted an inspection on China Southern Airlines Company in October 2005.
Among the 179 centralized enterprises in the 2004 performance assessment, China Southern Airlines Group was downgraded from B to C due to a major financial disciplinary incident.
At the end of April 2006, China Southern Airlines, which is listed in Hong Kong, New York and Shanghai, announced a huge loss of RMB 1.794 billion for the 2005 financial year; the company attributed this to the continued surge in aviation fuel prices and the escalation of expenses resulting from the acquisition of two companies, Northern Airlines and Xinjiang Airlines, in recent years; but this was clearly difficult to convince the market.
China Southern Airlines Group is a large state-owned enterprise with good credentials for bank loans, and can obtain loans of 1 to 2 billion yuan from every commercial bank without any collateral.
Using the bank's money to invest in finance is indeed a lucrative business opportunity.
The China Southern Airlines Group started its entrusted financial management business in 2001; it has entrusted financial management business with Hantang Securities, Zhongguancun Securities, and Century Securities.
China Southern Airlines Group mobilized a huge amount of funds and even off-the-books funds for entrusted wealth management, which only flowed to the Shenzhen Century Securities entrusted wealth management funds amounted to 1.2 billion yuan.
China Southern Airlines to Century Securities entrusted financial funds are basically used by Century Securities to hold a long position in China Southern Airlines (600029.SH), a subsidiary of China Southern Airlines Group.
China Southern Airlines listed on July 25, 2003, due to the impact of SARS, China Southern Airlines closed at 3.88 yuan on the first day of listing, the lowest share price among the four listed airlines.
Century Securities entered the stock at this low level, less than three months, China Southern Airlines rose from 4.2 yuan to 6.8 yuan, an increase of more than 60%, Century Securities also gained a substantial book profit.
But then, under the pressure of rising oil prices, aviation stocks began to wither, and Century Securities lost a lot of money.
From the books of Century Securities, the $1.2 billion in assets entrusted by China Southern Airlines to manage its finances can no longer be repaid.
It is also due to the huge debt pressure on the formation of China Southern Airlines, Century Securities was forced to embark on the road of reorganization.
Century Securities is unable to return the 1.2 billion yuan entrusted to the South China Airlines Group in the 715 million yuan, the South China Airlines Group had no choice but to implement its debt-to-equity.
In August 2005, SAC Group Vice President and listed company director Peng Anfa, SAC Group Finance Minister Chen Liming for suspected violations of the law, has been arrested by the judicial authorities in accordance with the law; in March 2006, the two were transferred by the Guangdong Provincial Anti-corruption Bureau to the Guangzhou Municipal Procuratorate prosecution.
October 16, 2006, China Southern Airlines Group, the former Minister of Finance Chen Limin on suspicion of embezzlement, embezzlement, bribery and other crimes, to accept the Guangzhou Intermediate Court public trial.
According to the prosecutor's investigation confirmed that, from August 2001 to May 2005, Chen Limin used the position of entrusted wealth management to facilitate the use of the first thing to do, and then ask for instructions or do not ask for instructions; only general report on the wealth management income, do not report on the object of cooperation or concealment of reporting, etc., a wide range of entrusted wealth management business, has been misappropriated part of the group's wealth management income, accept kickbacks; ultra-authority from the Bank loans for individuals, friends registered companies, business use; accept Hantang Securities, Century Securities, Yao Zhuangwen bribe of nearly 54 million yuan, misappropriation of public funds nearly 1.2 billion yuan, embezzlement of public funds more than 12 million yuan.
Case Brief: The commissioned financial management business of SAIC Group, in fact, SAIC Group with their own money, with the help of securities companies to operate their own stocks.
From the laws and regulations, whether it is state-owned funds into the stock market speculation, or the use of their own funds to operate their own stocks, are expressly prohibited.
From the point of view of internal control, the billions of entrusted financial management business of the China Southern Airlines Group is concentrated in the operation of the company's 2-3 people, the enterprise decision-making layer, the Party committee, internal audit supervision did not keep up, although we can't be sure of the existence of the management connivance, but we can certainly say that it is a major investment monitoring is not in place; personal acceptance of bribes, misappropriation and embezzlement of public funds, which reflects the key personnel's moral turpitude and the enterprise's problems such as the absence of basic internal controls or management override.
In addition, China's financial system facilitates this phenomenon.
(3) Copper futures speculation by the State Reserve Bureau
On November 13, 2005, foreign news outlets began to disclose that Liu Qibing, a trader with China's State Reserve Bureau, had been selling short in the LME (London Metal Exchange) copper futures market through the LME's on-exchange member, SEMPRA, at more than $3,000 a ton to establish a short position of about 150,000 to 200,000 tons. million tons.
This position has a delivery date of December 21st.
But since mid-September, copper prices have risen by more than $600 per ton, and these short positions have undoubtedly resulted in huge losses, while the trader, Liu Qibing, has mysteriously disappeared.
State Reserve's counterparties included Smythe Metals, Revel Futures, Standard Bank of London, Barclays, Man Group, AMT, Sutton, and a fund company based in Lyon, France.
The NRC opted for a partial delivery of 50,000 tons of spot copper to the LSE, with the remaining 150,000 tons of short orders rolled over to forwards.
Market participants pointed out that the State Reserve is currently at a loss of about 370 million yuan, in exchange for a short-term calm; but the duel with the international funds will continue, the final end has not yet appeared, do not rule out the situation of the fund to force the position again.
In the case of the State Reserve Copper, the same ordinary regulating center traders, while trading for the center, while building up as much as 200,000 tons of positions for themselves, serious set and long time no one found out; in addition, the trading behavior by the original two positions into the manipulation of Liu Qibing a person.
Case Brief: National Material Reserve is the state directly established and mastered the strategic reserve force, is to protect the country's military security and economic security of the important means.
In fact, when the State Reserve Bureau from responsible for the national strategic materials reserve regulation to speculation to make money in the direction of change, it has begun to deviate from its inherent duties.
As in the case of the AVIC oil options speculation, the State Reserve Board, also a small player and novice, is clearly no match for the international fund Dairodinger.
Wu Qibing speculative copper futures operations, clearly contrary to the relevant national regulations limited to hedging operations.
For the major futures business transactions by a person manipulation, a serious violation of the basic principles of internal control (incompatible job separation); in addition, together with the follow-up and the company's business equivalent of the "mouse position", indicating that the key traders there is a serious moral corruption.
(4) Summary and analysis of the above three cases
The above three cases are simply summarized as follows: speculative mentality, inadequate supervision, and the moral hazard of the key personnel are the important reasons for triggering the risk of speculation in financial instruments.
Chinese companies are still novices in the international financial market, and trading in financial instruments for speculative purposes is bound to become a "dish" for international financial predators.
Of course, the case of Chinese enterprises engaged in financial instruments compared to the bankruptcy of the Bank of Bahrain in 1995 (stock index futures speculation loss of $ 1.4 billion), the case of Sumitomo Corporation in 1996, a huge loss (copper futures speculation loss of 2.6 billion U.S. dollars) and the U.S. long capital bankruptcy case in 1998 (U.S. Long-term capital management company to carry out the Russian treasury bonds and the Japanese stock index speculation loss of 4.3 billion U.S. dollars), it is a little bit of a big deal. It is a small loss.
But the loss of CNOOC alone has been a pain in the neck for the SASAC.
In fact, as early as 1997, Zhuzhou Smelter lost $100 million because of speculation in zinc futures.
However, the same incident was repeated in 2004 and 2005.
Although China *** repeatedly emphasized that SOEs' financial derivatives transactions are limited to hedging, SOEs' use of financial derivatives for speculation has occurred repeatedly; the core reason is still speculative psychology and lack of supervision.
Therefore, in order to reduce the risk of speculation in financial instruments of state-owned enterprises, it is necessary to strengthen the supervision of investment in financial instruments and the internal control of related business operations.
3. Combined with the case of large state-owned enterprises to see the control of high-risk business
In July 2006, the State-owned Assets Supervision and Administration Commission issued the "Interim Measures for the Supervision and Management of Investment in Central Enterprises, the implementation of the rules" in the clearly stipulated that: non-main business investment in the proportion of the total investment in the general control of the proportion of the total investment of less than 10%; the proportion of the total investment of their own funds in the proportion of the total investment in general in the more than 30%; the total scale of the investment can not be beyond the enterprise financial The total scale of investment should not exceed the financial capacity of the enterprise, and the enterprise's asset-liability ratio should be at a reasonable level.
In October 2006, SASAC issued the "Notice on Doing a Good Job on the Financial Budget of Central Enterprises in 2007", which emphasized, among other things, that the central enterprises should strengthen the risk assessment and budgetary control of foreign investments, mergers and acquisitions, fixed asset investments, and investments in stocks, entrusted wealth management, futures (rights) and derivatives, etc., and timely tracking and evaluation of the risk level of the risky business.
From the relevant regulations of the SASAC and the above cases, it can be seen that diversified investment and speculation in financial instruments are identified as high-risk business of large state-owned enterprises is accurate.
Because, on the one hand, it is easier for large state-owned enterprises to obtain funds to engage in high-risk business, and it is more advantageous for them to obtain the qualification of trading financial instruments (especially overseas futures and options); on the other hand, the risk of these two types of business is fatal to large state-owned enterprises.
In order to prevent the occurrence of high-risk business of large state-owned enterprises, enterprises should focus on the following aspects to strengthen the control:
(1) Establish a correct risk culture and awareness
Revenue and risk are **** exist.
The establishment of a correct risk culture and awareness is to not emphasize profit and scale growth, the performance improvement depends on high-risk business, while ignoring the high risk of engaging in high-risk business.
(2) Improve the control system of high-risk business and strengthen supervision and inspection
Now the large state-owned enterprises involved in high-risk business management system is relatively small, because these businesses involve decision-making, and most of them belong to the emerging business.
In addition, there is a general lack of supervision and inspection of the implementation of the internal control system in state-owned enterprises, which also leads to the loss of the seriousness and authority of the system.
The main reasons for this are the lack of attention to internal control by business leaders and the weakness of the internal audit force in state-owned enterprises.
(3) Improve the corporate governance, the establishment of decision-makers checks and balances
Large state-owned enterprises management of the administrative color is relatively strong, corporate governance is not perfect, the phenomenon of insider control is still relatively serious, the management of the arbitrary and arbitrary is the main reason for decision-making mistakes.
The biggest risk of large state-owned enterprises is the risk of strategic decision-making; on the one hand, it is manifested in the wrong choice of strategic direction, and on the other hand, it is manifested in the lack of awareness and management of strategic risks.
(4) Strengthen the supervision of state-owned assets and establish a risk early warning mechanism
Although the 16th National Congress has made it clear that the State-owned Assets Supervision and Administration Commission (SASAC) has to "manage assets, manage people, and manage things", the supervision of state-owned enterprises by SASAC is still relatively backward.
The main reason for this is that the SASAC is still lagging behind in the technology and means of supervision of centralized enterprises, for example, it has not yet established a set of feasible risk warning mechanism.