Abstract
This chapter examines the structure and problems of Chinese enterprise risk management in light of COLC model. For this purpose, the chapter clarifies the peculiar features of the enterprise risk management under strong governmental safeguard and its problems in shifting process of governmental strategy from ‘absorbing foreign power’ to ‘going global’. The chapter understands the limitation of applying COLC model to this risk management through this examination. This chapter first enquires into a close relation between enterprise risk management and governmental administration system and some problems of the government-oriented risk management at the stage of ‘going global’ strategy. Then the chapter looks into the actual situations of risk management practices in finance company and supply chain under leadership of the group company. Last, the contemporary meaning of Chinese enterprise risk management is grasped in light of COLC model and from the viewpoint of uncertainty control.
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Central (national) enterprises are state-owned enterprises under supervision of SASAC and the administration sections of the State Council. Furthermore, state-owned enterprises primarily consist of the above central enterprises and nonfinancial state-owned and state-holding enterprises under supervision of 36 provincial governments. Though the number of the state-owned enterprises accounts only for very low percentage of total number of enterprises (about 2%), their role in national economy is tremendous. They occupy over half of total national sales in nine key industries such as resources, energy-related business, electric power, gas, iron and steel, and others, with governmental guardianship acting as a regulatory barrier to entry. Their added value accounts for about 20% of the national GDP, their fixed assets investment for 19% of total social fixed assets investment, and their taxes paid for 34.6% of the national financial revenue annually from 2007 to 2013. The number of central enterprises that are counted among the Fortune 500 increases every year. As for the listed central companies under supervision of SASAC , the converted ratio of assets into securities amounts to 50% of the total assets and governmental stockholders’ equity is overwhelmingly high in comparison with minority stockholders’ equity (20%). (See Yang and Song 2014, pp. 23–26.)
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For further details on national laws and regulations involving internal control systems and enterprise risk management, see SASAC’s document (2006), and Ministry of Finance (2008): mof.gov.cn/zhengwuxinxi/caizhengwengao/caizhengbuwengao2008/caizhengbuwengao200810/t20081030_86252.html.
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For further details of the plan, see Ninth Five-year Plan of National Economic and Social Development in the People’s Republic of China and Outline for Long-range Goal till 2010, Chinese Communist Party’s Papers and Documents/Data, 1996: available online at: <cpc.people.com.cn/GB/64184/64186/4494253.html#>.
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Regarding governmental documents, see Important Strategic Mission (1986), Enterprise Management, No. 5, pp. 24–25; Outlines for the Modernization of Enterprise Management (1986), Enterprise Management, No. 6, pp. 43–47.
- 6.
This chapter discusses ‘group companies’ on the basis of findings of Yuan and Zhang (2011) and Yuan and Zhang (2015). In the former paper, eight of the ten researched companies were state-owned enterprises and two companies were private enterprises; while in the latter, eight of the ten researched companies were state-owned enterprises, one was a local government–owned enterprise and the other was a private enterprise.
- 7.
The data is obtained from the following sources: Strong 500 Ranking in China (List of Companies Names), FORTUNEChina.com , 2011, 2015 and 2016: fortunechina.com/fortune500/c/2016-07/13/content_266415.htm, 2015-07/08/content_242835.htm and 2011-07/13/content_62684.htm.
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See Questions and Answers: Nobel Laureate Robert Engle on systemic risk and financial volatility in China, ARCH-economist, 19 December 2014: Chinaeconomicreview.com/ARCHeconomist.
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Nishimura, A. (2019). Examination of Chinese Enterprise Risk Management from the Perspective of the Integrated Management of Profit Opportunity and Risk. In: Management, Uncertainty, and Accounting. Palgrave Macmillan, Singapore. https://doi.org/10.1007/978-981-10-8989-3_12
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