Exploration of internal control risk management in auto parts manufacturing enterprises

  With the accelerated pace of reform and opening up, China’s automobile industry has developed rapidly, becoming an important part of the national economy and contributing to the socialist modernization.

Auto parts manufacturing enterprises play an important role in the auto industry, and their healthy and sustainable development has an important impact on the modernization of China. Therefore, how to promote the steady development of China’s auto parts manufacturing enterprises has become a topic of wide national attention, of which the promotion of the level of internal control risk management of enterprises is the key.

Therefore, the author’s research on the topic of “Exploring the risk management of internal control in auto parts production enterprises” is of practical significance.

  Types of financial risks in auto parts manufacturing enterprises

  At the present stage, the market economy system reform is gradually deepened and implemented, knowledge economy and economic internationalization are the main trend of economic development, the internal and external environment faced by enterprises in practice is increasingly complex, and the types of risks that enterprises need to deal with in the process of implementing internal control management are increasing, the core of which is financial risk.

The so-called financial risk refers to the uncertainty of corporate losses and the uncertainty of corporate profits. According to the actual development and business scope of auto parts manufacturing enterprises, the financial risks they face mainly contain the following three types.

  (i) Debt service risk

  Debt service risk is the most serious type of enterprise financial risk, in practice, once the enterprise debt service risk, the enterprise will face a relatively serious financial crisis, in serious cases will push the enterprise to bankruptcy. The so-called debt service risk refers to the enterprise in the production, operation and management of the process does not have sufficient funds and collateral to repay the enterprise’s debts, the evaluation of the enterprise debt service risk is generally through the current ratio, quick ratio, capital turnover ratio, interest multiplier, cash ratio and other indicators for evaluation.

Auto parts manufacturers generally have a high probability of debt service risk in the development process, so such enterprises should pay great attention to debt service risk and take effective ways to prevent the occurrence of debt service risk.

  (ii) Investment risk

  In the background of market economy, knowledge and capital are the fundamentals of enterprise development, so enterprises will make investment in the process of business management according to the market development, and the investment behavior of enterprises will be accompanied by certain investment risk, the so-called investment risk refers to the enterprise’s investment projects do not achieve the expected returns.

For small and medium-sized enterprises, investment behavior generally shows the characteristics of chance, so compared with large and medium-sized state-owned enterprises, small and medium-sized enterprises face a higher probability of investment risk in the investment process. With the continuous development of automobile industry, auto parts production enterprises face more business opportunities in practice, so the investment behavior will gradually increase in the future, so the investment risk will be the focus of the financial risks faced by auto parts production enterprises in the future.

  (C) operational risk

  Operational risk is the enterprise practice of financial management process, the accounts receivable, cash and inventory management of the uncertainty faced. Operational risk is the most common type of enterprise financial risk.

Since auto parts manufacturers are the end units in the automotive industry chain, they are generally in a passive state in the development of the industry chain, and because downstream enterprises have certain advantages in the industry chain, so the accounting period is generally long, which to a certain extent exacerbates the probability of the occurrence of operational risk.

Therefore, the auto parts manufacturing enterprises should focus on the operational risk in the process of implementing management.

  Countermeasures to improve the internal control risk management of auto parts production enterprises

  (1) Further strengthen budget management

  The premise of strengthening budget management is to clarify the objectives of budget management. Only by clarifying the objectives of financial budget management can we effectively make the actual operation consistent with the budget objectives and reduce the probability of financial risks.

What needs to be done is to combine the financial budget with the operating forecast. Relative to the smaller auto parts enterprises, the difficulty of the financial budget is the uncertainty of the future development direction of the enterprise, the control of the economic form in the general direction of the enterprise, and the judgment of the development prospect of the auto industry are also difficult points of management.

It is necessary to combine the enterprise’s own development status with the objective market development environment, improve the analysis of the entire industrial chain and value chain, and then clarify the financial budget management objectives.

  (2) Build risk management early warning mechanism

  Enterprise risk early warning system is a complete system for enterprises to collect alert information, analyze and process the alert information, and issue alert signals at the same time. If some financial risk factors change beyond the limits set, the system will automatically identify and evaluate the risk, and send out the corresponding warning signal.

Through the establishment of financial risk warning mechanism, enterprises can timely find the financial risks in the development process, and timely solve, greatly reducing the financial risk of enterprises. It is of great importance for the enterprise to control the finance. In the process of formulating, the enterprise needs to choose the early warning method and then set the standard value of the critical point to make the risk early warning mechanism more realistic.

  (c) Innovative risk management methods

  The control measures of financial risks mainly include several ways such as risk avoidance, risk retention, risk transfer and back-up measures. Adequate risk control measures can provide enterprises with a variety of options, so that enterprises can choose risk control methods in line with their own development needs and maximize the risk control effect.

Risk avoidance refers to the inevitable occurrence of risk control, while the consequences of the occurrence of risks beyond the scope of the enterprise; risk transfer means that the enterprise can sell, outsourcing and other ways to transfer the risk; risk retention refers to some enterprises are not able to transfer the risk, but the risk is within the tolerable range, can be used; backup measures refer to the enterprise in order to reduce the consequences of the risk assumed The back-up measures refer to the pre-designed measures to reduce the consequences of the risks undertaken by the enterprise, so that the risks can be stopped in time after they occur.


  In summary, the comprehensive improvement of the level of internal control risk management of auto parts production enterprises is to promote the needs of China’s economic development, is necessary to enhance the comprehensive competitiveness of enterprises, is the need to build a modern financial management system of enterprises.

It is hoped that the article can make the enterprise decision-making department, financial management department and financial workers have a correct understanding of the financial risks faced by the enterprise in the process of production and operation management, to ensure that the enterprise can take effective measures to strengthen internal control and risk management, and to implement effective prevention and resolution of the risks faced or to be faced by the enterprise.

This will ultimately help enterprises to embark on a healthy and sustainable development path, promote the orderly modernization of construction, and achieve the great rejuvenation of the Chinese nation during the critical period of China’s “13th Five-Year Plan” history.