Tóm tắt luận án Tiến sĩ Financial risk management at enterprises of the Vietnam national Coal and Mineral industries holding corporation limited

MINISTRY OF EDUCATION AND TRAINING
THUONGMAI UNIVERSITY
-------------------------

DAM THI THANH HUYEN

FINANCIAL RISK MANAGEMENT AT ENTERPRISES OF
THE VIETNAM NATIONAL COAL AND MINERAL
INDUSTRIES HOLDING CORPORATION LIMITED

Major: Banking - Finance
Code: 9.34.02.01

Summary of economic doctoral thesis

Ha noi


The work was completed at: Thuongmai University

Science instructor
1. Assoc.Prof.Dr. Nguyen Thu Thuy
2. Assoc.Prof.Dr. Pham Thi Thanh Hoa

Reviewer 1: .........................................................................................................
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Reviewer 2:..........................................................................................................
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Reviewer 3: .........................................................................................................

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The thesis will be protected before the thesis review board meeting at
………………………………………………………………………

The dissertation can be found at
National Library
Thuongmai University Library


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INTRODUCTION
1. Urgency of the thesis topic
Vietnam is on the path of strong development and integration into the global economy. This
provides a great advantage for Vietnamese enterprises in expanding their markets and business
fields and in penetrating into global markets. Thanks to this, strong development steps for
enterprises can be made, especially after WTO entry and the singing of Free Trade Agreements
(FTAs). However, enterprises also face fierce competition with foreign companies and large
multinational economic corporations. In fact, the experience of other countries shows that strong
economic groups in both the state and private sectors will be the driving force to ensure the
successful integration process. The development of economic groups is an inevitable part of the
process of cooperation and development of various types of enterprises and investment cooperation
relationships based on the demand for market development and international economic integration.
Among the economic corporations in Vietnam, the Vietnam National Coal and Mineral
Industries Holding Corporation Limited (Vinacomin) is a state-owned economic group created by
the merger of Vietnam Coal Corporation (established in 1994) and Vietnam Minerals Corporation
(established in 1995). Its main business lines include: Mining, processing coal and minerals;
production of electricity, building materials, and mining chemicals; repair, assembly and
manufacturing of mining equipment. Over the years, Vinacomin has exploited over 700 million

tons, becoming one of the strong economic groups of the country. Vinacomin is currently one of the
three pillars of ensuring national energy security, the largest coal producer and supplier, the only
alumina producer, and the largest non-ferrous metal producer and suppler for domestic economy
and export. Vinacomin is currently the State's top development priority. Thus, Vinacomin has
achieved many remarkable achievements and contributed to the country's economic development.
However, the management board of Vinacomin finds that enterprises in the group still had many
potential risks such as the use of financial leverage, the ability to balance cash flow to ensure
solvency, bad debts, ineffective financial investment... Therefore, it is necessary to have a financial
risk management mechanism to minimize losses, which has practical significance for enterprises of
Vinacomin when there are many potential factors that cause instability in the group's operations.
Moreover, in the context of many changes in the economy, corporate financial risk is an issue that
needs to be taken care of. Therefore, one of the necessary skills for financial management activities
is to be equipped with in-depth practical skills on financial risk management in enterprises,
including issues of risk identification and assessment, risk management tools, analysis and forecast
of corporate financial risk. To contribute to identifying, analyzing evaluating, and creating a
scientific and objective basis to propose solutions to prevent and limit financial risks at
Vinacomin’s enterprises under Vinacomin, the author has selected “Financial risk management at
enterprises of the Vietnam National Coal and Mineral Industries Holding Corporation Limited” as
the thesis topic.
2. Research objective
* Overall research objective
Based on applying the basic theory of financial risk and financial risk management, the thesis
studies financial risk management at Vinacomin’s enterprises during 2013-2019. From there, the
thesis provides policy recommendations to strengthen financial risk management at Vinacomin's
enterprises in order to prevent and minimize financial risk, and improve financial management quality
and business efficiency.
* Specific research objectives


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From the above overall research objectives, the thesis sets out the following specific
objectives in terms of theory and practice:
Firstly, systemize the theoretical issues of financial risk management at enterprises and
study practical experience of financial risk management at some enterprises in economic groups
Secondly, assess the current situation of financial risk, financial risk management and identify
the impact trend of factors affecting financial risk at Vinacomin's enterprises (such as: debt structure,
solvency...), and analyze achieved results, limitations and their causes.
Thirdly, propose solutions to strengthen financial risk management at Vinacomin's enterprises
3.1. Research subjects
The thesis focuses on studying financial risk management including identification,
measurement, control and financing of financial risks in business activities of Vinacomin's
enterprises.
3.2. Research scope
- In terms of content: The thesis focuses on studying financial risk management contents
including financial risks such as: exchange rate risk, interest rate risk, financial leverage risk,
commercial credit risk and liquidity risk in business activities at Vinacomin’s enterprises.
- In terms of space: The thesis studies Vinacomin’s enterprises, including 1 parent company
and 32 subsidiaries.
- In terms of time: The thesis focuses on the study and survey of the current situation of
financial risk management at Vinacomin’s enterprises; the actual data are studied in the years from
2013 to 2019 and proposed solutions are for the period up to 2035.
4. Contributions of the thesis
In terms of theory
The thesis has systemized and clarified the basic theoretical issues of corporate financial risk
and financial risk management.
Also, from analyzing the experience in financial risk management at enterprises in several economic
groups in the world, the thesis has drawn lessons for Vinacomin’s enterprises.
In terms of practice
The thesis has pointed out that the characteristics of business lines of Vinacomin’s enterprises

affected their financial risk management.
The thesis has analyzed the current financial risk situation of Vinacomin’s enterprises
regarding different types of risks: exchange rate risk, interest rate risk, financial leverage risk,
commercial credit risk, and liquidity risk.
The thesis has applied the MDA econometric model to analyze factors affecting the financial
risks at Vinacomin’s enterprises, including 1 parent company and 32 subsidiaries during the period
from 2013 to 2019.
The thesis has assessed the current situation in financial risk management at Vinacomin’s
enterprises from 2013 to 2019 according to four main aspects: identification, measurement, control
and risk financing in IPA model.
The thesis has presented the achieved results and existing limitations in financial risk
management at Vinacomin’s enterprises and analyzed the causes of such limitations.
From the above practical studies, the thesis has proposed solutions to strengthen financial risk
management at Vinaconmin’ enterprises, which are: solutions to enhance financial risk
identification, methods of financial risk measurement, financial risk control and financing risks,
solutions to improve risk management capacity and suggestion on a financial risk management


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model for Vinacomin’s enterprises. These solutions are linked to ensure consistency and feasibility.
At the same time, several recommendations to the government and banks have been proposed in the
thesis in order to facilitate the implementation of the mentioned solutions.
5. Thesis structure
In addition to the introduction, conclusion and list of tables, figures, list of references and
appendices, the thesis has 4 chapters:
Chapter 1: Literature review and research methods.
Chapter 2: Theoretical and practical bases of corporate financial risk management
Chapter 3: The current situation of financial risk management at Vinacomin’s enterprises
Chapter 4: Orientations and solutions to strengthen financial risk management at

Vinacomin’s enterprises
CHAPTER 1
LITERATURE REVIEW AND RESEARCH METHODS
1.1. Literature review
1.1.1. Studies on the theories of risk and financial risk
1.1.2. Studies on financial risk identification
1.1.3. Studies on financial risk measurement
1.1.4. Studies on financial risk control
1.2 Scientific and practical values of published studies; research gaps
1.2.1 Scientific and practical values
In general, relevant published studies so far have contributed to clarifying the theoretical
issues of financial risk and financial risk management of Vietnamese enterprises. Doctoral theses as
well as scientific articles mainly analyzed the current situation and pointed out types of financial
risk and financial risk management procedures of enterprises in general in a certain research period;
from there, they have proposed solutions to strengthen financial risk management in enterprises
About research methods: : Most of the published studies used qualitative methods; very few
studies used quantitative methods.
In the studying and writing processes, in order to come up with solutions to strengthen
financial risk management at Vinacomin’s enterprises in the current period, the author has consulted
a part of the theoretical and practical basis as well as research methods of these studies. The author
has also consulted the financial risk management experience at enterprises of large economic groups
in some countries, thereby drawing lessons for Vietnamese enterprises. Besides, the authors has
inherited the approach of quantitative models to study the current situation of financial risk
management or factors affecting financial risk at Vinacomin's enterprises.
1.2.2 Research gaps and research directions of the thesis
From the literature review, it is shown that the published studies still have the following
limitations and research gaps:
- These studies have mentioned a lot about corporate financial risk management; however,
there has not been any specific research on financial risk management at Vinacomin's enterprises.
- There has not been any published study on corporate financial risk management at

enterprises in general and at enterprises of specific economic groups in Vietnam using the IPA
model for analysis.
- There have not been many in-depth studies on the financial risk management model using


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the MDA regression model to analyze the factors affecting the financial risks of Vinacomin's
enterprises. The expected results of the study will provide recommendations for management
agencies and risk management methods for Vinacomin's enterprises in particular and other
economic groups in general.
Based on such limitations and gaps, the thesis will focus on clarifying the following main
contents:
- Synthesize theoretical basis and practical model in corporate financial risk management
- Analyze the current situation of financial risk management at Vinacomin's enterprises in the
period of 2013 - 2019 through the IPA model.
- Provide conclusions in verifying factors affecting financial risk at Vinacomin's enterprises
through the MDA model.
- Propose solutions and recommendations for adjusting appropriate policies for financial risk
management activities atVinacomin's enterprises.
1.3. Thesis research process and research methods
1.3.1 Thesis research process
To answer the above research questions, the author has proposed a research process
consisting of 6 steps:
Step 1: Identify the research problem
Step 2: Present literature review
Step 3. Identify research gaps and provide viewpoint on the thesis approach
Step 4. Systemize the theoretical basis related to the research topic.
Step 5. Study the current situation of financial risk, financial risk management and factors
affecting financial risk at Vinacomin's enterprises and present research results.

Step 6. Based on the research results, provide viewpoints, discussions and recommendations
to strengthen financial risk management at Vinacomin's enterprises
1.3.2 Research methods
The thesis has applied methods of dialectical materialism and historical materialism to study
socio-economic issues. Accordingly, the thesis has used a combination of research methods, which
are qualitative and quantitative research methods..
1.3.2.1. Qualitative research methods
Qualitative research method aims to explore and understand deeper the practice of financial risk
management at Vinacomin's enterprises in the current context. This qualitative research has been
conducted through in-depth interview technique with experts. This is a very suitable research method to
explore the views and thoughts of research subjects. The author has conducted the interview method
directly or by phone with leaders of enterprises who are the Board of Directors/Board of members,
directors, deputy directors, financial experts, chief accountants and other experts, specialist in
accounting and finance.
1.3.2.2. Quantitative research methods
The theis has applied the quantitative method on the basis of using information from
questionnaires to collect data on the current situation of financial risk management at Vinacomin's
enterprises. As the characteristics of financial risk management is to prevent, limit and avoid loss
due to risks for enterprises, to assess the importance and usage level of each group of financial risk
management, the application of the IPA method is considered to be the most appropriate and


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feasible. It is because this model measures the characteristics of the types of financial risk based on
the difference between the importance of the types of financial risk and the usage level of the types
of financial risk by enterprises. Results from the analysis of importance and usage level is shown
by scatter plot with the support of SPSS software version 20.

Importance level

In the traditional IPA model, the matrix is built based on two factors, namely "Performance"
and "Importance", using the average value of these two factors to build a Quadrant matrix
consisting of 4 cells, with the following components:

STRATEGY C

STRATEGY K

(Concentrate here)

(Keep up good work)

STRATEGY L

STRATEGY P

(Low priority)

(Possible overkill)

Performance (Usage level)
Figure 1.1: Matrix of Importance - Performance Analysis with respective strategies
- In addition, the thesis has applied the MDA econometric model of Alexander Bathory to study
the factors affecting financial risks at Vinacomin's enterprises. The observational sample of 33
Vinacomin's enterprises is collected from audited financial statements, annual reports and other
related data for the period from 2013 to 2019. The data in this thesis are balanced panel data,
consisting of 231 observations. The thesis has applied the methods of quantitative analysis on panel
data (Panel Data), Pooled OLS, FEM, and REM to analyze factors affecting financial risk of
Vinacomin's enterprises.

Alexander Bathory (1984) analyzed 25 indexes including indicators reflecting profitability,
capital structure ..., then focused on 5 indicators explaining financial risk (FRit) of the business:
FRit = SZLit + SYit + GLit + YFit + YZit. In which, SZLit: (Profit before tax + Depreciation of
fixed assets + Deferred income tax) / Short-term debt; SYit: Profit before tax / Total capital; GLit:
Equity / Short-term debt; YFit: Residual value of fixed assets / Liabilities; YZit: Working capital /
Total assets. The feature of this model is applicable to all types of businesses because it is very
simple for calculating and forecasting the possibility of bankruptcy as well as measuring the
financial capacity of the business. Alexander Bathory (1984) states that the smaller the value of the
model (FRit), the higher the financial risk of the business.
Table 1: Description of variables in the research model

01
01
02
03

Variable name
Dependent variables
Dependent variables
Independent variable
Debt structure
Solvency

Code
FRit
DS
CR
QR

Formula

Expectations

SZLit + SYit + GLit + YFit + YZit
Current liabilities
Total liability
Current assets
Current liabilities
Current assets - Inventories

(-)
(+)
(+)


8

04

IGS

05
06

ROS
Profitability
ROA

07

IT

08
09

FAT
Operation ability
TAT

10

RT

11
12

ES
Financial structure
FAS

Control variable
01
Interest rate
02
03
04

Current liabilities
Total assets
Total liabilities

Net income
Sales
Net income
Average total assets
Cost of goods sold
Average inventories
Sales
Average fixed assets
Sales
Average total assets
Sales
Average accounts receivable
Equity
Total assets
Fixed assets
Total assets

Average interest rate on loans
of the commercial Bank
Time calculated by year since
AGE
Firm age
the enterprise was founded
STATE
State ownership rate
State ownership rate (%)
Numbers of member in
The size of Members'
BOD
Member’s Council / Board of

Council / Board of Directors
director
Source : Results colleted from references
IR

(+)
(+)
(+)
(+)
(+)
(+)
(+)
(+)
(+)

(-)
(+)
(-)
(+)

Based on experimental studies and related theory, the author proposes the following research
hypotheses:
- H1: Debt structure (DS) of VINACOMIN has a negative impact and has statistical significance
on FRit.
- H2: The solvency (CR, QR, IGS) of VINACOMIN has a significant positive impact on the FRit.
- H3: The profitability (ROA, ROS) of VINACOMIN has a positive influence on FRit.
- H4: Performance (FAT, TAT, RT) of VINACOMIN has a significant positive influence on FRit.
- H5: Financial structure (ES, FAS) of VINACOMIN has a significant positive impact on FRit.
- H6: Interest rate (IR) of loan of VINACOMIN has a negative impact on Frit.
- H7: Age (AGE) of VINACOMIN has a significant positive influence on FRit.

- H8: The size of Members' Council / Board of Directors (BOD) of VINACOMIN has a
significant positive impact on FRit.
- H9: State ownership ratio (STATE) has a negative impact and has statistical significance to FRit.


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CHAPTER 2
THEORETICAL AND PRACTICAL BASES OF CORPORATE FINANCIAL REISK
MANAGEMENT
2.1. Corporate financial risk
2.1.1. Overview of corporate financial risk
Although there are many different approaches to the concept of risk, according to the author's
approach:
- In qualitative aspect: Risk is uncertainty or a state of uncertainty.
- In quantitative aspect: Risk is the difference between the actual value and the expected
value, measured by standard deviation.
The nature of risk is also reflected in its inherent characteristics, which are uncertainty,
randomness and instability.
2.1.2. Overview of financial risks at enterprises
From the above studies on financial risk, the author has introduced the concept of corporate
financial risk as follows: “Corporate financial risk is the risk arising from changes in interest rates,
foreign exchange rates and the implementation of corporate financial decisions that cause
fluctuations in the actual rate of return compared with the expected rate of return during the
operation of an enterprise”.
2.1.3. Impact of financial risk on enterprises
2.1.3.1. Impact of financial risk on business costs
The impact of financial risks on business costs is reflected in three aspects: the cost of capital
mobilization (or the cost of using capital), business expenses and financial distress costs.
2.1.3.2. The impact of financial risk on corporate profitability

When investing in a project, an enterprise considers if the return is worth the risks encountered?
Theoretically, the higher the risk, the greater the return. If enterprises do not manage project finance
effectively, long-term risks can cause "erosion" of profits. Financial risks may occur leading to an
increase in the inefficient costs of the project, affecting profits.
2.1.3.3. Impact of financial risks on business performance and competitiveness of enterprises
The impact of financial risks on business expenses and profit is the impact on business
efficiency and competitiveness of enterprises. Business efficiency of an enterprise shows the
comparison between the results obtained with the costs spent to achieve that result in business. The
lower the cost spent, the greater the profit obtained and the higher the efficiency, . The higher the
business efficiency, the healthier the financial situation and the higher the competitiveness of an
enterprise.
2.1.3.4. Impact of financial risk on business value
Financial risks results in reduced cash flow and affects investor confidence. Due to increased risk,
investors demand high rates of return to compensate. They all affect business value.
2.2. Corporate financial risk management
2.2.1. The concept and necessity of financial risk management
2.2.1.1. The concept of financial risk management
Steven Li (2003); Triantis (2000); Drogt & Goldberg(2008); Assoc.Prof.Dr. Nguyen Thi Ngoc
Trang (2007); Assoc.Prof.Dr. Vu Van Ninh and Dr. Pham Thanh Hoa (2017), the authors would like to
introduce the concept of corporate financial risk management as follows: "Financial risk management
is the identification of the level of financial risk that an enterprise accepts and the measurement of the
level of risk that an enterprise may have to bear, thereby using management tools and measures to
adjust the actual level of risk according to an enterprise’s objectives”.


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2.2.1.2. The necessity of corporate financial risk management
- Ensure that production and business activities are not interrupted
- Help enterprises achieve their set strategic goals

- Help to build strong trust with investors
2.2.2. Contents of corporate risk management
2.2.2.1. Identify corporate financial risk
Risk identification methods
Traditional method: This method is based on the risks that enterprises encountered in the past
to determine the risks that may be faced in the future.
Safe system approach: Since the risks in this field were mostly unknown in the past but
required maximum prevention, scientists had to build risk simulation models based on the analysis
of the operational process and environment, thereby detecting the risks arising in that simulated
environment.
Financial risk identification tools
Four common groups of tools are commonly used for risk identification:
- Risk analysis questionnaire: this is the main tool used in identifying financial risk. The questions
can be arranged according to the origin of financial risk or by the impact environment (micro, macro,
internal, or external environment)...revolving around issues such as the corporate financial risks
encountered, level of loss, the number of occurrences of the risk in a given period, precautions used and
their effectiveness.
- List of risks: this list includes common risks such as: interest rate risk, exchange rate risk,
investment risk, credit risk... However, this list cannot cover all the risks that an enterprises may encounter;
it must be used in combination with other tools.
- List of insured financial risks: This list can be obtained from insurance companies to determine
which risks can be moved or shared by insurance policies, and which risks cannot. The statistics of
insurance companies on financial risks that economic corporations may encounter also provide a good
basis for determining corporate financial risks.
- System of experts: these are pre-built financial risk identification procedures for each specific field,
which is a combination of all three tools above. However, these systems are not always available and may
not be suitable for all enterprises in all circumstances.
Financial risk identification procedure
Financial risk identification is usually carried out through the following four steps:
- Orientation: This is the first step that must be taken to detect financial risk. The purpose is to

gain a broad and comprehensive understanding of the enterprise and its activities to guide the
identification of financial risk.
- Document analysis: this is the analysis of documents related to the enterprise, including internal
documents and documents about the enterprise provided by external parties.
- Interview: A lot of information cannot be found in documents but can only be obtained
through interviews with managers or employees. The interviews were aimed at clarifying the
information in the documents or supplementing the missing information.
- Direct survey and investigation: On-site survey will help provide information that is often very
valuable, helping to identify financial risks that may not have been detected before.
Signs to identify financial risks
- Identify exchange rate risk
- Identify interest rate risk
- Identify risks posed by financial decisions


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2.2.2.2. Measurement of corporate financial risk
- Objectives of measurement of corporate financial risk
Identifying financial risks is the first step in the risk management process. However, there are
many types of financial risks; enterprises cannot deal with, control and prevent all types of financial
risks at the same time due to limited financial resources and the fact that risks are unexpected events
so they cannot all be recognized. There are types of financial risks that occur with high frequency
and those with very low frequency; there are also types that cause serious consequences or those
that cause less serious impact... As a result, appropriate financial risk management measures must
be taken. To do so, enterprises needs to conduct the measurement, analysis and forecast of corporate
financial risk; they are included in the process of quantifying and assessing the severity of corporate
financial risks to ensure effective financial risk management.
- Qualitative measurement methods
According to experts, experience of financial risk management shows that the following five

groups of criteria are most widely used in qualitative measurement of financial risks.
- The ratio of value of overdue debts or bad debts or written-off debts to total outstanding
loans is increasing
- The proportion of debts that have been restructured or reversed, postponed, extended or
frozen compared to the total outstanding loans is increasing.
- The ratio between provisions for bad debts, decrease in inventory price, and annual decrease in
financial investment price compared to provision to total assets is high and increasing.
- Operational efficiency tends to decrease or become negative.
- Performance tends to decrease.
- Quantitative measurement methods
- One: using standard deviation and coefficient of variation
- Second: using the value of risk VaR (Value at Risk)
- Third: using the bankruptcy risk coefficient Z-Score
- Fourth: using the research model of Alexander Bathory
2.2.2.3. Control of financial risk
- Basic content of financial risk control: this often aims at the following five groups of
solutions: financial risk reduction, risk avoidance, risk prevention and mitigation, risk transfer or
risk sharing, risk taking.
- Some measures to prevent financial risks: (1) Using derivative financial instruments; (2)
Controlling interest rate risk and financial leverage risk; (3) Controlling exchange rate risk; (4)
Controlling trade credit risks
2.2.2.4. Corporate financial risk offset
Financial risk management is not about preventing all bad possibilities from happening,
but accepting a reasonable cost to prevent and minimize losses due to risk. A financial risk
management plan is only effective when it costs less than the damage caused by risk or the
insurance premiums an enterprise has to pay. However, there are many types of risks that cannot
be transferred and an enterprise is forced to accept. Therefore, the cost of financial risk
management cannot be the only factor to evaluate the effectiveness of corporate financial risk
management. In order to cope with financial risks, enterprises must regularly ensure necessary
reserve funds and be ready to cover all possible losses to ensure safety for financial activities.

Depending on the characteristics of each type of loss, an enterprise is entitled to use appropriate
capital sources to offset.
2.2.3. Financial risk management model
Currently, there are 3 models of financial risk management in the world and in Vietnam as


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follows:
(1) Centralized financial risk management model
(2) Dispersed financial risk management model
(3) Combined model of the above two models
2.2.4 Evaluation criteria for corporate financial risk management
Quantitative evaluation criteria:
- The level of understanding and interest of enterprises in corporate financial risks and
financial risk management
- The degree of completion of the legal framework related to corporate financial risk
management
- The level of completion in terms of organizational structure, personnel, and physical
facilities
- The level of compliance and implementation of the contents of corporate financial risk
management process
- The level of effectiveness and efficiency of financial risk management activities in each
stage of identifying, measuring, controlling and handling risks and financial risk offset of the
enterprise.
Quantitative evaluation criteria:
- The reduction in standard deviation or coefficient of variation of an enterprise's return on
equity (ROE)
- The reduction in the ratio of overdue debt (or bad debt, written off debt) compared to the
total outstanding debt of the enterprise.

- Reduction in the ratio of provisions for risks
- In addition, businesses can also use the indicators of change in risk value (VaR), change
in risk coefficient of bankruptcy (Z-Score), research model of Alexander Bathory... before and
after implementing risk management measures to evaluate risk management results.
2.3. Factors affecting corporate financial risk management
2.3.1 Internal factors of enterprises
In this section, the author has presented the theory of factors affecting financial risk
management in the internal and external environment of enterprises, including: management level
of the leadership team, business line, management structure, and corporate financial policy.
2.3.2 Internal factors of enterprises
In this section, the author has presented the theory of factors affecting financial risk
management in the internal and external environment, including: political environment, sociocultural environment, regulatory environment, and economic environment.
2.4. Experience in financial risk management at some enterprises of economic groups
in the world and lessons for enterprises of economic groups in Vietnam
Through studying the financial risk management process at enterprises in leading
economic groups in the world (such as: Petronas Group - Malaysia, NTT Group - Japan, TELUS
Economic Group - Canada, US economic groups), the author has drawn a number of lessons
learned for enterprises of economic corporations in Vietnam in risk management as follows:
Firstly, raising awareness of financial risks for all enterprises of economic groups.
Secondly, establishing a unit specializing in risk management
Thirdly, establishing a set of criteria to evaluate the results of financial risk management


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activities to ensure comprehensive and systematic characteristics.
Fourthly, applying advanced science, technology and models to help identify, measure and
assess corporate financial risks
Fifthly, promoting the activity of hiring consultants to improve the risk management
process

Sixthly, selecting a financial risk management model suitable to the size and development
of economic groups' enterprises
CHAPTER 3
THE CURRENT SITUATION OF FINANCIAL RISK MANAGEMENT AT VINACOMIN’S
ENTERPRISES
3.1. The history of establishment and development of Vinacomin’s enterprises
3.1.1. General information about Vinacomin’s enterprises
Vinacomin was established under Decision No. 345/2005/QD-TTg dated December 26, 2005
of the Prime Minister on the basis of merging Vietnam National Coal Corporation (formerly known
as Vietnam Coal Corporation established on Oct 10, 1994 under Decision No. 563/QD-TTG of the
Prime Minister) and Vietnam National Minerals Corporation. The corporation operated under the
Charter approved by the Prime Minister in Decision No. 228/2006/QD-TTg dated Oct 11, 2006.
Then, on June 25, 2010, the Prime Minister issued Decision No. 989/QD-TTg on restructuring the
parent company - The Vietnam National Coal and Mineral Industries Group - into a one-member
limited company owned by the State. On Dec 19, 2013, the Prime Minister issued Decree No.
212/2013/ND-CP on the Charter of organization and operation of Vinacomin (replacing the former
charter issued under Decision No. 418/QD-TTg on March 21, 2011 of the Prime Minister).
- Currently, Vinacomin has one parent company (27 affiliated units) and subsidiaries: onemember limited liability enterprises (04 companies), joint-stock enterprises (29 companies), other
subsidiaries with independent accounting systems and revenue (04 units), and overseas subsidiaries
(02 enterprises).
3.1.2. Business lines of Vinacomin’s enterprises
Group of coal - mineral production enterprises; Group of
enterprises; Group of service enterprise.

mechanical manufacturing

3.1.3. Operational organizational structure of Vinacomin’s enterprises
The current organizational structure of Vinacomin's enterprises is the basis for building an
appropriate financial risk management mechanism. The organizational structure of the management
apparatus of enterprises under Vinacomin includes: Board of Directors / Board of members, Control

Board, Board of manager, Functional departments and units.
3.2. Overview of the financial situation in Vinacomin’s enterprises
3.2.1. Business results of Vinacomin’s enterprises in the period of 2013 - 2019
Business results show the business situation and results of Vinacomin's enterprises in a certain
period, including a number of indicators such as net revenue, profit before interest and tax, loan
interest, profit before tax, and profit after tax. The table below shows that all indicators fluctuate in
an increasing and decreasing trend over the years.
Especially in 2015-2016, the decrease in revenue and profit of Vinacomin's enterprises was


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caused by the decrease in coal price by 7-10% compared to the planned cost. Revenue from the sale
of non-coal products at Vinacomin also dropped sharply due to the lack of customers. The decrease
in coal price was caused by the need to import coal from China,; the main coal import market of
Vietnam fell deeply. As a result, the coal industry's inventories increased sharply with the inventory
value reaching thousands of billions of dong. Moreover, the historic flood at the end of July and the
beginning of August in 2015 resulted in many incurred costs to overcome the consequences of
natural disasters at coal mines in Quang Ninh.


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BUSINESS PERFORMANCE OF VINACOMIN'S ENTERPRISES IN THE PERIOD OF 2013-2019
Unit: million VND
N
o

12/31/2013
Criterion

(b)

Difference (b/a)
Absolute
ratio
value
(%)

12/31/2014
(c)

Difference (c/b)
Absolute
ratio
value
(%)

(e)

Difference (e/d)
Absolute
ratio(%)
value

(1,700,863.24)

-2.2%

71,055,465.18

(5,335,143.56
)

-7.0%

(540,275.06)

-7.4%

4,669,992.87

(2,051,541.29)

-30.5%

5,521,070.68

851,077.81

18.2%

3,905,273.26

(306,181.54)

-7.3%

3,831,332.73

(73,940.53)

-1.9%

4,484,589.08

653,256.35

17.1%

-12.1%

2,816,260.90

(234,093.52)

-7.7%

838,660.14

(1,977,600.76)

-70.2%

1,036,481.60

197,821.47

23.6%

-13.7%

2,118,080.37

49,237.88

2.4%

472,799.78

(1,645,280.59)

-77.7%

1,171,950.58

699,150.80

147.9%

77,093,384.14

5,663,632.67

7.9%

78,091,471.97

998,087.83

2

EBIT

7,261,809.22

73,715.45

1.0%

6,721,534.16

3

Interest

4,211,454.80

493,000.93

13.3%

4

Profit before tax

3,050,354.42

(419,285.48)

5

Profit after tax

2,068,842.49

(327,580.30)

N
o

Criterion

(e)

12/31/2016

76,390,608.73

Net Revenue

Difference (e/d)
Absolute
value

(d)

Difference (d/c)
Absolute
ratio(%)

value

1.3%

1

12/31/2016

12/31/2015

ratio
(%)

12/31/2017
(f)

Difference (f/e)

12/31/2018

Difference (g/f)

Absolute
value

ratio
(%)

(g)

Absolute
value

ratio(%)

12/31/2019
(h)

Difference (h/g)
Absolute
value

ratio(%)

1

Net Revenue

71,055,465.18

(5,335,143.56
)

-7.0%

79,259,534.80

8,204,069.6
2

11.5%

103,081,005.01

23,821,470.21

30.1%

103,231,013.06

150,008.05

2

EBIT

5,521,070.68

851,077.81

18.2%

7,932,430.23

2,411,359.55

43.7%

9,613,691.75

1,681,261.52

21.2%

5,439,469.29

(4,174,222.46
)

-43.4%

3

Interest

4,484,589.08

653,256.35

17.1%

4,881,673.20

397,084.12

8.9%

4,615,449.58

(266,223.62)

-5.5%

1,541,875.64

(3,073,573.94
)

-66.6%

4

Profit before tax

1,036,481.60

197,821.47

23.6%

3,050,757.03

2,014,275.4
3

194.3
%

4,998,242.17

1,947,485.14

63.8%

3,897,593.66

(1,100,648.51
)

-22.0%

5

Profit after tax

1,171,950.58

699,150.80

147.9%

2,497,086.10

1,325,135.5
2

113.1%

3,867,239.57

1,370,153.47

54.9%

3,197,140.95

(670,098.62)

-17.3%

0.1%


16

((Source: Calculated from Vinacomin's consolidated financial statements for the 2013-2019 period)


17

3.2.2. Fluctuations in assets and capital sources of Vinacomin’s enterprises in the period of
2013 – 2019
The asset scale of Vinacomin's enterprises tended to decrease in the period of 2013-2019; total assets
were in the range of 124,573 - 140,211 billion VND.
Regarding the capital structure, in the period of 2013 - 2019, the corporation's capital structure lean
towards account payable which accounted for over 60% of total capital. During 2013-2016, the account
payable each year was higher than the previous year; in 2017-2019, the account payable decreased
gradually.
3.2.3. Performance efficiency of Vinacomin’s enterprises
For more accurate assessment of the performance efficiency of Vinacomin's enterprises, it is

possible to base on the profit ratio indicators. The data table shows that return on sales (ROS),
economic rate of return (BEP) have decreased sharply over the years in the period from 2013 to
2016, increased by 2017-2018 and feltt sharply in 2019.
It is shown in the appendix and chart 3.4 that both the ratio of profit after tax/total assets
(ROA) and return on equity (ROE) experienced unstable fluctuations and decreased significantly in
the period 2013-2016, then increased in 2017-2019, especially for ROE.
3.3.1 The current situation of financial risk of Vinacomin's enterprises
3.3.1.1 market risk
- Interest rate risk:
As in the overview of the financial situation of Vinacomin's enterprises, their capital
structures lean more towards loans and debts with a debt ratio of over 70%, of which short-term
loans and debts account for a relatively large proportion of total loans (approximately 50% in
2019), so the fluctuation of interest rates is a factor that has a strong impact on costs, access to
capital, and business performance. Therefore, according to the survey, most businesses have
experienced this risk.
- Exchange rate risk
Over the years 2013-2015 and 2017-2019, enterprises faced exchange rate risk due to
negative differences in the category of exchange rate. Therefore, they need to pay more attention
and take measures to identify, control and finance exchange rate risks.
3.3.1.2 Trade credit risk
Credit sales is a sales policy that enterprises apply; however, with the reduction of
receivables turnover, it shows that Vinacomin's enterprises are still slow in collecting money.
This leads to the reduction in the amount of working capital; also, in order to ensure capital
for business activities, it is necessary to mobilize more capital. In 2013, due to better changes
in the economy, and also thanks to the collection of debts of over 2,000 billion VND from
Vinacomin's enterprises, the annual capital recovery rate improved. But in 2015-2016, due
to the economic downturn, the corporation could not maintain this level of improvement. By
the year 2018-2019, when the economy improved, Vinacomin began to make a breakthrough.
In general, however, Vinacomin's enterprises were not very proactive in financial management
and did not actively respond to changes in the economy. These are the causes leading to the

commercial credit risks.
3.3.1.3 Financial leverage risk
In the period of 2013 - 2019, Vinacomin’s capital structure leaned towards accounts payable


18

which accounted for over 60% of total capital. Accounts payable from 2013 to 2016 were high,
increasing by the year. In 2017-2019, accounts payable decreased gradually. As the production and
business scale of enterprises increased, enterprises also increased capital mobilization by using
financial leverage. Even though the level of financial leverage increased, ROE decreased; as a result,
enterprises faced difficulties in paying the due principal. Clearly capital usage of enterprises were not
efficient. The high ratio use of debt while the efficiency of capital usage is reduced; this led to a
decrease in ROE and an increase in financial leverage risk for enterprises.
3.3.1.4 Liquidity risk
- Current ratio: from 2014 to 2019, these ratios were all less than 1, showing it was not
guaranteed that Vinacomin's enterprises could meet short-term debts.
- Quick ratio: the quick ratios of 0.317-0.575 (all less than 1) showed difficulties of
enterprises in settling debts.
- Acid test ratio: these ratios were all at 0.037- 0.154, less than the required level, which
showed that liquidity in cash and cash equivalents of Vinacomin's enterprises for due debts was still
low.
- Interest coverage ratio: The ratios of enterprises from 2013-2017 were all greater than 1 and
less than 2, indicating that the ability to pay interest on loans was low. In 2018-2019, these ratios
were greater than 2, showing positive and improved signs in that their ability to pay interest.
3.3.1.5. Results of verifying factors affecting financial risk of Vinacomin's enterprises
(1). Analytical process
(2). Analysis results
According to Table 3.5, Prob = 0.000 is less than 0.05, thus rejecting hypothesis H0. The final
chosen model for analysis is the FEM model

By using suitable regression techniques for the data set, the thesis has found that the factors
affecting financial risks of Vinacomin’s enterprises are: quick ratio (QR), return on sales (ROS),
inventory turnover (IT), fixed asset turnover (FAT), total asset turnover (TAT), receivable turnover
(RT) , capital structure (ES), fixed asset structure (FAS), state ownership ratio (STATE) and age of
the enterprise (AGE).
3.4. The current situation of financial risk management of Vinacomin's enterprise
3.4.1. Basis for financial risk management of Vinacomin’s enterprises
- Law on Enterprises and Decrees guiding the implementation of regulations on legal forms,
rights and obligations, organizational and management structure of the parent company and its
subsidiaries; method of exercising the rights and obligations of the parent company in relation to the
subsidiaries.
- Decree No. 105/2018/ND - CP dated 8/8/2018 of the Government promulgating the charter
of organization and operation of Vinacomin's enterprises; Decree No. 69/2014/ND-CP dated
15/07/2014 on state economic groups and state corporations. Resolution No. 44/2019/ND - HDTV
dated October 2, 2019 of the members' council of Vinacomin; Decision 1818/QD-TKV dated
October 17, 2019 promulgating the Regulation on risk management and prevention at Vinacomin;
risk management according to ISO 31000 and COSO 2004 standards; Accounting Law No.
03/2003/QH11….
3.4.2. Financial risk management model of Vinacomin's enterprises


19

There are 3 models of financial risk management In the world: dispersed model, centralized model,
and a combination model these two models. According to the results of expert interviews, currently,
Vinacomin's enterprises are applying the dispersed financial risk management model.
3.4.3. Contents of financial risk management of Vinacomin's enterprises
This IPA model classifies the attributes that measure the quality of financial risk management,
provides business managers with useful information about the current status of existing and
potential financial risks, thereby creating a scientific basis for financial risk management. This helps

managers/leaders of economic groups make the right strategic decisions to improve the quality and
effectiveness of financial risk management. The analytical results fof the importance and usage are
shown by scatter plot with the support of SPSS software version 20.
From the overview of financial risk management process presented in the previous section
combined with the results of expert interviews, the thesis has built 23 observed variables
corresponding to the survey questions.
These criteria will be evaluated on two scales: the usage level and implementation level (part
3, Appendix 1). Each scale is rated from 1 to 5 on the Likert scale. With a score from 1 to 5, the
distance value = (Maximum value - Minimum value) / n = (5-1)/5 = 0.8, so the meaning of the
average scores is as follows:
Importance level: - Scale: 1=Not important; 2=Less important; 3= Average; 4= Quite
important; 5 = Very important;
- Mean score: 1.00 - 1.80: Very unimportant; 1.81 - 2.60: Doesn't matter; 2.61 - 3.40: Average;
3.41 - 4.20: Important; 4.21 - 5.00: Very important.
Usage level: - Scale: 1= Never used ; 2 = Rarely used; 3= Occasionally; 4 = Regularly; 5=
Always.
- Mean score: 1.00 - 1.80: Never used; 1.81 - 2.60: Rarely used; 2.61 - 3.40: Occasionally;
3.41 - 4.20: Regularly; 4.21 - 5.00: Always.
From the developed set of criteria, the author has made and distributed questionnaires to 165 people
of 33 Vinacomin's enterprises, including key officials who are: directors, deputy directors, chief
accountants, heads of finance department, deputy heads of internal control department... 153 valid answer
sheets were obtained, data were cleaned and the IPA model was run on SPSS software to assess the current
situation of financial risk management.
Data collected through questionnaires using SPSS software on the respondents' assessment of
the importance and use of financial risk management are handled with results shown in the
following table:
Table 3.6. Mean score and standard deviation of importance level and usage level of each
observed variable
Importance level
Standard

Mean score
deviation
Financial risk identification
C1.1
4.00
0.975
C1.2
4.50
1.032
C1.3
3.50
0.856
C1.4
4.00
0.994
C1.5
4.30
0.985
C1.6
4.10
1.003
C1.7
4.50
0.964
Financial risk measurement
Criteria

Usage level
Standard
Mean score

deviation
2.20
4.50
1.50
3.70
4.10
4.00
4.10

1.003
0.985
0.897
0.902
0.963
0.958
0.972

Mean
difference
1.8
0
2
0.3
0.2
0.1
0.4


20
C2.1

C2.2
C2.3
C2.4
C2.5
Financial risk control
C3.1
C3.2
C3.3
C3.4
C3.5
C3.6
C3.7
C3.8
Tài trợ rủi ro tài chính
C3.1
C3.2
C3.3

4.00
4.50
4.00
4.00
3.30

0.958
1.003
0.978
0.867
0.907

4.00
4.00
4.20
1.50
3.90

0.983
1.003
0.897
0.906
0.925

0
0.5
-0.2
2.5
-0.6

3.20
4.10
3.90
4.50
4.00
4.30
4.20
3.00

1.005
0.930
0.904

0.893
0.975
1.007
1.076
0.948

2.20
3.00
3.00
4.00
3.20
4.00
3.80
4.00

1.002
0.958
0.983
0.896
0.954
0.992
0.907
0.984

1.0
1.1
0.9
0.5
0.8
0.3

0.4
-1.0

4.00
4.20
3.00

0.968
1.006
0.983

3.00
3.00
2.50

1.008
0.903
0.929

1.0
1.2
0.5

(Source: The author’s calculation using the SPSS software)
The statements about the criteria in financial risk management activities at Vinacomin are
summarized according to two descriptive statistics: the mean score and the standard deviation. The
standard deviations of observed variables fluctuate around the value 1, showing that these observed
variables follow the standard distribution with statistical significance at 95% level. From the results of
data processing, the author has made comments on the current situation of financial risk management at
Vinacomin's enterprises according to the following contents.

3.4.3.1. Financial risk identification
Among the 7 assessment factors of financial risk identification (table 3.1), most of the
respondents considered the importance level and usage level high with the mean score above 4.
However, the mean score of 1.5 for usage level factor C1.3 is low in Vietnam, meaning that no
enterprise has identified risks by building forecast models; they have mainly identified risk through
periodic analysis of corporate finance. .
According to the survey results, up to 72.5% of the respondents believed that their business
has encountered all 4 types of financial risks; especially, up to 90.19% of respondents answered that
they have encountered market risk (risk related to fluctuations in interest rates, exchange rates and
price). Thus financial risk has been a frequent problem for enterprises.
3.4.3.2. Financial risk measurement
Table 3.6 shows measurement results using qualitative methods, quantitative methods and results
obtained with different importance and usage levels.
- Ratio of overdue debt (or bad debt or written off debt) to total debit: Total debit is the amount
that customers owe to an enterprise at a given time. Not all businesses use this indicator and usage
results were different among enterprises. Among the respondents, they rate the importance level and
usage level of use at 4, showing that this measurement is very important and often used. Thus, it is clear
that businesses have overdue debt at high levels..
- Provision rate: 100% of the respondents believe that their enterprises make provisions even
though the provision rates are different among enterprises and depend on loss level of provisional
categories.
- Degree of financial leverage : The respondents also say that their enterprises all use this
measurement with a high level of importance and performance; the average score is above 4.
- There are 4 quantitative measurement methods mentioned in Table 3.6 which are standard
deviation, risk value (VAR), Z-scores are used to predict corporate defaults, and Alexander Bathory
model. 100% of the respondents believe that their enterprises do not use this method. The importance


21

level is 4 but the usage level 1.5.
- With the measurement method by sensitivity, the results show the importance level of 3.3 and
usage level of 3.9. This means the importance level is average while enterprises are regularly using the
sensitivity method. The sensitivity method is used to determine the volatility of foreign exchange rates
at the enterprise.
3.4.3.3. Financial risk control
Financial risk control is carried out to determine the control limits and extent of an enterprise
over financial transactions. The content of financial risk control includes creating an appropriate
financial risk management environment, implementing an effective financial management
mechanism and maintaining a synchronous financial risk management process.
3.4.3.4. Financial risk offset
Financial risk management is not about preventing all bad possibilities from happening, but
accepting a reasonable cost to prevent and minimize losses due to risk. A financial risk management
plan is only effective when it costs less than the damage caused by risk or the insurance premiums
an enterprise has to pay. However, there are many types of risks that cannot be transferred and an
enterprise is forced to accept. In order to cope with financial risks, enterprises must regularly
ensure necessary reserve funds and be ready to cover all possible losses to ensure safety for
financial activities.
The author's summary of financial risk offset activities at Vinacomin's enterprises is shown in
C3.1, C3.2, and C3.3.
3.3.4.5. Matrix of importance level and usage level of financial risk management criteria of
Vinacomin's enterprises
The author based on calculated the mean value of the importance level (importance) and the
performance level (performance) of the corresponding factor to create the Scatter plot. The
obtained results include 4 quadrants as follows:

Some policy and management implications drawn from the IPA matrix analysis
Concentrate here
Firstly, this strategy targets factors with high importance but low usage level. Specifically,
Vinacomin enterprises should apply more frequently the financial risk measurement technique by

quantitative model, such as through standard deviation Var, Z-Score and Alexander Bathory model.
Secondly, it is necessary to focus on improving the identification of financial risks through
building a financial risk prediction model combined with the use of expert advice.
Thirdly, Vinacomin's enterprises need to maintain the method of controlling financial risks
with an internal control system, and operate this system effectively to control financial risks which
can happen to the company at any time.
Keep up good work
This strategy continues to maintain and retain the elements that are currently both considered
important and achieve high levels of use.
First of all, Vinacomin should focus on maintaining methods to control financial risks by adjusting


22

the level of financial leverage impact, maintaining the method of measuring financial risk by DFL and
ensure that current asset retention is higher than current liabilities.
In addition, Vinaconmin should focus on improving loss offset with corporate funds and
insurance. These are two forms of risk offset that are considered important, but are currently used
sparingly. The corporation should continue to maintain liquidity risk identification through
difficulties in paying short-term debts.
Finally, Vinacomin should continue to maintain the financial risk measurement method by the
provision rate, adjusting the risk provision rate.
Minimize investment
This strategy targets factors that have a high level of current usage but low importance. An
enterprise does not need to spend too many resources to achieve the use of financial risk
management factors. . Specifically, Vinacomin should minimize investment in financial risk control
activities by using L/C contracts and the method of measuring financial risk by sensitivity, because
these two methods are not evaluated. high price in importance.
As for the sensitivity method, the importance is not high because at present, the single
analysis type enterprises do not take into account the correlation of some factors.

Low attention strategy
This strategy suggests that Vinacomin should not prioritize investment in factors that are
currently considered both unimportant and not widely applied. In addition, Vinacomin should also
limit the form of post-loss financing with the enterprise's available sources such as cash, short-term
investments, through debt, equity, selling assets, this is not necessary and companies also quite
rarely use this method.
3.5. General assessment of financial risk management of Vinacomin's enterprises
3.5.1. Achievements
Firstly, in terms of awareness, most of Vinacomin's enterprises have gradually approached and
actively implemented financial risk management, albeit at different levels of interest.
Secondly, in terms of implementation, enterprises have been completing the financial risk
management process. Vinacomin is building a process on financial risk management for enterprises.
Thirdly, in terms of production and business efficiency, most of Vinacomin's enterprises have
made profits which is considered very important in the financial risk management.
3.5.2. Limitations and causes
3.4.2.1. Limitations in financial risk management at Vinacomin's enterprises
Firstly, financial risk identification is mainly based on the analysis of financial statements,
which is a common method applied by most of Vinacomin's enterprises. The modern methods for
financial risk have not yet been applied. Therefore, the effectiveness of financial risk identification
at enterprises is not high.
Secondly, all businesses are aware of the risks they face, but the measurement of financial risk
is not really effective.
Thirdly, financial risk control stage is a very important stage. Financial risk managers also
realize this problem, but the organization of the financial risk control system is still not well
organized.
Fourthly, financial risk offset is an indispensable content in financial risk management, but
enterprises are still passive in allocating financial resources as well as making early forecasts to
reserve financial resources for financial risks in case of loss due to risk.

23

Fifthly, Vinacomin's enterprises have not built their own risk management models.
Sixthly, human resources for financial risk management activities in enterprises are still
lacking and not really effective.
3.5.2.2. Causes of the limitations
There are many reasons to explain the existence of the above-mentioned limitations in
financial risk management at Vinacomin's enterprises; they are divided into objective and
subjective causes.
(1) Objective reasons:
Firstly, the legal environment of risk management activities in general and financial risk
management activities in particular is still not specific enough to help Vietnamese enterprises fully
understand and comprehensively implement the risk management process.
Secondly, the statistical information and economic forecasting system serving and supporting
enterprises for financial risk management has not yet met practical requirements.
Thirdly, the derivatives market has not yet developed. As a result, enterprises do not have
many opportunities to actively hedge financial risks with derivative financial instruments.
(2) Subjective reasons:
Firstly, it is due to managers' perception of financial risk management. They start to be
interested in financial risk management, but there was no formal and standard process for
identification, measurement, control and offset of financial risks.
Secondly, financial risk management has not been carried out in a regular, continuous, and
compulsory manner.
Thirdly, enterprises have not yet effectively used advanced risk management methods and tools.
Financial risk management tools have been applied but have not been highly effective.
Fourthly, the financial resources of enterprises are limited and human resources for financial
risk management activities have not been adequately invested.
Fifthly, enterprises have not built and applied an appropriate risk management model, causing
the effectiveness of financial risk management to be at low and medium levels.
CHAPTER 4

ORIENTATIONS AND SOLUTIONS TO STRENGTHEN FINANCIAL RISK
MANAGEMENT AT VINACOMIN'S ENTERPRISES
4.1 Development orientations and viewpoints to strengthen financial risk management of
Vinacomin's enterprises
4.1.1. Strategic objectives of Vinacomin's enterprises
Based on the development plan of Vietnam's coal industry up to 2025 with a vision to 2035,
Vinacomin strives to achieve 60 million tons by 2025, 65 million tons by 2030 and 75 million tons
by 2035. In the coming time, Vinacomin's enterprises aim at developing and applying mechanized
technology for coal and mineral exploitation, providing mining technology solutions in special
geological conditions, developing technology for deep processing and selection in order to increase
the value of coal and minerals.
4.1.2. Development orientation of Vinacomin's enterprises


24

- Continue to restructure Vinacomin's enterprises to suit the new context.
- Ensure sustainable development and risk management at Vinacomin's enterprises in the
context of domestic and international economic fluctuations affecting the corporation's production
and business.
- Improve the quality of human resources, renovate the management and organization at
Vinacomin's enterprises.
4.1.3. Perspectives on strengthening financial risk management at Vinacomin's enterprises
- Manage financial risks on the basis of compliance with legal policies and regimes, in line
with the government's macro policies
- Financial risk management must be in sync with the objectives of corporate financial
management
- Financial risk management must be economical, effective and feasible
4.2. Solutions to strengthen financial risk management of Vinacomin's enterprises
4.2.1. Solutions for the organizational model of financial risk management

The author proposes the establishment of a specialize unit for risk management at Vinacomin's
enterprises. One of the models most appreciated and applied by financial experts recently is called the
“three lines of defense assurance model.” The three rounds of defense are highly appreciated by
domestic and international experts because this system helps the entire enterprise to understand and
deeply participate in the risk management process.
4.2.2. Solutions for financial risk management processes
4.2.2.1. Strengthen financial risk identification
Currently, Vinacomin's enterprises mainly use financial risk identification method through past
data to identify risks that may be encountered in the future. However, this method still has many
limitations to fully identify the financial risks of enterprises. To ensure adequate financial risk
identification, Vinacomin's enterprises should develop a financial risk identification process on the
basis of analyzing the business process and operating environment. In addition, enterprises can
combine the use of consulting services of professional companies.
4.2.2.2. Enhance financial risk measurement
Currently, some of Vinacomin's enterprises only stop at measuring financial risk by sensitivity
method. In chapter 3, the author presents a model for forecasting financial risk by Alexander Bathory.
This model has also been tested by many studies in many countries, producing reliable results.
However, there are many other models that are being used quite commonly. Enterprises can flexibly
apply these models to check the seriousness of their financial situation and make the right and timely
decisions to avoid falling into bankruptcy. Here are a few quantitative and qualitative models that are
being widely applied in the world that Vinacomin's enterprises can refer to:
- Z-Score
- Research by Fulmer, H
- Qualitative model
4.2.2.3. Strength financial risk control
- Control financial risk through the internal control system
- Control financial risk through the financial control system at Vinacomin's enterprises


25

- Control financial risk through financial instruments
- Control financial risk by financial planning
4.2.2.4. Offset solutions for financial risk
- After-loss offset with the enterprise's available source
- Pre-loss offset by insurance
- Loss offset with enterprises' funds
4.2.3. Solutions to improve financial risk management
4.2.3.1. Financial management policy
- Build a reasonable capital structure
- Improve liquidity
- Improve profitability
- Improve operational efficiency
- Create stability at Vinacomin's enterprises
- Accelerate the state capital divestment roadmap
4.2.3.2. Human resource solutions
Enterprises should build and complete a team of staff specialized in risk management, including
each stage of from identification, assessment... to forecast and offset of financial risks. . Accordingly,
each specialized officer must have a solid background of specialized knowledge in finance in general
and financial risk management in particular, with priority given to candidates who are trained by
enterprises in foreign educational institutions in the right field, where they have a lot of conditions and
experience to access modern financial risk management theories, models, software and technology
solutions.
4.2.3.3. Strengthen internal links in Vinacomin's enterprises
Vinacomin's enterprises need to strengthen internal links at a high level to utilize scale
advantage, perform specialization and cooperation to create a high competitive advantage, effectively
use resources, save costs, disperse risks in order to create a driving force for growth and sustainable
development.
4.3. Recommendations to ensure the effective implementation of solutions to strengthen
financial risk management at Vinacomin's enterprises.

4.3.1. For the government
- Improve the legal system related to business activities of enterprises
- Develop the derivatives market
- Improve the macro control environment for the activities of Vinacomin's enterprises.
- Support statistical information system and economic forecast
4.3.2. For the banks
- Provide support in consulting, propagating and promoting financial risk control tools to
enterprises
- Create favorable conditions for enterprises to borrow capital and design many products
specifically for Vinacomin's enterprises
- Diversify derivative products and train a qualified team of consultants