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VIETNAM ACADEMY OF SOCIAL SCIENCES GRADUATE ACADEMY OF SOCIAL SCIENCES NGUYEN VIET GIANG RISK MANAGEMENT OF BAC NINH DEVELOPMENT INVESTMENT FUND Major: Business Administration Code: 9340101 DOCTORAL DISSERTATION SUMMARY OF BUSSINESS ADMINISTRATION HANOI, 2020 The dissertation has been completed at GRADUATE ACADEMY OF SOCIAL SCIENCES Supervisors: Dr Nguyen Phuong Bac Dr Nguyen Binh Giang Reviewer 1: Assoc.Prof.Dr Le Thai Phong Reviewer 2: Prof.Dr Do Duc Binh Reviewer 3: Assoc.Prof.Dr Hoang Van Hai This doctoral dissertation will be defended before the Council of Examiners, at Graduate Academy Of Social Sciences At… on… 20 This doctoral dissertation can be found at: National Library of Vietnam Library of Graduate Academy of Social Sciences INTRODUCTION The nessessary of research topic In the context of the constant fluctuation of the domestic and foreign economic and political situation, the business activities of the Development Investment Funds currently contain many risks that administrators, researchers have to find solutions to prevent risks from causing great damage to the Fund's capital in particular and to the economy in general In fact, risk is undesirable for development investment funds and other financial institutions because of which there are responsibilities and damages in many aspects The concept and implications of risk management in development investment funds are not yet fully understood Therefore, the application of theory to solve practical problems of risk management in these funds is not scientific and feasible In fact, in Vietnam, risk management is considered an important content in the business activities of development investment funds, but the organization of risk management has not met the requirements yet Structure, operating mechanism and implementation method are still inadequate, the number of officials in charge is small and the number of expertise is limited, so it is difficult to foresee the risks in the process of lending, investment and guarantee Credit, investment and guarantee risks can also cause inflation or stagnation, especially when the investment does not create a value of goods corresponding to the amount of investment borrowed At that time, this risk can be complicated and cause unpredictable and significant consequences for investors Therefore, improving the efficiency of risk management, putting risks under control in the financial capacity of enterprises is the priority target of development investment funds Bac Ninh Development Investment Fund is a fledgling financial institution (established in 2014), with risk management initially concerned but still facing many challenges They not have an independent risk management apparatus; human resources are insufficient and weak in professional skills Everything is in the beginning stages It should be emphasized that the Fund has not yet developed a risk management plan at the request of corporate governance theory and the requirements of national standards (TCVN ISO 31000: 2011) on risk management For example, the problem of risk identification still has many shortcomings; measurement of unqualified risks; risk management monitoring process is still limited; the implementation of risk review mechanism, management reporting regime is not timely Meanwhile, the business scope of the fund covers the whole area of Bac Ninh province It should be noted that for a province with a very high demand for credit, investment and guarantee, it requires an effective business plan, including risk management, to be able to meet it Facing this fact, the PhD student selected the topic "Risk management of Bac Ninh Development Investment Fund" to be a doctoral dissertation In other words, the implementation of this project is extremely necessary, of great scientific and practical significance because it contributes to improving the quality of risk management, meeting the Fund's business requirements and of Bac Ninh province Research purpose and tasks 2.1 Research purpose The main research purpose of the dissertation is to propose solutions to improve risk management at the Bac Ninh Development Investment Fund, contributing to improving the business efficiency of the Fund 2.2 Research tasks To achieve the purpose of the dissertation research, it is necessary to solve the following research tasks: - Clarify the basic theoretical issues related to risk management at the Development Investment Fund - Analyze the current situation of risk management and risk-affecting factors at Bac Ninh Investment and Development Fund for the period of 2014 - 2018, thereby pointing out the achievements, limitations and causes of those limitations - Proposing solutions and recommendations to improve risk management at the Bac Ninh Development Investment Fund in the coming time Research subject and scope 3.1 Research subject The object of the dissertation is risk management at Bac Ninh Development Investment Fund 3.2 Research scope Scope of time: the dissertation studied risk management in this Fund from 2014 to 2018, proposed solutions to 2025 and development orientation to 2030 - Scope of space: operational risk management in the Bac Ninh Development Investment Fund - Scope of content: the project is implemented by a combination of business operations of the Fund and risk management (focusing on three areas of loan, investment and credit guarantee) New contributions to the science Firstly, the author of the thesis affirmed the content of risk management in the local development investment fund in our country because this fund functions as a business enterprise in the field of finance This content contributes to the diversity and interference of risk management in business administration activities Secondly, the author agrees and shares Robert and Bob's risk management concept, they consider risk management in financial institutions including development investment funds as a comprehensive review and assessment of business activities to identify the potential risks ie risks The author of the thesis added that the aspect of risk management should be considered as a decision-making process to ensure safety as much as possible and take appropriate measures to deal with it to minimize the consequences of the risk And thirdly, the dissertation shares and adds a basic content in the internal meaning of risk management at the development investment fund That is building a risk management plan, considering this as the first stage, having a key position in the risk management process and then coming to identify risk This contributes to the theory of risk management in business operations of development investment funds and financial institutions Theoretical and practical significance of the research 5.1 Theoretical significance The dissertation contributes to systematize risk management theory in business activities of financial institutions, including Development Investment Funds Contribute to interpret risk management according to the management process and operational activities of the business 5.2 Practical significance Firstly, the thesis shows that in the business activities of development investment fund, the risk management should be seen as an integral part of the development strategy of this organization Secondly, the thesis has pointed out the factors affecting risk management in both qualitative and quantitative aspects This contributes to helping risk managers to quantify the positive and opposite effects on business risk management Thirdly, the most research results are the proposed solutions for Bac Ninh Development Investment Fund, which is not only practical for this Fund in improving business efficiency but also experience There is a reference value for other financial institutions including local Development Investment Funds in our country The structure of the dissertation In addition to the introduction, conclusion, references and appendices, the research content of the topic consists of five chapters: Chapter 1: Overview of the studies related to the dissertation topic Chapter 2: Theoretical and practical basis for risk management in development investment funds Chapter 3: Characteristics of the study area and research methods Chapter 4: Current situation of risk management of Bac Ninh Development Investment Fund Chapter 5: Development strategy and solutions to improve risk management at the Bac Ninh Development Investment Fund Chapter 1: OVERVIEW OF THE STUDIES RELATED TO THE DISSERTATION TOPIC Risk management for Investment and Development Funds is a matter of great concern to many domestic and foreign researchers In the country, there are many scientific researches and discussions on risk management in general and risk management for Development Investment Fund in particular, specifically: 1.1 Domestic studies So far, there have been some studies on risk management issues in Vietnam In terms of risk and crisis management, there is work of Dang Duc Thanh "Risk management" in 2016; Doan Thi Hong Van, Kim Ngoc Dat, Ha Duc Son "Managing risk and crisis" in 2015; "Risk management in enterprises" by Nguyen Thi Quy in 2008; " Managing financial risks" by Nguyen Minh Kieu in 2012; Nguyen Thi Ngoc Trang, Ho Quoc Tuan, Nguyen Khac Quoc Bao, Tran Ngoc Tho "Financial risk governance" in 2013; "Risk management in banking business" by Nguyen Van Tien in 2010, Hoang Xuan Phong "Market risk management at Vietnam Joint Stock Commercial Bank for Industry and Trade" in 2014, Duong Ngoc Hao "Mechanical solution version to improve credit risk management at Vietnamese commercial banks” in 2015, Nguyen Quang Hien “Credit risk management at Military Commercial Joint Stock Bank” in 2016, Ta Dinh Long “Lifting improve credit risk management capacity at Vietnam Bank for Agriculture and Rural Development” in 2016 In term of evaluation criteria system for the management, there is the doctoral dissertation "Building a system of evaluation criteria for the management of the State Treasury's budget fund" by Phan Quang Thong in 2015 In term of fund risk management and experience, there is Doan Huu Tue's research "Improving the organization and operation of the Vietnam People's Credit Fund system" in 2010; Nguyen Dinh Luu "Improving and developing the Vietnam People's Credit Fund system" in 2008; Tran Quang Khanh "Solutions to ensure safety for the operation of the Vietnam People's Credit Fund system" in 2003; doctoral dissertation "Solutions to improve the operational efficiency of local development investment funds in Vietnam today" by Pham Phan Dung in 2008; Ministry-level Scientific Research Project "Venture capital fund and the ability to form and develop in Vietnam" by the Center for Scientific Research and Investment in 2003 These studies have focused on analyzing and clarifying risk management in business operations of enterprises, including risks in business strategy, credit, corporate finance; building theoretical framework of crisis and risk, the relationship between them; business leadership and role in risk management; solutions to deal with risks that financial institutions and businesses in the world often use These are basic theoretical issues on risk management 1.2 Foreign studies There are some of the overseas studies on risk management The issue of risk theory and risk management is mentioned in detail in “Fundamentals of Risk Management: Understanding, Evaluating and Implementing Effective Risk Management” by Paul Hopkin in 2012; “Risk Management and Financial Institution” by John C Hull in 2012; Jonathan Reuvid “business risk management” in 2014; “Certified Investment Fund Governance: Developing a Risk-Based Oversight Framework” Report of Certified Investment Fund Director Institute in 2015; “Risk management in banking” by Joel Bessis in 2015; “Managing fund liquidity risk in Europe” by the European Capital Markets International Association in 2016; “The Social Enterprise Development and Investment Funds Lessons from the implementation process,” 2013 Australia Department of Education, Human Resources and Office Relations; "Risk Management Implications of Mutual Fund Investment Objective Classifications" by Larry J Prather in 2012; "Risk Management Issues in European Equity Funds" by Andrew Clare1, Miguel Corte-Real, Natasa Todorovic in 2012; "Challenges and issues faced by Indian Mutual Fund Industry" by Naila Iqbal, 2011; “Political Risk - An Important Issue for Sovereign Wealth Funds, by David A Glancy, 2012; "Agricultural investment funds for developing countries" of the United Nations Food and Agriculture Organization, 2010; “How Pension Funds Manage Investment Risks: A Global Survey, by Sandy Halim, Terrie Miller, and David Dupont, 2010; "Managing Investment Risk in Defined Benefit Pension Funds", by Franzen, D., 2010; “Hedge Fund Investments: Risk Management Perspectives” of Banking and Financial System Evaluation Committee, Japan Bank, 2007; "Managing collective investment fund" by Ekaterina Alexeeva, Sally Buxton, Mark St Giles in 2000 In the above works, the authors have focused on clarifying the content of risks, concepts, defining the inner meaning of the term; role and impact of risks on business activities; risk identification method; risk assessment criteria and risk management for some types of funds Point out the risk measurement model and the formation of conditions to ensure the development of risk measurement and control models for development investment funds 1.3 Evaluate domestic and foreign studies and research gaps 1.3.1 Evaluation of domestic and foreign studies In general, the research on risk management for Development Investment Funds in Vietnam and abroad has mainly provided measures to prevent or limit risks and not focus much on risk management of the Funds, meaning that risk is a problem that always happens in the operation of the Fund In addition, there is no scientific research on comprehensive risk management as well as proposing a system of solutions to enhance risk management for Development Investment Funds in Vietnam In other words, these works mainly address issues related to the risk management theory of some business entities in some countries and Vietnam, but none of the works mentioned to the risk management of the Bac Ninh Development Investment Fund Therefore, this is a new research direction and the author made that in addition to helping the Bac Ninh Development Investment Fund to develop sustainably, there will be significant contributions to the field of practical application of risk management in Vietnam 1.3.2 Research gaps From domestic and foreign studies on risks and risk management of financial institutions, research and development investment funds of PhD students find some research gaps as follows: - The rationale system of risk and risk management associated with the administration of a financial institution (development investment fund), responsible to the State for investment, lending and security However, it is not logical and systematic to serve socio-economic development in Vietnam - The risk management process of the development investment fund in Vietnam in general and Bac Ninh in particular has many differences from other economic organizations (such as banks), so this process needs to be clarify - The external environment, internal environment is the main factor the impact on fund operations and factors that constitute risk and determining how to respond to the risks of these funds, however, this is a problem that the aforementioned studies haven't mentioned - The reality of risks and risk management in domestic financial institutions, especially local development investment funds, should be carefully studied and analyzed, thereby proposing solutions to manage appropriate risk treatment 1.4 Questions, research hypotheses 1.4.1 Research question Question 1: Does Bac Ninh Development Investment Fund inherit experience of risk management of other financial institutions in risk management? Question 2: What are the risks faced by Bac Ninh Development Investment Fund in operation, direct investment, lending and guarantee? Question 3: How does risk management of the Bac Ninh Development Investment Fund take place? Question 4: What factors affect risk management at the Bac Ninh Development Investment Fund? Question 5: What is the solution to improve risk management for Bac Ninh Development Investment Fund in the period of 2019-2025? 1.4.2 Research hypotheses Hypothesis 1: Risk management of the development investment fund basically inherit the risk management of financial institutions, including: developing risk management plans, risk identification, risk analysis and evaluation, risk handling, monitoring and reporting Hypothesis 2: In the process of operation, investment and lending of investment funds in general, Bac Ninh Development Investment Fund also encountered a series of risks such as capital loss, market risk, and institutional risk These risks arise from various sources such as from customers, from the fund's activities, from the macro environment Hypothesis 3: Risk management of Bac Ninh Development Investment Fund are often associated with lending, direct investment and credit guarantees; this activity is identified through the stages of risk management planning, risk identification, risk analysis and evaluation, risk handling, monitoring and consultancy Hypothesis 4: Risk management of Bac Ninh Investment and Development Fund are influenced by management, business organizational structure and operational institutions, human resources of the Fund and customers' deliberate fraud Meanwhile, the less influential factors are customers' awareness and ability to repay debts, corporate culture Hypothesis 5: Developing a reasonable risk management strategy, considering this as a basic component of the Fund's business strategy and strictly implementing the organization will minimize risks and control risks in process of promoting direct investment, lending and guarantee Chapter 2: THEORETICAL AND PRACTICAL BASIS FOR RISK MANAGEMENT IN DEVELOPMENT INVESTMENT FUNDS As is well known, the Development Investment Fund is a financial institution because according to Siklos, Pierre, 2001, and Robert E Wright and Vincenzo Quadrini, 2012, financial institutions are financial institutions that are established by law and engaged in business activities as a financial intermediary in the process of transferring capital from lender to borrower Diagram 1: Internal function of risk management (1) Building a risk management plan (2) Risks identifying (3) Risks analyzing and assessing (4) Risks handling (5) Risks monitoring, advice and reporting 2.3.1 Building a risk management plan It should be noted that, from a business management science perspective, developing a risk management plan is the first and decisive factor The work that a financial institution, including development investment funds, must at this stage is to grasp the environmental characteristics in which the business is operating, on which basis, draft a management plan Managing risks associated with business strategy In this plan, external environmental factors and the internal operating mechanism of the business are considered in terms of regulations, requirements, codes, standards, industry guidelines as well as documents of enterprises, related organizations, reports as well as business plans, operations and risk management of enterprises in the previous period (previous year, previous quarter) etc The tools used to develop risk management plans include SWOT (Strengths, Weaknesses, Opportunities, and Challenges) and PEST (Political, Economic, Social and Technical technologies) in a framework 2.3.2 Risks identifying Using the information gathered from the context, and classified by the SWOT and PEST analysis tools, the next step is to identify risks that may affect the achievement of the business goals, even the activities 11 and initiatives of the business It should be noted that, in some cases, risks might be opportunities and strengths, which are often not recognized or ignored by the enterprise Risk identification of a specific system, business or activity may contain a large number of potential risks In fact, receive comprehensive risk is a screening process, a process where the potential risks are considered, forecasting, classification and the corresponding contingency plans 2.3.3 Risks analyzing and assessing Risk analysis involves considering the source of the risk, its consequences, and the ability to estimate inherent risk and unintended risks without local control This step also includes identifying control methods, estimating impacts, quantifying the extent of damage and on-site control methods Qualitative, semi-quantitative and quantitative techniques are the analytical techniques applied to this step, depending on the risks, the purpose of the analysis as well as information on the available data 2.3.4 Risks handling This is an important content in risk management Along with risk assessment is the development of cost selection criteria system, thereby improving the effectiveness of risk treatment Methods of dealing with risks in some cases are not necessarily mutually exclusive or require appropriate in all circumstances Depending on specific circumstances, specific requirements, businesses can choose one or several suitable ways 2.3.5 Risks monitoring, advice and reporting One thing to note is that the characteristics of risk are dynamic, so it needs to be periodically reviewed formally Risk monitoring is the inspection of the implementation of the risk management plan system through risk verification This work also includes monitoring the handling of risk parameters at an acceptable level of risk or having exceeded the threshold and any adjustments in the event of a change in the risk assessment step 2.4 Factors affecting risk management The following will discuss in more detail the main factors affecting risk management 2.4.1 The role of leadership 2.4.2 The organizational structure of the enterprise and the operating mechanism 2.4.3 Corporate culture 12 2.4.4 Human resources 2.4.5 Information technology (IT) 2.4.6 Customer 2.5 Experience in risk management of some development investment funds 2.5.1 PYN Fund (Mutual Fund Elite) and IDG (IDG Ventures Vietnam) 2.5.2 Bac Giang Development Investment Fund 2.5.3 Hanoi Development Investment Fund 2.5.4 Thai Nguyen Development Investment Fund In order to ensure these funds operate safely and effectively in the area, the immediate solution of each province is to improve their financial capacity, quality and operation scale; contribute positively to the local socio-economic development, detect and promptly handle violations and problems; attaching importance to professional fostering, ethical and law education for the contingent of officials and employees, raising the quality of administration and administration, ensuring safe, efficient operation, strengthening relationships closely link the system vertically (Ministry of Finance) and horizontally (People's Committee of provinces and cities) It can be said that this is the experience and Bac Ninh Provincial Development Investment Fund can refer, especially in terms of preparing necessary conditions to identify and handle risks coming from the natural, economic and environmental environment, society, from customers and from within the Fund Chapter 3: CHARACTERISTICS OF STUDY AREA AND RESEARCH METHODS 3.1 Characteristics of the study area 3.1.1 Some natural, economic and social characteristics of Bac Ninh province 3.1.2 Bac Ninh Development Investment Fund Bac Ninh Development Investment Fund (hereinafter referred to as the Fund), in English name, Bac Ninh Development Investment Fund, was established under Decision No 192 / QD-UBND dated June 5, 2015 of People's Committee of Bac Ninh province on the basis of transferring the status quo of assets, equipment and executive apparatus of the Credit Guarantee Fund for small and medium-sized enterprises in Bac Ninh province According to Article of Decision No 192/QD-UBND, the Fund is a State-owned financial institution under the People's Committee of Bac Ninh Province, performing the function of financial investment and development investment The Fund has a legal status, charter capital, a balance sheet, a seal, and is allowed to open accounts at the State Treasury and commercial banks 13 operating legally in Vietnam The Fund's specific functions and tasks are to receive budget capital, mobilize medium and long-term capital from domestic and foreign individuals and organizations to provide loans, invest in projects, enterprises and develop socio-economic infrastructure of the province, provide credit guarantees for small and medium-sized enterprises according to regulations The Fund's charter capital is VND 500 billion The Fund operates under the model of a policy bank, implementing the principle of financial autonomy, preserving and developing capital The Fund is limited liability within the equity of the Fund The Fund's functions, duties, responsibilities and powers are clearly demonstrated through the following activities: Firstly, development investment and financial investment Second, guarantee activities, namely credit guarantees Thirdly, trusteeshiping and receiving activities 3.2 Research models Based on the systematization of theoretical basis in Chapter 2, and the survey, collecting data related to risk management, factors affect on risk management of Bac Ninh Development Investment Fund The author offers the research model shown in the diagram below: + Model of risk management content at the Fund in accordance with Diagram below Risk anlayzing and assessing Risks handling Risk identifying Building a risk management plan Content of risk management Risks monitoring, advice and reporting Diagram 2: Content of risk management 14 + Model of the main factors affecting the risk management under the Diagram Diagram 3: Factors affect on risk management Corporate culture Human resources Organizational structure the role of leadrship Information technology Risk management Custormer 3.3 Approach and research method 3.3.1 Approach method The topic approaches in an interdisciplinary and multi-dimensional direction from the perspective of history, economics, politics and law; combine the bottom-up approach (from corporate customers, individual customers borrowing from the Development Investment Fund) and from the top (from the state management agencies of the Development Investment Fund) to clarify the risk management of the Fund 3.3.2 Research method In this dissertation using theoretical research methods (analysis, synthesis, systematization of documents, comparisons ), practical research methods include (actual investigation by questionnaires, interviews directly officers in charge of risk management and management at the Fund, agencies related to the Fund, customers are entitled to borrow, guarantee; their observations and assessments) These are popular highquality scientific research methods that allow the author to synthesize, inherit and analyze existing materials to perform the tasks set out in a specific dissertation 3.3.2.1 Analysis and synthesis methods 15 This method is used in the whole process of project implementation, to evaluate and research the existing and domestic collected documents, thereby forming the theoretical framework in chapter 2, assessing the real situation of risk and risk management in Bac Ninh Development Investment Fund in chapter This is a very important research method in the dissertation 3.3.2.2 Comparative method Compare the situation of risk management in Bac Ninh Development Investment Fund and investment funds in other provinces; compare the situation and the requirements of renovating risk management provided by the state funds or other funds derived from it draw out their inadequacies and clarify their causes This method is also used to assess the change of research phenomenon over time In this study, the comparison method is used to compare figures on labor, investment, guarantee at this Fund 3.3.2.3 Investigation and interview methods 3.4 Study sample size 3.5 Choose a template In accordance with the capacity to implement the dissertation in terms of time, cost , the author uses a non-probability sampling method, although the method is objective and represents the whole not by the selection method random sample However, the author will try to apply information sources to select the most representative sample group through quota sampling in the form of loans that the Investment and Development Fund is implementing for customers; for those who are lent by the Fund, they will be balanced in the number of survey samples 3.6 Scale design The design of a scale with two contents is the construction of the questionnaire content and a scale for the questionnaire 3.7 Survey method 3.8 Processing and analyzing data methods Data were analyzed by statistical, comparative and quantitative methods to identify risk management and factors affect on risk management at Bac Ninh Investment and Development Fund 16 Chapter 4: CURRENT SITUATION OF RISK MANAGEMENT OF BAC NINH DEVELOPMENT INVESTMENT FUND According to the Decree Estimate the number 37/2013/ND -CP, Bac Ninh Development Investment Fund is one of institutional finance, operate as a business The Fund was established based on the inheritance of equipment and personnel structure of Bac Ninh SME Credit Guarantee Fund After years of establishment, the Fund has affirmed the role of a state-owned financial enterprise to perform the function of financial investment and development investment in the province Throughout that process, the Fund's risk management have been focused 4.1 Risk management situation of Bac Ninh Development Investment Fund The current situation of risk management is analyzed and evaluated in association with the Fund's business operations and implemented in accordance with the theoretical framework mentioned in Chapter 2, specifically as follows: 4.1.1 Building a risk management plan Risk management plan of the Bac Ninh Development Investment Fund, first based on the legal text and simultaneously develop and promulgate documents of the Fund Accordingly, the Fund's risk management focuses on debt classification, provisioning and use of risk provisions; application of risk handling forms and other risk management measures in investment lending activities (lending activities), direct investment, capital contribution to establishment of enterprises (investment activities), credit guarantee activities of the Fund For lending, investment and trust activities For guarantee activities 4.1.2 Identify risks Risk identification for the Fund's business operations is to identify risk information, including what are the risks? risk sources, influencing factors, risk constituents …… This process includes many tasks ranging from finding, identifying and forecasting risks associated with investment lending activities, direct investment and guarantee A common risk in business operations of the Fund is the risk of capital loss This risk is identified through the Fund's business activities, customers, and business environment 17 4.1.2.1 In investment, lending and credit guarantees activities 4.1.2.2 Surveying and identifying risks of investment loans and credit guarantees 4.1.3 Risks analyzing and assessing 4.1.3.1 Analysis and assessment of risks to investment lending, direct investment and credit guarantees 4.1.3.2 Case study (case study 1): on risk analysis and assessment activities at Bac Ninh Development Investment Fund through direct investment 4.1.2.3 Surveying Fund’s analysis and risk assessment activities 4.1.4 Risk handling Since its foundation, the Fund has applied various measures to deal with risks in investment, direct investment and guarantee activities 4.1.4.1 Dealing with risks of the Fund 4.1.4.2 The second case study (case study 2): on risk handling activities at Bac Ninh Development Investment Fund through credit guarantee 4.1.4.3 Surveying the Fund's risk handling activities 4.1.5 Monitoring, advice and reporting 4.1.5.1 Monitoring, consulting and reporting for investment lending, direct investment and credit guarantees 4.2 The main factors affect on the risk management 4.2.1 Statistical analysis of factors affecting the risk management of Bac Ninh Development Investment Fund 4.2.2 Testing the reliability of the scale through Cronbach’s Alpha reliability coefficient in analyzing factors affecting risk management activities 4.2.3 Exploratory factor analysis (EFA) 4.2.4 Results of the model 4.2.5 Testing research hypotheses 4.2.5.1 Correlation analysis 4.2.5.2 Multivariate regression analysis 4.2.6 Discuss regression results 4.3 Assessing risk management at Bac Ninh Development Investment Fund 4.3.1 Result 18 Since the Fund's Risk Management Regulation came into effect, the Fund’s risk management have achieved some remarkable results as follows: Firstly, risk management were recognized very early since its establishment The steps in the risk management process have been carried out relatively effectively, contributing to promoting the Fund's business activities in recent years Secondly, professional staff are responsible for regularly updating information, monitoring and reporting signs that may incur risks in the process of lending, direct investment, credit guarantee and proposing measures, risk management contingencies, for leaders to consider Thirdly, regularly training, fostering and improving professional skills and professional ethics for staff Improve the management level, risk monitoring capacity and sense of personal responsibility in assigned risk management Fourthly, follow the order and procedures in investment lending, credit guarantee and direct investment in accordance with the Fund's Regulation and other relevant legal documents to prevent and handle risks 4.3.2 Limitations in risk management Although, since its establishment, the Fund's activities have achieved a number of results contributing to the socio-economic development of the province in general but the current risk management have not met governance requirements set out today by the Bac Ninh Development Investment Fund (i) For the risk identification process, the Fund still has no software system to support this work; (ii) In addition, at present, the Fund has not built a risk analysis and measurement model, so it has not been able to quantify the level, probability of occurrence of risks, and level of losses if risks occur (iii) The process of monitoring and reporting the results of the risk management process is limited; especially, it is not possible to follow up on cases where customers fail to comply with the debt repayment plan (iv) Management system of risk in the Fund have not specialized and weak professionalism At present, there is a part-time situation of handling risks, implementing guidance and controlling risks (v) The part-time risk management team still lacks in both quantity and quality, which increases the work pressure, resulting in negative inspection and supervision of the field, leading to credit risk is at an increased risk 19 (vi) Restrictions on the implementation of legal documents on risk management Although the Fund's Regulation on risk management has been issued, the Fund has not yet established a mechanism to control loans, investments and periodic guarantees (vii) Restrictions on credit risk management by debt resolution Currently, the application of the debt settlement the same for loans from the Fund for all cases led to consequences undesirable bending over the operation to recover capital of funds 4.3.3 Causes of limitations (i) There is no warning and risk reduction system (ii) The Fund does not have a full-time staff structure for risk management, the Fund's staff is still small, and due to the newly established staff, the staff lacks professional experience, so the identification, evaluation, weak risk analysis; (iii) The Fund is subject to many overlapping laws The issuance of many documents and regulations on lending, investment and credit guarantee activities has led to Fund staff having difficulties in handling incidents (iv) The customer information collection process is still poor (v) The Fund has not yet established a system of risk measurement criteria, so the debt classification and provisioning in many cases have not been effective Chapter 5: DEVELOPMENT STRATEGIES AND SOLUTIONS TO IMPROVE RISK MANAGEMENT AT BAC NINH DEVELOPMENT INVESTMENT FUND 5.1 Development strategy of the Fund According to the development strategy of Bac Ninh Development Investment Fund, in the coming time, the Fund will focus on the following key issues: 5.1.1 Improving and improving the quality of human resources 5.1.2 Supplement and complete the system of regulations and business processes 5.1.3 Establishing relationships with domestic and foreign financial institutions to exploit capital 5.1.4 Proactively exploiting the subjects using new capital effectively, in accordance with the trend of supporting and developing enterprises, creating social value 5.1.5 Expand direct investment activities 5.1.6 Supplementing the direct investment portfolio and lending period 2020 - 2025 for a number of small and medium-sized enterprises, 20 issuing lending regulations and procedures for these enterprises at the same time adding supplement capital for lending to small and medium enterprises 5.1.7 Develop and apply a customer credit rating system 5.2 Solutions to improve risk management at Bac Ninh Development Investment Fund In order to ensure the Fund's operation in a sustainable manner and to increase the effectiveness of a financial instrument of the province, in the coming time, the Fund's risk management should be comprehensively considered and considered the set Based on the weaknesses in risk management, the proposed solutions are placed in relation to the economic and legal environment of the province in general and the Fund's development strategy in particular 5.2.1 Increase awareness of risk management Management of risk is an ongoing process that needs to be done at every stage of the business operations of the Fund Moreover, it is a mandatory requirement for the Fund to achieve its goals, maintain its viability and financial transparency But first of all the fund needs to be aware of that prevention and risk reduction activities should be considered as a key element to develop the Fund's lending, investment and credit guarantee activities in a sustainable manner This needs to be thoroughly understood in the Fund's operating documents, disseminated to all managers and experts In fact, over the years, the perception of some managers and many experts on this issue is even weaker 5.2.2 Improve risk management for each Fund's business sector To improve operational risk management of the Bac Ninh Development Investment Fund, it needed to build the only objective of identifying risks through the warning signs below and then perform the necessary measures to improve risk management of the Fund The warning signs include the Fund is slow to receive financial statements as planned; there are sudden changes in customers' business plans; there is a sudden change in the composition of the Board of Directors or Members' Council; there are unfavorable trends in customers' business markets; failure to strictly comply with the credit terms; repeated requests for debt rescheduling may be an indication of an abnormal flow of money; delay in payment to suppliers, to other creditors and to employees and sell other properties in an unusual way 5.2.3 Develop an early warning system to minimize risks This system must be developed based on the development orientation and set in the overall operational strategy of the Fund The system must also 21 be in relation to the volatility with the ability to raise capital, based on which it is possible to accept risks at a safe level without affecting the Fund's reserves The Early Warning System (EWS) helps automatically review all debts and detect cases of possible deterioration in the next months, thereby helping the Fund take appropriate measures to handle risks EWS is built based on signs of risks coming from customers, such as a decline in business situation, financial indicators, debt repayment cash flow of customers showing abnormal signs and adverse fluctuations of the market Based on modern computing techniques, statistical models from historical data to make a list of customers likely to be difficult within the next months This customer list will be analyzed and evaluated by risk management professionals 5.2.4 Improve human resource management system So far, the Fund has no specialized department on management of risk Apparatus of the management department of this can work towards the following: i) regarding organizational apparatus: Deputy Director of the Fund topped this apparatus, and to coordinate the cooperation between the Department of Finance - Accounting, Loan Department Use - Trust On the basis of the personnel of these two sections to set up the Internal Audit Inspection Department and the Risk Handling Team; ii) Regarding human resources: Manpower can be mobilized from Finance - Accounting Department, Credit - Trust Department on the basis of concurrently working and supplementing work allowances The proportion of human resources working in the Risk Management Team should account for at least 20% of the total workforce of the Fund; iii) It is necessary to strengthen professional training, send staff to attend training courses on operational analysis, guarantee, investment and risk assessment Paying attention to the quantity and quality of Specialists doing inspection and supervision work; iv) A loud create professionals responsible operations risk management towards specialization 5.2.5 Improve the quality of inspection and supervision both before, during and after lending, direct investment and credit guarantees There are mechanisms for monitoring and evaluating the quality inspections of department in charge In fact, the Fund has taken this work seriously, but many shortcomings still exist Examination and supervision in all three stages and the connection between the three stages is still lacking, unprofessional Therefore, it is necessary to develop a system of risk 22 measurement criteria associated with the inspection, supervision before, during and after lending, direct investment and credit guarantee Based on this to decide which projects to invest, loans and guarantees to the type of customers Thereby step by step implementing the debt classification and setting up risk provisions It is necessary to closely follow and apply the principles of supervision and inspection according to the TCVN ISO 31000:2018 on risk management standards promulgated by the Vietnamese Government 5.2.6 Increase technology investment; focus on information gathering, storage and exploitation information to serve risk classification, assessment and measurement to improve risk management Information gathering, storage, and information exploitation are still inadequate The Fund should appreciate and increase investment in this work It should be noted that these are the basic types of solutions that Bac Ninh Development Investment Fund needs to apply to improve risk management without preconditions and implementation roadmap Because from the establishment and organization of business activities up to now, the Fund has always considered risk management as an important means and a key component of corporate governance, connecting, operating continuously and consistently in the Fund's business activities CONCLUSIONS AND RECOMMENDATIONS Based on the study of risk management of Bac Ninh Development Investment Fund, some conclusions can be drawn: Firstly, risks can occur in business activities and when it happens will negatively affect the business of the business Especially in the business of financial institutions such as banks, financial institutions, development investment funds when risks occur, its negative impacts will be heavy and difficult to overcome It should be emphasized here that many of the perceptions of risk and risk management stated and analyzed in the theoretical and practical basis from the research work are reasonable and widely accepted However, the dissertation author confirmed risks are the threat, exists within the business activities of enterprises subjective, connected with the existence of threats coming from outside objectively, especially from customers This is an additional and new aspect when it comes to the concept of risk in business activities of financial institutions, including the Investment and Development Fund Secondly, the internal meaning of risk management is codified It should be emphasized here that the risk management process of a 23 development investment fund is usually carried out through five steps, including planning, risk identification, analysis and evaluation, risk handling, monitoring and reporting These five steps are considered a "risk lock" bag here for businesses to handle As mentioned above, the author of the dissertation thinks that these are both principle and complementary steps to create a unified and seamless connection in the risk management process at the Development Investment Funds The effectiveness of this activity depends on the resources of the administrators and the dynamics of the executives Thirdly, there are many factors affecting risk management These factors can be approached in an objective, subjective, internal and external group of enterprises or approached by their importance The approach according to the importance of the factors used, because risk management is only one aspect of the business operation and this approach provides the basis for the most quantitative level determine the effects of these factors in practice Fourthly, the reality of risk management of the Development Investment Fund is analyzed and evaluated quite comprehensively The Fund's management said that risk management needs to pay much attention; even risk management should be considered as a priority because the risks come from and are associated with financial activities, investors, credit and guarantee always exist And thirdly, six proposed solutions are to increase awareness of risk management; improve risk management for each major business area; building an early warning system; complete the personnel apparatus; improve the quality of surveillance activities and increase technology investment, focusing on information gathering and exploitation The basis for proposing these solutions is from the Fund's experience in risk management, from weaknesses in risk management and from the Fund's development strategy in the coming years The reality shows that six solutions to export are closely related to the business management activities, financial management, and human resource management of Bac Ninh Development Investment Fund It can be said that these solutions are proposed based on practical and scientific basis, if the Fund organizes the implementation, it will help improve risk management and promote better business Recommendations: Recommendations to the Government, Ministry of Finance and Bac Ninh People's Committee 24 LIST OF AUTHOR’S PAPERS PUBLISHED Nguyen Viet Giang, 2017, "Understanding and managing risk in business operations", Journal of Indian and Asian Studies, No (55), p 66-71 Nguyen Viet Giang, 2017, "Key contents of risk management in development investment funds", Journal of Indian and Asian Studies, No (56), p 35-44 ... institutional risk These risks arise from various sources such as from customers, from the fund's activities, from the macro environment Hypothesis 3: Risk management of Bac Ninh Development Investment... multi-dimensional direction from the perspective of history, economics, politics and law; combine the bottom-up approach (from corporate customers, individual customers borrowing from the Development... characteristics of Bac Ninh province 3.1.2 Bac Ninh Development Investment Fund Bac Ninh Development Investment Fund (hereinafter referred to as the Fund), in English name, Bac Ninh Development Investment