Application of Data Mining Technology in Financial Risk Management

Abstract

In the era of big data, data mining technology has made great progress in the past decades and has been widely used in various fields. Applying data mining technology to enterprise management can provide more effective support for enterprise decision-making. In order to improve competitiveness in the fierce market competition, more and more enterprises pay more attention to the need of risk management and control. On the one hand, financial risk analysis can make early warning to ensure the continuous operation of enterprises and bring economic profits for enterprises; on the other hand, it can also avoid risks for investors. This paper takes small, medium and micro enterprises on the New Third Board as the research object and uses data mining technology to study the internal relationship between main financial ratios and enterprise bankruptcy risk. Through the application of association rules and apriori algorithm, this study found some indicators closely related to the bankruptcy risk of enterprises, including current ratio, quick ratio, ROA and cash ratio. When these ratios fall below a certain value, enterprises are more likely to get into financial trouble. Enterprises can timely evaluate their financial risks by focusing on related financial ratios, and build up a financial risk early warning index system, so as to promote their stable and long-term development.