A Novel Financial Risk Early Warning Strategy Based on Decision Tree Algorithm

Abstract

This paper requires a lot of assumptions for financial risk, which cannot use all of the data and is often limited to financial data; and in the past, most early warning models for financial crises did not, so they could not track the fluctuation and change trend of financial indicators. A decision tree algorithm model is used to propose a financial risk early warning method. Enterprises have suffered as a result of the financial crisis, and some have even gone bankrupt. Any financial crisis, on the other hand, has a gradual and deteriorating course. As a result, it is critical to track and monitor the company's financial operations so that early warning signs of a financial crisis can be identified and effective measures taken to mitigate the company’s business risk. This paper establishes a financial early warning system to predict financial operations using the decision tree algorithm in big data. Operators can take measures to improve their enterprise’s operation and prevent the failure of the embryonic stage of the financial crisis, to avoid greater losses after discovering the bud of the enterprise’s financial crisis, and to avoid greater losses after discovering the bud of the enterprise’s financial crisis. This prediction can be used by banks and other financial institutions to help them make loan decisions and keep track of their loans. Relevant businesses can use this signal to make credit decisions and effectively manage accounts receivable; CPAs can use this early warning information to determine their audit procedures, assess the enterprise's prospects, and reduce audit risk. As a result, the principle of steady operation should guide modern enterprise management. Prepare emergency plans in advance of a business risk or financial crisis to resolve the financial crisis and reduce the financial risk.