Raymond Woo, who chairs business operations at Ernst & Young China, said the massive losses and limited transparency of the Chinese holding company somehow tarnish image of Chinese enterprises overseas.

China Aviation Oil (Singapore) Corp., corporate child of the state-owned China Aviation Oil Holding Company, got involved in petroleum derivative trading, leading to losses valued roughly at 554 million US dollars.

A spokesman for the State-owned Assets Supervision and Administration Commission (SASAC), the top state assets watchdog, said over the weekend that the company seriously violated the decision-making process, decided to endorse the trading beyond its authority and made wrong judgments on the trading.

At the annual meeting of state-owned company leaders which was opened on Dec. 13, SASAC carefully adjusted the schedule, postponing the work report delivering of Li Rongrong, minister in charge of SASAC, and organizing instead a risk management course for those profit-earning company leaders.

"We could never rule out any risks in business, but we should try all out to minimize possible risks," Li said. "We must not repeat mistakes."

Woo and another senior financial consultant discussed the cases of Enron, WorldCom, Barings Bank and Yaohan with 280 presidents and 30 chairs of supervisory board of companies.

The management and professionals at various levels need to understand business risks, and different sections should effectively communicate with each other, Woo said.

No company should ever set targets too ambitious to realize, he said, adding that random expansion and unadvised investment should be prohibited.

The key to establishing risk management mechanism is to standardize control and balance of power inside companies, Woo said.

"Effective risk management and crisis prevention systems would primarily guard against too much individual power in management," he said.

Companies are advised to build early-warning systems, which encourage employees, even low-ranking professionals, to find potential risks and report them to management.

Woo warned the state companies to notice their cash flow. Unusual cash flow in companies usually betrays procedural violations or illegal behavior.

"You should never simply rely on your accountant," he said.

While they are often employed by wise management in companies, incentives are not always positive for companies, Woo said.

"Sometimes," he said, "very talented professionals will break the law because they are stimulated by those incentives. Pursuit of profits and growth at all costs is very much risky and might finally get your life," he said.

In the 1980s, European and American economists started to study risk control and management theories. How to control risks and prevent crises were major topics in the world after the financial crises that struck many Asian countries in the late 1990s.

After the scandals of Enron and WorldCom were released and carefully observed, many companies zeroed in on inner supervision and financial reporting mechanism.

The United States legislature enacted a law in 2002 on risk management of companies. The European Union is expected to adopt a similar law in 2006.

China has adopted a group of laws and regulations on company management standardization. However, Woo said, strict implementation and supervision are urgently needed.