Финансовая среда предпринимательства, предпринимательские риски. Учебное пособие

Identification of external and internal factors which increase and reduce certain types of risk

Analysis of identified factors

Two approaches in assessment of specific risk type

Analysis of transactions at selected risk level

Development of measures to reduce risk level

Fig. 4.2

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Riskology highlights the following risk assessment methods: Qualitative analysis, Quantitative analysis and Complex analysis

Let’s give a detailed description of the qualitative method.

Main objective of qualitative test is to identity all possible types of risk and factors, which affect risk level as well as potential areas of risk

External factors include:

1.political and economic situation in the country and abroad;

2.legal and regulatory basis of business;

3.tax system;

4.competition;

5.natural disasters and etc.

Internal factors include:

1.economic strategy of the company;

2.degree of use of resources in the industrial activities;

3.qualification of employees;

4.quality of management, etc.

Methods to evaluate financial risk

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Minimal risk

Critical risk

Catastrophic risk

Qualitative analysis

Fig. 4.4

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As seen in the next slide the selection of these zones depends on the degree of losses.

In the risk-free zone bissness does not risk anything and gets the planned profit.

Then follow the zones of losses.

In the area of permissible risk the company risks losing part of or entire profit.

In catastrophic risk zone – the firm risks its assets and may not receive revenue.

Further risk taking can lead to bankruptcy.

Fig. 4.5

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The quantitative assessment method also allows to highlight risk zones.

Riskology recommends using risk ratio for this – look at the slide, where

y- maximum losses,

c – own financial resources.

As seen on the slide - zone of risk depends on size of this ratio.

Calculating the risk ratio helps highlighting areas of risk. For example:

1.If the ratio here is less than point one, we can speak about minimal risk zone,

2.if the ratio here is between point one and point three

– we can speak about area of permissible risk,

3.if the ratio is between point three and point seven, we can speak about critical zone,

4.And finally, if the ratio is more than point seven, the

risk is catastrophic.

After qualitative and quantitative risk assessment, it is necessary to proceed to risk management.

This topic will be covered in the next lecture.

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The quantitative methods are listed on the next slide. They are:

-Statistical

-Method of estimating the probability of expected damage

-Minimization of loss method

-Method of using “Decision tree”

-Method of using financial indices

-Mathematical

We will take a closer look at each of these methods while doing practical exercises.

Quantitative analysis

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Consider the various methods of risk management

1.Avoidance of risk - Exit from risk zone;

2.Risk retention - Risk acceptance with all financial implications and Selfinsurance;

3.Risk reduction – Diversification, Limit setting and Improving the level of information support;

4.Risk transfer – Insurance, Hedging and Other contractual forms of transfer of responsibility;

5.Compensation of risk - Creating a system of reserves in the enterprise and plans for their use and Development of strategy and plans for its implementation;

6.New ways of Risk reduction – Innovation, Financial engineering, Socio-psychological methods and Corporate culture.

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