The purpose and principles of risk management
Risk is an inherent part of financial and economic activities of enterprises and requires considerable attention from financial managers. The existence of a specific risk level of operations does not mean that we must give them. Because denial is equivalent to the loss of expected revenue and profits. In all measure necessary and balanced financial solutions.
Of course, the potential losses in the market environment, no one is safe. But this does not imply that in order to fully avoid losses should be carried out only conservative policy. It's not just fear of risk in market activities, and time to analyze the causes undesirable developments, consider the previous negative experience, constantly adjust the system operational matters from the standpoint of maximizing results.
An important role in determining the acceptable level of risk, predicting the probability of occurrence of risk events and timely neutralize their negative effects given to risk management.
Risk management - a system of measures for the identification, assessment, prevention and risk insurance and includes the strategy and tactics of management actions.
Risk management strategy is a combination of selected enterprise management measures to achieve the goal of risk management and helps focus efforts and resources on the most optimal solution. After achieving this goal, each strategy is no longer used because of new priorities necessitate a new strategy. The main strategic goal of risk management can be defined as the task of protecting the company from the adverse effects of environmental factors and the optimization problem of internal environment and so on. Al.
Tactics include risk management practices and financial management techniques to achieve this goal in a specific context. Tactical objective of financial risk management of the enterprise is to choose the most meaningful and best ways to reduce risk and neutralize their negative effects in case of risk events in each case.
As a control system, risk management includes two subsystems: one that manages (the subject of risk management), and that which is managed (facility management). As seen from the scheme, subjects management in financial risk management are the risk managers, functional responsibilities which are:
- The rationale for investment in risky assets and the development of risk investment programs;
- Choice of ways to avoid the risks and methods of its znyzh6nnya)
- Of insurance risks;
- Organization of financial relations: between insurers and policyholders; between borrowers and lenders; between contractors and others.
To address a number of management tasks related to the identification, assessment and neutralize financial risks for a significant amount of risk operations it is advisable to create a special department in the enterprise (station, center) of risky investments.
The objects of risk management is risk capital investments and financial relations system. In the management of financial managers purposefully affect facilities management within their administrative functions. The main functions of the subject of risk management include planning, organization, motivation and control.
Scheduling is predicting the likelihood of exposure by alternative embodiment of the financial and business transactions. It is very important to predict the possible kinds of risks arising justify and possible consequences of their impact on financial results. It is advisable to include a separate section entitled "Risk Assessment" to the business plan of any investment project.
The organizational risk management function is to establish special units for financial risk management, the definition of the functional responsibilities of individual managers and financial specialists in insurance, coordinate their actions.
The function of motivation associated with stimulation of the interest of financial managers in the implementation of financial monitoring of the level of risk of individual operations and the development of an effective mechanism to respond to adverse trends in economic development in order to minimize financial losses.
The control function provides risk management organization of the checks to reduce the risk evaluation of the effectiveness of the measures to neutralize risk surgery in the course of financial and business processes for timely prevention of risky events.
The policy of financial risk management is part of the overall financial strategy of the company lies in the development of a system of measures to identify financial risks, evaluation of their concentration and probability of occurrence, preventing undesirable consequences of risk events and compensation for losses incurred.
Quantitative methods of assessment of probabilities of possible financial losses is an important part of financial instruments justify making under risk. However, the development of the strategy and tactics of risk management should take into account that not every type of risk can be quantitatively measured.
Where the level of financial risk accurately measure fails, the process rationale for management decisions should be based on a general heuristic rules of decision making under risk.
• Risk only within equity.
• You need to weigh the possible negative consequences of risk.
• You can not risk large amounts of capital if the expected result is too small.
• It is necessary to simultaneously consider other alternative solutions that may be less risky.
Where the risk can be quantified, the selection decision based on the following criteria:
1. Maximizing financial results - with possible alternatives investment risk is chosen the option that provides the most effective results with minimal or acceptable level of risk investors.
2. The optimal probability of financial results - with possible solutions selected the option whereby the probability outcome is acceptable for the investor.
3. Optimal variation financial results - with possible alternatives as preferred option, in which the gap between the minimum and maximum financial result is the lowest.
4. The optimum combination of benefit and risk - the possible alternatives chosen the option decision, which can be obtained substantial profits, while avoiding large risk.
In addition to these criteria optimal risky decisions should take into account the condition of their acceptance (certainty economic situation, uncertainty, conflict).
In the event that the likelihood of events for individual scenarios known value determined by the average expected rate of return for each option and the option is chosen to ensure its maximization.
If the probability of possible economic situations is unknown, but it is the assessment of relative values by expert procedures established likelihood of certain activities and conditions determined by the average expected rate of return on invested capital. Assessing the results obtained in this way, you can choose:
- Maximum solution provides the maximum possible rate of return of minimum quantities;
- Minimax solution provides the minimum amount of financial losses of the possible maximum values;
- A compromise solution - provides the average value of the result.
In case of conflict mathematical tools to select the optimal strategy for risk management based on the use of game theory.