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BUSINESS RISK ASSESSMENT METHODS A.M. Seisenbayeva

Caspian University, Almaty, Kazakhstan e-mail: [email protected]

Abstract. The article presents a comparative analysis of risk assessment methods based on such criteria as the presence quantitative output data, applicability for various risk categories, applicability of various risk categories, taking into account both negative and positive impact of events on the company objectives is goals, minimal influence of the subjective factor in the risk assessment process. The results can be useful to employees of enterprises operating in various industries faced by the task of choosing the risk assessment method. Risk assessment is a set of analytical measures that allow to predict the possibility of obtaining additional entrepreneurial income or a certain amount of damage from the risk situation that has arisen and the late adoption of measures to prevent risk.

Key words: risk management system, risk assessment, risk assessment methods, financial risks.

Introduction. Risks are inherent in any business activity. They can be different according to the source, date and circumstances of occurrence and, accordingly, by the analysis methods and assessment.

All modern companies are forced to work in conditions of high uncertainty. Therefore, the assessment of possible risks and their management becomes a key task on which the future of the company depends.

One of the main stages of the risk management process is the provision of information necessary for informed decision making regarding the activities to achieve the purpose.

The main purpose of assessment is to identify the main types of risks affecting the financial and economic activities. The advantage of this approach is that already at the initial stage of the analysis, the head of the enterprise can visually assess the degree of riskiness by the quantitative composition of risks and already at this stage refuse to implement a certain decision.

Risk assessment allows you to answer the following basic questions:

− what events can happen;

− what are the consequences of these events;

− what is the probability of their occurrence;

− whether the level of risk is acceptable, whether further processing is required.

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Method of research. At the stage of quantitative analysis risk calculated numerical values of the individual risks and the object risk as a whole. It also identifies possible damage and provides a cost estimate for the manifestation of risk, and finally, the final stage of quantification is the development of an anti- risk system measures and calculation of their value equivalent.

Quantitative analysis can be formalized, for which the tools of probability theory, mathematical statistics, and the theory of operations research are used. The most common methods of quantitative risk analysis are statistical, analytical, expert evaluation method, the method of analogues. Methods: statistical methods, analytical methods, expert estimation method, the method of analogues[1].

Results and discussion.

Statistical methods.

The essence of statistical methods for risk assessment is to determine the probability of loss based on statistical data from the previous period and to establish the area (zone) of risk, risk ratio, etc. Merits statistical methods is the ability to analyze and assess different scenarios and take into account different risk factors in a single approach. Main disadvantage of these methods considered the need to use probabilistic characteristics in them. The following statistical methods can be used: assessment of the likelihood of execution, analysis of the likely distribution of the flow of payments, decision trees, risk simulation, and the technology “Risk Metrics”.

Method for estimating the probability of execution allows you to give a simplified statistical estimate of the probability of execution of a decision by calculate the proportion of completed and outstanding decisions in the total amount of decisions taken.

Method for analyzing probability distributions of payment flows It allows for a known probability distribution for each payment flow element values to estimate possible deviations from the expected payment flows. The stream with the least variation is considered less risky. Decision trees usually used to analyze the risk of events with a visible or reasonable number of development options. They are especially useful in situations where decisions made at time t = n are highly dependent on decisions made earlier, and in turn determine the scenarios for further developments. Simulation is one of the most powerful methods of analysis of the economic system; in general, it refers to the process of conducting experiments on computers with mathematical models of complex real-world systems. Simulation is used in cases where conducting real experiments, for example, with economic systems, is unreasonable, costly and / or not feasible in practice. In addition, it is often practically impracticable or costly to collect the necessary information for decision- making; in such cases, the missing actual data is replaced with the values obtained during the simulation experiment (i.e. computer generated).

The essence of statistical methods for risk assessment is to determine the probability of loss based on statistical data from the previous period and to establish the area (zone) of risk, risk ratio, etc. Merits statistical methods is the ability to analyze and assess different scenarios and take into account different risk factors in a single approach. Main disadvantage of these methods considered the need to use probabilistic characteristics in them. The following statistical methods can be used: assessment of the likelihood of execution, analysis of the likely distribution of the flow of payments, decision trees, risk simulation, and the technology “Risk Metrics”.

Method for estimating the probability of execution allows you to give a simplified statistical estimate of the probability of execution of a decision by calculate the proportion of completed and outstanding decisions in the total amount of decisions taken.

Method for analyzing probability distributions of payment flows It allows for a known probability distribution for each payment flow element values to estimate possible deviations from the expected payment flows. The stream with the least variation is considered less risky. Decision trees usually used to analyze the risk of events with a visible or reasonable number of development options. They are especially useful in situations where decisions made at time t = n are highly dependent on decisions made earlier, and in turn determine the scenarios for further developments. Simulation is one of the most powerful methods of analysis of the economic system; in general, it refers to the process of conducting experiments on computers with mathematical models of complex real-world systems. Simulation is used in cases where conducting real experiments, for example, with economic systems, is unreasonable, costly and / or not feasible in practice. In addition, it is often practically impracticable or costly to collect the necessary information for decision- making; in such cases, the missing actual data is replaced with the values obtained during the simulation experiment (i.e. computer generated).

Script method allows you to combine a study of the sensitivity of the resulting indicator with an analysis of the probability estimates of its deviations. Using this method, you can get a fairly clear picture for different variants of events. It represents the development of a sensitivity analysis methodology, since it involves the simultaneous change of several factors.

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Expert estimation method.

It represents a complex of logical and mathematical statistical methods and procedures for processing the results of a survey of an expert group, and the survey results are the only source of information. In this case, it becomes possible to use intuition, life and professional experience of survey participants. The method is used when the lack or complete lack of information prevents the use of other features. The method is based on a survey of several independent experts, for example, in order to assess the level of risk or determine the influence of various factors on the level of risk. Then the information obtained is analyzed and used to achieve the goal. The main limitation in its use is the difficulty in selecting the necessary group of experts.

The method of analogues.

This method is used in the case when the use of other methods is unacceptable for some reason. The method uses a database of similar objects to identify common dependencies and transfer them to the object under study.

For analysis and risk assessment specialist uses basic information:

− company accounting records;

− structure and staffing table of the organization;

− maps of technological flows (for a range of production risks);

− contracts (for legal risk analysis);

− input prices of production;

− financial and production plans of the company.

The role of a quantitative assessment of economic risk increases significantly when there is the possibility of choosing from a set of alternative solutions the optimal solution that ensures the greatest probability of the best result at the lowest cost and loss in accordance with the tasks of minimizing and programming risk.

Here it is necessary to identify, quantify, assess and compare the elements of the economic processes under consideration, identify and identify relationships, trends, patterns with their description in the system of economic indicators, which is unthinkable without using mathematical methods and models in economic analysis.

Risk assessment is a set of analytical measures that allow to predict the possibility of obtaining additional entrepreneurial income or a certain amount of damage from the risk situation that has arisen and the late adoption of measures to prevent risk[2].

According to this parameter, as a production activity, the risk classification can be as follows:

− organizational risks. They are formed due to errors in the management system of the organization and employees, not a built-in system of internal control - that is, associated with violations in the internal business processes of the enterprise;

− market risks. In case of unstable economic conditions, there are: threats of monetary losses due to jumps in the value of goods, risk of falling demand for a product, loss of liquidity;

− credit risks threaten if the partner of the organization is not able to comply with the terms of the loan agreement. Such risks threaten both banks (non-payment of money) and companies that have accounts receivable or services sector tied to the securities market;

− deposit risk is the risk of possible non-return (in whole or in part) of deposits in connection with a bankruptcy of a bank or other financial institution. It is associated with an incorrect assessment and unsuccessful choice of a bank (or other financial institution) for deposit operations of an enterprise.

− legal risks are characteristic in a situation where the legal framework was not taken into account during the transaction, or amendments to the legislation were introduced. Here we also mention the risk of discrepancies between the points of legislation in different countries and incorrectly formed documentation;

− technical / production / environmental risks suggest the likelihood of damage that may be caused to the environment, the possibility of accidents and fires, disruptions in the process due to violations during design and installation works.

The risk degree is the likelihood of a loss event, as well as the amount of possible damage from it. Risk may be:

− permissible - there is a threat of complete loss of profits from the implementation of the planned project;

− critical is possible not to receive not only profit, but also revenue and cover losses from the funds of an entrepreneur;

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− catastrophic is possible loss of capital, property and bankruptcy of the entrepreneur.

Final quality risk results analysis, in turn, serves as the initial information for carrying out quantitative analysis, that is, only those risks that are present in the implementation of a specific operation of the decision- making algorithm are assessed.

Quantitative analysis is the determination of the specific amount of monetary damage of individual sub-types of financial risk and financial risk in the aggregate.

Sometimes a qualitative and quantitative analysis is made on the basis of an assessment of the influence of internal and external factors: an element-by-element assessment of the proportion of their influence on the operation of a given enterprise and its monetary value is carried out. This method of analysis is quite time-consuming from the point of view of quantitative analysis, but it brings its undoubted results in a qualitative analysis. In this connection, more attention should be paid to the description of methods for quantitative analysis of financial risk, since there are many of them and some skill is necessary for their competent application.

In absolute terms, risk is determined by the magnitude of possible losses in material (physical) or monetary (monetary) terms[3].

In relative terms, risk is defined as the amount of possible losses related to a certain base, in the form of which it is most convenient to accept either the property status of an enterprise, or the total cost of resources for a given type of business activity, or the expected income (profit). Then the losses will be considered a random deviation of profit, income, revenue downward. in comparison with the expected values. Entrepreneurial losses are primarily an accidental decrease in entrepreneurial income. It is the magnitude of such losses that characterizes the degree of risk. Hence, risk analysis is primarily associated with the study of losses.

Depending on the magnitude of probable losses, it is advisable to divide them into three groups:

− losses, the value of which does not exceed the estimated profit, can be called admissible;

− losses, the value of which is more than the estimated profit are classified as critical - such losses will have to be compensated from the pocket of the entrepreneur;

− even more dangerous is the catastrophic risk, in which the entrepreneur risks losing more than his entire property.

If it is possible in some way to predict, assess the possible loss of this operation, it means that to obtain a quantitative risk assessment, which is employed. Dividing the absolute value of possible losses by the estimated cost or profit, we obtain a quantitative assessment of risk in relative terms, in percent.

Saying that risk is measured by the magnitude of the possible. probable losses should take into account the random nature of such losses. The probability of an event occurring can be determined by an objective method and a subjective one. The objective method is used to determine the probability of an event occurring on the basis of calculating the frequency with which this event occurs.

The subjective method is based on the use of subjective criteria that are based on various assumptions. Such assumptions may include the judgment of the evaluator, his personal experience, the assessment of the rating expert, the opinion of the auditor-consultant, etc.

Thus, at the heart of the assessment of financial risks lies the determination of the relationship between certain sizes of losses of an enterprise and the probability of their occurrence. This dependence finds expression in the curve of probabilities of occurrence of a certain level of losses under construction.

Creating a curve is an extremely difficult task, requiring from employees involved in financial risk sufficient experience in knowledge. To build a probability curve for a certain level of losses (risk curve), various methods are used: statistical; cost benefit analysis; expert assessment method; analytical method; analogy method. Among them, three should be highlighted: the statistical method, the method of expert estimates, the analytical method.

The content of the statistical method lies in the fact that the statistics of losses and profits that occurred in a given or similar production is studied, the magnitude and frequency of obtaining one or another economic return are established, the most probable forecast for the future is compiled.

Undoubtedly, risk is a probabilistic category, and in this sense it is most reasonable from scientific positions to characterize and measure it as the probability of a certain level of losses. Probability means the possibility of obtaining a certain result.

Financial risk, like any other, has a mathematically expressed probability of loss occurrence, which is based on statistical data and can be calculated with sufficiently high accuracy. To quantify the magnitude of financial risk, it is necessary to know all the possible consequences of any particular action and the probability of the consequences themselves.

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As applied to economic problems, methods of probability theory are reduced to determining the values of the probability of occurrence of events and to choosing from possible events the most preferable based on the largest value of the expectation, which is equal to the absolute value of this event multiplied by the probability of its occurrence.

The main tools of the statistical method for calculating financial risk: variation, variance, and standard (root-mean-square) deviation.

Variation is a change in quantitative indicators in the transition from one version of the result to another. Dispersion is a measure of the deviation of actual knowledge from its average value.

The risk degree is measured by two indicators: the average expected value and the variability of the possible result.

The average expected value is related to the uncertainty of the situation, it is expressed as the weighted average of all possible results E (x), where the probability of each result (A) is used as the frequency or weight of the corresponding value (x). In general terms, this can be written as:

E (x) = A 1 X 1 + A 2 X 2 + ··· + A n X n (1)

The average expected value is the value of the magnitude of the event, which is associated with an uncertain situation. It is the weighted average of all possible results, where the probability of each result is used as the frequency, or weight, of the corresponding value. This calculates the expected result.

Cost-benefit analysis focuses on identifying potential risk areas, taking into account the financial sustainability of the company. In this case, you can simply do with standard methods of financial analysis of the performance of the main enterprise and the activities of its counterparties (bank, investment fund, client company, issuer company, investor, buyer, seller, etc.).

The expert evaluation method is usually implemented by processing the opinions of experienced entrepreneurs and specialists. It differs from the statistical one only in the method of collecting information for constructing a risk curve.

This method involves the collection and study of estimates made by various specialists (of the enterprise or external experts) of the probabilities of different levels of losses. These estimates are based on the account of the financial risk factors, as well as statistical data. The implementation of the expert evaluation method is significantly complicated if the number of assessment indicators is small.

The analytical method for constructing a risk curve is most complex, since its underlying elements of game theory are available only to very narrow specialists. The most commonly used subtype of the analytical method is the sensitivity analysis of the model.

The sensitivity analysis of the model consists of the following steps: the choice of a key indicator, against which the sensitivity estimate is made (internal rate of return, net present value, etc.); the choice of factors (the level of inflation, the degree of the state of the economy, etc.); calculation of the key indicator values at various stages of the project implementation (purchase of raw materials, production, sale, transportation, capital construction, etc.)[4].

Conclusions. Formed in this way, the sequence of costs and receipts of financial resources make it possible to determine the flow of funds of funds for each moment (or length of time), determine performance indicators. The diagrams are constructed, reflecting the dependence of the selected result indicators on the value of the initial parameters. Comparing the diagrams obtained, one can determine the so-called key indicators that most affect the assessment of the project's profitability.

The sensitivity analysis has serious drawbacks: it is not comprehensive and does not specify the likelihood of alternative projects

The method of analogies in analyzing the risk of a new project is very useful, since in this case the data on the effects of adverse financial risk factors on other similar projects of other competing enterprises are being investigated.

Indexation is a way to preserve the real value of money resources (capital) and profitability in the context of inflation. At the heart of it is the use of various indexes.

For example, when analyzing and forecasting financial resources, it is necessary to take into account price changes, for which price indices are used. Price index - an indicator characterizing the change in prices over a certain period of time.

The above classification allows you to conduct a competent analysis and risk assessment. But, before we turn to the question of risk assessment and analysis, it is necessary to determine the concept.

Risk assessment is systematic work on tracking factors and varieties of risk, as well as their

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