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INFORMATION TECHNOLOGIES AND CORPORATION OF FINANCIAL RISKS IN ECONOMICAL STATISTICAL ANALYZE
Asociatedprofessor Nona Akhvlediani
Georgia, Kutaisi, Akaki Tsereteli State University, Economic department
ABSTRACT_
One of the main factors for development of the international economics is operation of transnational corporations in different countries of the world. Transitional corporations implies large firms (or union of the firms of different countries) which own foreign assets (capital investments) and has a great influence on economics in the worldwide.
The main characteristics of transnational corporations are:
- Peculiarity of realization: the firm sells important part of its own product abroad by which makes a great influence on the world market;
- Peculiarities of arrangement of the enterprise: some daughter companies and branches are established at the foreign countries;
- Peculiarities of ownership: owners of the firm represent residents (citizens of different countries) of different countries
Permanently changeable environment and frequent vagueness of the future stipulated inevitability for transnational corporations to make management of expected risks and to apply famous methods for analyzing and estimating the risks. Transnationalization reduces economic risks for corporations, but it grows them for beneficiary countries. The matter is that the transnational corporations can easily move their own capital to other countries. In case of unhealthy economic and political conditions in the country, the transnational corporations can replace their own capital to other country._
One of the main factors for development of the international economics is operation of transnational corporations in different countries of the world. Transitional corporations implies large firms (or union of the firms of different countries) which own foreign assets (capital investments) and has a great influence on economics in the worldwide.
The main characteristics of transnational corporations are:
- Peculiarity of realization: the firm sells important part of its own product abroad by which makes a great influence on the world market;
- Peculiarities of arrangement of the enterprise: some daughter companies and branches are established at the foreign countries;
- Peculiarities of ownership: owners of the firm represent residents (citizens of different countries) of different countries
It's quite enough if the firm will have only one of the above listed characteristics to be involved in the category of transnational corporations. Some large companies have all these three characteristics at the same time. The first characteristic is admitted as the most important one. According to these criteria the absolute leader is a Sweden firm "Nestle" which exports more than 98% of its own product. As for internalization of the right and property these two characteristics even may not have a place.
In 60 years of XX century UNO belonged the firm with no less than 100million USD annual turnover and branches placed in no less than six countries to the number of transnational corporations. Later they began to use less strict criteria. At present UNO belongs it to that transnational corporation which covers the following formal characteristics:
- they have industrial team in no less than two countries
- there is carried out agreed economic policy with centralized management
- industrial teams actively interact to each other and they exchange resources and responsibilities
In practice they distinguish three different types of transnational corporations:
ARTICLE INFO
Received 3 September 2017 Accepted 17 September 2017 Published 7 October 2017
KEYWORDS
© 2017 The Author.
The first type covers those companies which are established by using of authorized capital stock, management control and international sphere of activity of one country. The head office of transnational corporations is in based country, but daughter companies and branches -around the world. The typical example of such companies is "Ford", "Exon", "Nestle".
The second type covers multinational corporations which are international according to their capital, control and activity sphere. They unite national companies of two or three countries of the world economy. The most typical representatives of the present group are: "Royal Dutch Shell", "Universal", "Fiat-Citroen". The mentioned type of corporations was created earlier than transnational corporations, but it isn't widely spread now. This is caused by the fact that the corporations of the developed countries extend their activity in the developing countries.
The third type covers international corporation unions, which are unions of industrial, banking and other concerns for solving large economic problems. These unions are mainly created at electric, electro technical, chemical, oil, motor and aircraft building, IT spheres, for example: West European Concern "Airbus Industry".
According to scales of activity, all transnational corporations are divided into large and small types. The conditional criterion is a value of the annual circulation. For example: in 80 years of XX century to transnational corporations covered only those companies which annual turnover amounted 1 billiard dollar. If small transnational corporation had 3-4 branches abroad, in the large transnational corporations their number reached up to tens and hundreds.
Transnational banks are allocated separately (TB) as an important variety of transnational banks which carry out business crediting and organization of monetary accounts on an international scale.
The transnational corporations which started operation in XVI-XVII centuries were seriously evolved during the period of their existence. The British East-Indian Company was established in 1600. The founders of the company were not only English businessmen, but Dutch merchants and German bankers as well. Such types of colonial companies were only engaged in trade. That is why they didn't have a key role in capitalist economy. They are considered as predecessors of the modern transnational corporations which were established at the end of the XX century when free competition was shifted with a large firm- active development of monopolies and mass export of capital made a start. There are distinguished three stages in the development of transnational corporation:
At the first stage, at the beginning of XX century, for the first time transnational corporations make investment in the source of raw materials of economically weakly developed foreign countries where purchasing and selling subdivisions had been established. Foundation of high technological industrial company wasn't profitable at that time. One of the reasons of this was insufficiency of qualified staff at the beneficiary country, and technologies still needed improvement. In this period unions of the firms of different countries are appeared as the subjects of transnationalism. (international cartels). They divided sale markets, carried out agreed price policy and etc.
The second stage of evolution of transnational corporation started since the second part of XX century. It's related to reinforcement of the role of subdivisions of the foreign company not only in the developing countries but in the developed countries as well. On the whole, the foreign industrial departments are specialized on producing same product which was produced in the country of "origin" of transnational corporation before. Gradually, transnational corporations become more oriented to local request and local market service. If in the past international cartels had been acting at the world economy scene, now there is creating large national firms in order to carry out independent economic strategy. Just in 60 years of XX century a term "transnational corporation" was appeared.
In 1960 years fast growth of the number and significance of transnational corporations were going as a result of scientific and technical revolution. Introduction of new technologies and simplification of industrial operations, ability of using low qualified staff, made possibilities of space seclusion of separate technological processes. Development of transport and information communications supported realization of possibilities. It made possibility of painless division of industrial processes and arrangement of separate technological processes in those countries where national factors of industry was cheaper. The space decentralization of industry and concentration of management as well started on a global scale.
At the contemporary stage, since the end of XX century, the main peculiarity of development of transnational company includes making of global scale and creation of realization net.
To choose a place for establishing daughter companies the key role plays analysis of company costs which is often lower at developing countries. Production is sold in those countries where a high request is for it -mainly at developed countries. That is why, German population buy product of German firm "Bosch" which is produced not in Germany but in South Korea.
The role of transnational corporations in modern world economy is evaluated with the following activities:
- Translational corporations control over 2/3 of the world trade
- Approximately 1/2 of industrial production comes on them
- Almost 10% of employees work at nonagricultural production of the companies of transnational corporations
- Transnational corporations control approximately 4/5 of patents, licenses and know-how in the world.
Apart integration of owners, managers and clients, organization of corporate management implies efficient interaction of separate components of organizational and economic development. At the same time it's important to choose the right consecutive way for implementation of integration of the most significant spheres of management in order the management principles to work more productively.
The basis of corporate management is rationalization of all business-process and correspondingly elaboration of business-strategy is a condition for formation of the whole system of corporate management.
Fig. 1.
As transnational corporations represent business elite, as well as transnational corporations have their elite- super large companies which compete with many states according to industry, budget and number of "subordinates". According to joint volume of the foreign assets and foreign sales, 100 largest transnational corporations (less than 0.2 % of general number) make control on 12 % and 16 %.
There are two famous rating of the largest companies of the planet: Magazine "Fortune' makes ranking of nonfinancial companies according to profit volume, and the newspaper "Financial Times"-according to asset values of all companies (including financial). The analysis of the group composition of the largest transnational corporations in the world and their changes in the last decade displays the process of modification of dominated branches and regions (see schedule 1-6).
At first the largest branch groups of transnational corporations were branches of procuring raw materials. In 1973 the oil crisis caused growth of the role of oil transnational corporations, but in 1980 years together with relaxation of "oil hunger" their influence reduced and in the foreground were brought motor assembly and electrical transnational corporations, but correspondingly to development of scientific and technical revolution - firms from high technological spheres of service- American corporation "Microsoft" (world monopolist in software production) , American Electronic Trade Company "Wall-Mart Stores Inc."
During the years the membership of transnational corporations became more international. American firms are in the absolute lead among ten largest firms of the world, but if we view more numerous groups of the largest transnational corporations of the planet, leadership of USA is significantly weakly expressed here.
According to data of the magazine "Fortune", in 1950 years is observed absolute superiority of American firms; in 1980 years West European firms are dominated. This tendency is observed according to membership of all transnational corporations: in 1970 years more than half part of transnational corporation were from two countries- USA and Great Britain; now only half part of transnational corporation comes from USA, Japan, Germany and Switzerland taken together (especially Asian "Dragon" countries as are: Taiwan, South Korea, China). According to data of magazine "Financial Times" in 2003 in the list of 500 largest companies of the world entered Russian companies Rao "Gazprom", Lukoil and Rao "UES".
Transnational corporations are much more presented as determining factor of further development of the country in economic relationship international system.
The investments flow yields multilateral profit to beneficiary countries (countries where the branches and daughter companies of the head firms are established). The wide attraction of the foreign capital supports reducing of unemployment in the country and growth of revenue of state budget. Inevitability of import is annihilated by organizing of output of that product in the country which had been imported before. The manufacturer of competitive product in the world market and mainly export-oriented companies significantly support strengthening of the foreign trade positions of the country.
The activity of transnational corporation forces administration of the local companies to make amendments in the technological processes, developed practice of industrial relations, in order to allocate more funds for training of employees and pay attention to quality of the product, design, consumer specificity. Frequently, foreign investments are followed introduction of new technologies, output of new kind of production, new style of management, ability to apply the best experience from the foreign business practice.
The active industrial, investment and trade activity of transnational corporations give possibility of implementation two functions, which is significant for the whole world economy, especially:
- stimulation of economic integration
- international regulation of output and distribution of product
Transnational Corporation supports economic integration and establishes stable economic relations among different countries. Through them "mixing" of national economics in the united world economy is going. As a result of this, there is made a global economy spontaneously by net economic means and without violence.
It is significant that with advantages of operation of transnational corporations', it makes negative influence upon economics of the country they are operating in, as well as economics of donor country or economics of the country where the leader company is located.
It's significant to observe main negative signs of impact of transnational corporations upon economics of beneficiary country posing jeopardy to their national security:
- Ability of dictating unpromising directions to the companies of beneficiary country in the international distributing system of labour, danger of converting as a place of old and ecologically dangerous technologies of beneficiary country
- Occupying the most developed and perspective segments of industrial production and scientific and research structures of beneficiary country by foreign firms
- Growth of risks in the development of investment and industrial processes
- Reducing of state budget revenues by transnational corporations as a result of using of inside prices (transfer).
Permanently changeable environment and frequent vagueness of the future stipulated inevitability for transnational corporations to make management of expected risks and to apply famous methods for analyzing and estimating the risks.
Estimation of risk is a stage of its analysis when probability of starting of undesirable events and caused damage shall be determined
Fig. 2.
There are made three kinds of analysis to estimate risks of specific processes. They are:
- Statistic data analysis of undesirable events displayed last years
- Theoretical analysis of the structure of cause-and-effect relations of processes
- Expert analysis
- Application of the following methods to estimate probability of undesirable events
1. "Event tree" method
2. "Event-result" method
3. "Rejection tree" method
4. "Danger index" method (Dow-index method)
Let's discuss each of them:
The essence of "Event tree" method is to observe sequence of feasible separate incidents of technologic processes or system.
"Event tree" is made on the basis of event referred to as an "incident". On each stage of the event is displayed system work i.e. good development (upper branch of tree) or system failure (lower branch of tree).
"Event-result" method is divided into four stages to identify risks. At the first stage is specified purpose of researching process or its part. At the second stage - moving of the process from standard to the third stage- reasons of moving. At the fourth stage- results caused by moving.
The activity of BP in Georgia has significant financial and economic effect. According to information of 2016 approximately 7% of foreign investments made in Georgia are on the account of BP and its partners. By payment of taxes and transit fees it makes a great bit in the state budget of Georgia.
REFERENCES
1. Shambaugh, Jay C. "The Euro's Three Crises." Brookings Papers on Economic Activity, Spring 2012. http://www.brookings.edu~/media/Projects/BPEA/Spring%202012/2012a_Shambaugh.pdf
2. Dawson, Mark. "The Legal and Political Accountability Structure of 'Post-Crisis' EU Economic Governance." JCMS: Journal of Common Market Studies 53, no. 5: 976-993, 2015.
