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Gogoleva M.A., Candidate of pedagogic sciences
Assistant Professor Grachyova A. V., post graduate student The Institute of Service and Business (branch) of Don State Technical
University Shachty
MANAGEMENT OF CREDIT RISK AT THE ENTERPRISES OF SMALL
AND MEDIUM BUSINESS Abstract: The article is devoted to management of credit risk at the enterprises of small and medium business. Financing and loans to small businesses are among the instruments and the implementation of economic levers of risk management practices. The authors studied the risk management techniques, defined the most appropriate optimal method depending on the goals and objectives set by the small or medium enterprise, as well as the current situation in the market. It is shown here by both theory and experience that credit risk has a complex internal structure. The survey showed that credit risk management of commercial bank for small and medium-sized enterprises, on the one hand - is the urgent necessity, but, on the other hand, it is a real opportunity to improve the system of credit risk management of the bank.
Keywords: credit risk, small business, medium-sized company loans, the creditworthiness of the borrower, commercial bank.
In the years of market transformations both in representation and on the contribution to the economy of Russia and its regions, small and medium business has become one of the key sectors of the Russian Federation, securing a performance of both social and economic functions. Development and application of criteria for the classification of enterprises to small and medium-sized enterprises is of great scientific and practical importance. Relationship between large, medium and small business, the amount of state support for small and medium businesses, the amount of tax benefits to small and medium-sized businesses, statistical reporting depend on the adoption of certain criteria [1].
Modern business, we speak about small and medium-sized enterprises, is impossible without risk. Risk is the flip side of modern entrepreneurship. With the
development of market relations in Russia competition is raising, business opportunities are expanding. To succeed in business, one needs original decisions and actions, constant creative search, mobility and readiness to implement all possible technical and technological innovations, and all these are inevitably associated with a risk.
Every activity, whatever it may be, and life itself contains a certain amount of risk and a chance of a different nature. Any economic activity comes into uncertainty associated with changes in market conditions, that is, to a large extent with the behavior of other economic entities, their expectations and their solutions.
Risk is an element of uncertainty that may affect the operation of a business entity or carry out any economic transaction. So the bank cannot operate without risk. And since the purpose of the bank is to maximize profits, it must pay great attention to the implementation of its operations at the lowest possible risk. In order to avoid the bankruptcy of its liquidation, to achieve and maintain a stable position in the banking market, banks need to seek and apply effective methods and tools to manage these risks.
Credit operations is the most profitable article of banking business. This source forms the bulk of the net profit which will be deducted in reserve funds and spent on the payment of dividends to shareholders of the bank.
At the same time these operations, again are related to the credit risk faced by banks. Credit risk management process deserves special attention as the success of the bank depends on its quality. Studies of bank failures around the world suggest that the main reason was the poor quality of assets. Credit risk is a non-payment by the borrower of principal and interest on the loan, interest rate risk and so on. A careful selection of borrowers, the analysis of the conditions of the loan, continuous monitoring of the borrower's financial condition, its ability (and willingness) to repay the loan can avoid credit risks. Performing all these conditions ensures the success of the most important banking operation - lending.
The technique of credit risk management of credit products for small and medium business is based on finding the economic laws that lead to the benefits of a lending range of borrowers - small and medium-sized businesses [2].
In terms of handling a potential credit risk of the loan product predominantly proactive approach is one of findings specific ways to influence the risk. Consequently, the management of potential credit risk of the loan product looks the following way:
Chart 1. Stages of process control potential credit risk of credit product Credit risk management of credit product will allow a commercial bank in the future assess the borrower's financial condition more qualitatively; reasonably reduce the level of credit risk. Quantified reduction can be achieved through reduction of contributions to the reserve. The main indicators in this case will be: resizing estimated reserve of the principal amount of the loan, (Ar); value of the estimated bad debt on loans extended to the analyzed
loan product, (Skn).
Let's define the value of Ar, which will provide the loss reserves in a new environment. Let a be share of non-repayment of credit, r - the proportion of redundancy applied before the introduction of measures to manage potential credit risk of credit product, psr - the average cost of allocating of a commercial bank's resources. We denote by a non-return - a0 share funds after management activities, and, a0 - the value of changes in the share of default funds - it may with equal probability range from 0 to a critical. Then, following proportions (1)
S
kna
S
kn
Skn(a -«<)) Skn(r ~Ar) (1)
and determined by the ratio of reliability, certain internal policy of the bank, we get that
r
Ar = r
1
a -a
\
0
V a y (2)
The product of the previously mentioned indicators as well as the average cost of resource allocation of a commercial bank (psr) may be indicative of results of measures taken to manage the potential credit risk credit product and used for comparing the feasibility of developing a variety of new loan products:
f r „ ~ \
R = SnPc
cp
r
V V
1 -
a -a
0
a
a -a
0
a
(3)
In this case, the formula (3) can also be adjusted by the amount of average losses of an incorrect assessment a0. The formula looks like this:
f , x A
R = S
kn
P
cP
r
1
a -a
\
0
y V y Kpum j (4)
Thus, the advantages of this technique are illustrated, credit risk management of a bank can be improved on its base, as well as it can be used in the development of credit products for small and medium-sized businesses in order to reduce credit risk in the future.
More effective management of potential credit risk of credit product can be achieved in a certain way by grouping potential borrowers and creating for them special loan products. In particular, we consider the group of small and medium-sized enterprises and entrepreneurs, members of the economic clusters.
Considering the small and medium-sized enterprises in terms of their participation in the cluster simplifies the process of assessing credit, costs associated with the issuance of the loan reduce. In addition, due to the specialization economic analysis becomes deeper, consideration of the application time decreases.
Bank, working with members of the economic clusters, increases the quantity and quality of the sources of information about borrowers. Comparative analysis of similar borrowers and assessment of trends and prospects of the market are possible.
Thus, members of the lending economic clusters is one way to reduce the risk of lending to small and medium-sized businesses, simplify the management of credit risk, thereby increasing the efficiency of the bank and obtain benefits.
Application of the extended reverse factoring for small and medium-sized businesses that have economic characteristics of the members of the cluster (in the presence of a large chain linkages enterprises reliable firm) will allow each of the parties and economic relations to realize their interests.
Table 1 - The interests of members of reverse factoring
a
a
J
2a
Interests of the borrower Interests of the buyer Factor interests (bank)
- a loan at a reasonable interest rate; - postponement of payment; - lack of necessity to study the financial situation of the seller
- improved liquidity, cover cash gaps;
- the possibility of expanding sales to attract customers through more favorable terms;
- establishing closer contact with the servicing bank, the beginning of the credit history;
- lack of need to provide collateral, the minimum required documents;
- an extremely low probability of regression;
- faster compared with the credit process;
- cheaper purchase of own prepayments._
- the possibility of centralized-balanced, debt management;
- tough control of the delivered goods (works, services).
thoroughly;
- economies of scale (one buyer has a lot of suppliers);
- expansion of the customer base, operations and increase profits;
- the ability to introduce new products for small and medium-sized businesses;
- attracting merchants for permanent service, increasing of cross-selling;
- gathering a credit history of small and medium-sized enterprises;
- diversification of the bank offers.
Reverse factoring and banking products based on it in conditions of economic instability is a promising scenario of development of crediting segment of small and medium-sized businesses. It allows to expand the operations of the bank, lending small and medium-sized businesses with a high level of credit risk in taking the risks, equivalent to the level of credit risk of a large enterprise, representing a first-class buyer.
The survey showed that credit risk management of commercial bank for small and medium-sized enterprises, on the one hand - is the urgent necessity, but, on the other hand, it is a real opportunity to improve the system of credit risk management of the bank.
Bibliography:
1. Sergeev, I.V., Veretennikova I.I. Economics of enterprises: study guide / I.V. Sergeeva. - Edition 4, M. - 2011. - p. 670.
2. Bel'kov, M.A. Technical principals of potential credit risk management of credit products // Management of economic systems: Electronic scientific journal. 2012. - #11. URL: http://www.uecs.ru.
Kholopov A. V.
First-year student of master's degree in Financial University under the
Government of the Russian Federation Moscow city, Russia TEST OF THE GENERALIZED COBB-DOUGLAS MODEL FOR
RUSSIAN COMPANIES
This work devoted to the study the relationship between firm performance and the factors influencing the results. The empirical study is to identify factors that are directly or indirectly related to foreign direct investment in a particular company, industry enterprises and companies to the region and influencing the performance of companies.
