CC BY
18
УДК 33.2964
Sheneman N. V. student
2nd year, Faculty of Economics Omsk State University named F.M. Dostoevsky
Russian Federation, Omsk
RISK MANAGENEMT
The агйс1е is devoted to the pi^ess of risk тапа§етеп! The агйс1е deаls with the incept of risk mаnagement, types of risk. АЬо the Brticle аna1yzes the steps of identifying risks and аddressing risks.
Шенеман Н.В. студент 2 курса экономический факультет Омский государственный университет им. Ф.М. Достоевского
Россия, г. Омск
РИСК МЕНЕДЖМЕНТ
Статья посвящена процессу риск менеджмента. В статье рассматривается понятие риск менеджмента, виды риска. Также в статье анализируются этапы выявления рисков и адресации рисков.
Risk is unavoidable. Like the proverbial death and taxes, it's one of the few things in life that's inevitable. All businesses, whatever their size and shape, whatever markets they operate in and whatever products or services they provide, are constantly faced with a multitude of risks, large and small. Some risks are so minor as to be insignificant, whereas others have the potential to seriously affect business continued well-being. So it's important to understand the likelihood and the potential consequences of companies particular risks, and to take sensible, cost-effective mitigation measures for the significant ones.
Risk is a part of all our lives. As a society, we need to take risks to grow and develop. In our fast paced world, we have to manage the risks which evolve quickly. We need to make sure that we manage risks so that we minimise their threats and maximise their potential.
Risk is uncertainty of outcome, and good risk management allows an organisation to:
• have increased confidence in achieving its desired outcomes;
• effectively constrain threats to acceptable levels;
• take informed decisions about exploiting opportunities.
So, the purpose of this work is analysis of the risk management system.
For implementation of this purpose it is necessary to solve the following
tasks:
1) To define the concept of risk and types of risk.
2) To show ways allowing us to identify risks.
3) To show techniques of addressing risk.
1. Risk management and types of risk
All businesses have to deal with risks, but successful businesses are the ones that employ good risk management. Risks come in all shapes and sizes. A risk could be a minor critical event, an event that may or may not affect the operations of the business or it could be something major like the possibility of a natural disaster, such as flood.
Risk Management deals with the identification, assessment and various strategies that help mitigate the adverse effects of risk on the organization. Management uses risk management as a strategic tool to mitigate the loss of property and increase the success chance of the organization.
There are various kinds of risk. The types of risk management differ on the basis of the nature of operations of a particular organization and other factors like its overall goals and performance. All these types of financial risk management processes and risk management reports play a significant role behind the growth of an organization in the long run.
Commercial enterprises apply various forms of risk management procedures to handle different risks because they face a variety of risks while carrying out their business operations. Effective handling of risk ensures the successful growth of an organization [4].
Different types of risk management can be categorized as follows:
Operational Risk Management. Operational risks are present in every enterprises.These risks arise due to the execution of the business functions of the enterprises. Enterprises need to assess these risks and prepare action plans to meet the impact of risk. At the primary level, operational risk management deals with technical failures and human errors like: mistakes in execution, system failures, policy violations, legal infringements, rule breaches, indirect and direct additional risk taking.
Financial Risk. Financial risk is the loss of key resources like funding, etc. In this case the company will not have adequate cash flow to meet financial obligations.
Credit Risk Management. Managing credit risk is one of the fundamental work of the financial institution. Credit portfolio management is largely becoming essential for the enterprise to keep track of risk.It Deals with the risk related to the probability of nonpayment from the debtors.
Quantitative Risk Management. In quantitative risk management, an effort is carried out to numerically ascertain the possibilities of the different adverse financial circumstances to handle the degree of loss that might occur from those circumstances.
Commodity Risk Management. It Handles different types of commodity risks, such as price risk, political risk, quantity risk and cost risk.
Bank Risk Management. It Deals with the handling of different types of risks faced by the banks, for example, market risk, credit risk, liquidity risk, legal risk, operational risk and reputational risk.
Non-profit Risk Management. This is a process where risk management companies offer risk management services on a non-profit seeking basis [3].
Currency Risk Management. Deals with changes in currency prices.
Project Risk Management. Deals with particular risks associated with the undertaking of a project.
Liquidity Risk. Sometimes due to lack of liquidity in the market an asset cannot be sold to make the profit or to prevent a loss this is what called as Liquidity risk [5].
Market Risk. Due to the change in value of the market risk factors value of investment portfolio or the value of a trading portfolio will decrease. Foreign exchange rates, stock prices, interest rates, and commodity prices are the standard Market risk factors.
Time Risk. Risks which often involve things connected to time are Time
risks.
Human Risk. Loss of critical employees or knowledge which are connected to manpower are Human risks.
Legal Risk. Losses include government regulations and the same having an impact on the operations of the company are Legal Risks.
Physical Risk. Physical risks are those loses of physical resources such as equipment, buildings, land, etc due to natural disasters or man made.
Risk management process begins when somebody asks what kind of events can damage the business and how much damage can be done. Identifying and measuring the potential loss exposures, choosing the most efficient methods of controlling and financing loss exposure and implementing them and finally Monitoring all the out comes are the main steps involved in Risk Management [10].
2. Identifying risks
1. In order to manage risk, an organisation needs to know what risks it faces, and to evaluate them. Identifying risks is the first step in building the organisation's risk profile. There is no single right way to document an organisation's risk profile, but documentation is critical to effective management of risk.
2. The identification of risk can be separated into two distinct phases. There
is:
• initial risk identification (for an organisation which has not previously identified its risks in a structured way, or for a new organisation, or perhaps for a new project or activity within an organisation), and there is;
• continuous risk identification which is necessary to identify new risks which did not previously arise, changes in existing risks, or risks which did exist ceasing to be relevant to the organisation (this should be a routine element of the conduct of business) [8].
3. In either case risks should be related to objectives. Risks can only be assessed and prioritised in relation to objectives (and this can be done at any level of objective from personal objectives to organisational objectives). Care should be taken to identify generic risks which will impact on business objectives but might not always be immediately apparent in thinking about the particular business objective. When a risk is identified it may be relevant to more than one of the organisation's objectives, its potential impact may vary in relation to different
objectives, and the best way of addressing the risk may be different in relation to different objectives (although it is also possible that a single treatment may adequately address the risk in relation to more than one objective). In stating risks, care should be taken to avoid stating impacts which may arise as being the risks themselves, and to avoid stating risks which do not impact on objectives; equally care should be taken to avoid defining risks with statements which are simply the converse of the objectives. A statement of a risk should encompass the cause of the impact, and the impact to the objective (cause and consequence) which might arise.
4. The individual risks which an organisation identifies will not be independent of each other; rather they will typically form natural groupings. For instance, there may be a number of risks which can be grouped together as "resources" and further risks which can be grouped together as "environmental" [9].
5. It is necessary to adopt an appropriate approach or tool for the identification of risk. Two of the most commonly used approaches are:
• Commissioning a risk review: A designated team is established (either inhouse or contracted in) to consider all the operations and activities of the organisation in relation to its objectives and to identify the associated risks. The team should work by conducting a series of interviews with key staff at all levels of the organisation to build a risk profile for the whole range of activities (but it is important that the use of this approach should not undermine line management's understanding of their responsibility for managing the risks which are relevant to their objectives);
• Risk self-assessment: An approach by which each level and part of the organisation is invited to review its activities and to contribute its diagnosis of the risks it faces. This may be done through a documentation approach (with a framework for diagnosis set out through questionnaires), but is often more effectively conducted through a facilitated workshop approach (with facilitators with appropriate skills helping groups of staff to work out the risks affecting their objectives). A particular strength of this approach is that better ownership of risk tends to be established when the owners themselves identify the risks.
6. These approaches are not mutually exclusive, and a combination of approaches to the risk identification process is desirable - this sometimes exposes significant differences in risk perception within the organisation. These differences in perception need to be addressed to achieve effective integration of risk management at the various levels of the organization [7].
3. Adressing risks Business risk comes in a variety of tangible and intangible forms over the course of the business life cycle. Some risks occur during the ordinary course of business operations, while others are due to extraordinary circumstances that are not easily identified. Regardless of a company's business model, industry or level of earnings, business risks must be identified as a strategic aspect of business planning. Once risks are identified, companies take the appropriate steps to manage them to protect their business assets. The most common types of risk management implemented in business include avoidance, treat, transfer and acceptance.
Avoidance of risk: The easiest way for a business to manage its identified risk is to avoid it altogether. In its most common form, avoidance takes place when a business refuses to engage in activities known or perceived to carry risk of any kind. For instance, a business could forgo purchasing a building for a new retail location as the risk of the location not generating enough revenue to cover the cost of the building is high. Although avoiding risk is a simple method to manage potential threats to a business, the strategy also results in lost revenue potential [2].
Treat risk: By far the greater number of risks will be addressed in this way. The purpose of treatment is that whilst continuing within the organisation with the activity giving rise to the risk, action (control) is taken constrain the risk to an acceptable level. Such controls can be further sub-divided according to their particular purpose.
The option of "treat" in addressing risk can be further analysed into three different types of controls:
Preventive controls: These controls are designed to limit the possibility of an undesirable outcome being realised. The more important it is that an undesirable outcome should not arise, the more important it becomes to implement appropriate preventive controls. The majority of controls implemented in organisations tend to belong to this category. Examples of preventive controls include separation of duty, whereby no one person has authority to act without the consent of another (such as the person who authorises payment of an invoice being separate from the person who ordered goods prevents one person securing goods at public expense for their own benefit).
Corrective controls: These controls are designed to correct undesirable outcomes which have been realised. They provide a route of recourse to achieve some recovery against loss or damage. An example of this would be design of contract terms to allow recovery of overpayment. Insurance can also be regarded as a form of corrective control as it facilitates financial recovery against the realisation of a risk. Contingency planning is an important element of corrective control as it is the means by which organisations plan for business continuity / recovery after events which they could not control.
Directive controls: These controls are designed to ensure that a particular outcome is achieved. They are particularly important when it is critical that an undesirable event is avoided typically associated with Health and Safety or with security. Examples of this type of control would be to include a requirement that protective clothing be worn during the performance of dangerous duties, or that staff be trained with required skills before being allowed to work unsupervised [1]. Transfer of risk: For some risks the best response may be to transfer them. This might be done by conventional insurance, or it might be done by paying a third party to take the risk in another way. This option is particularly good for mitigating financial risks or risks to assets. The transfer of risks may be considered to either reduce the exposure of the organisation or because another organisation (which may be another government organisation) is more capable of effectively managing the risk. It is important to note that some risks are not (fully) transferable - in
particular it is generally not possible to transfer reputational risk even if the delivery of a service is contracted out. The relationship with the third party to which the risk is transferred needs to be carefully managed to ensure successful transfer of risk.
Risk acceptance: Risk management can also be implemented through the acceptance of risk. Companies retain a certain level of risk brought on by specific projects or expansion if the anticipated profit generated from the business activity is far greater than its potential risk. For example, pharmaceutical companies often utilize risk retention or acceptance when developing a new drug. The cost of research and development does not outweigh the potential for revenue generated from the sale of the new drug, so the risk is deemed acceptable [2].
In designing control, it is important that the control put in place is proportional to the risk. Apart from the most extreme undesirable outcome (such as loss of human life) it is normally sufficient to design control to give a reasonable assurance of confining likely loss within the risk appetite of the organisation. Every control action has an associated cost and it is important that the control action offers value for money in relation to the risk that it is controlling. Generally speaking the purpose of control is to constrain risk rather than to eliminate it [1].
To conclude, if properly done, risk management is a wise investment. It can help us when planning staring up our new business ventures and during our ongoing business operations. It can help us to increase the chances of successfully exploiting new opportunities. The resulting risk reduction and resilience measures can pay dividends by improving processes and reducing the occurrence of everyday problems. Risk management can help us ensure that we have the correct types and levels of insurance in place. It can give us the confidence as far as we are safeguarding our businesses and our livelihoods from the threat of failure, disruption or disaster.
We can't avoid risk. But we can manage it to our advantage. The most effective way to do this is to understand that is a part of the businesses culture. Whether it employs just a few, a few dozen or hundreds of people, your business needs to manage its risk and everyone in the business has a part to play, in this process from the Chief Executive to the office junior.
Risk management isn't just the domain of the professional risk manager and it's not just for huge corporations. It's a versatile management tool that can, and should, be used by everyone.
Bibliography:
1. «Management of risk - principles and concepts» (www.hm-treasury.gov.uk).
2. «What are some examples of risk management techniques» (http://www.investopedia.com).
3. «Definition of risk management» (http://lexicon.ft.com).
4. «Financial Risk and Its Types» (https://www.simplilearn.com/financial-risk-and-types-rar131-article).
5. «Risk management» (http://www.delo-angl.ru/ekonomicheskii-angliiskii/6520-2/).
6. «Types of risk» (http://www.marquette.edu/riskunit/riskmanagement/whatis.shtml).
7. Osborne A. Risk management made easy. ISBN 978-87-7681-984-2, 2012.
8. Newton P. Managing project risk. ISBN 978-1-62620-986-4, 2015.
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УДК 33
Syrkina A. V. Student of 2 course Faculty of Economics Scientific director: Sergina S.A. Omsk State University of F. M. Dostoevsky
Russia, Omsk
FINANCIAL MARKET
Abstract: the article discusses the nature and significance of financial markets the main functions of financial markets, their basic classification, the influence of financial markets on the economy as a whole.
Keywords: financial market, functions of financial market, money market, capital market, economic development, financial system, financial instruments.
Сыркина А.В. студент 2-го курса факультет «Экономический» Сергина С.А. научный руководитель Университет: ОмГУ им. Достоевского
Россия, г. Омск
ФИНАНСОВЫЙ РЫНОК
Аннотация: в статье рассматриваются сущность и значение финансовых рынков, главные функции финансовых рынков, их основные классификации, влияние финансовых рынков на экономику в целом.
Ключевые слова: финансовый рынок, функции финансовых рынков, денежный рынок, рынок капиталов, экономическое развитие, финансовая система, финансовые инструменты.
1.Introduction
The formation of efficient investment and well-targeted use of financial resources is carried out thanks to the financial market in a market economy.
Financial market is a system of economic relations. The financial market consists of a system of markets: currency, securities, and loan capitals or money. The financial market is an organized or informal system of trading of financial
