Evaluation of the effectiveness of risk management methods...

Evaluating the effectiveness of risk management methods

Based on the existing approaches to domestic and foreign practice, it is possible to identify qualitative and quantitative methods for assessing the effectiveness of financial risk management systems in an enterprise. Qualitative methods can be considered in two aspects: as methods of the integrated analysis and as the legalized qualitative estimation which is used by many the largest auditing companies.

Let's consider in more detail certain methods for evaluating the effectiveness of the financial risk management system (FRMS).

Qualitative methods for assessing the effectiveness of the FRMS

The methodological basis for detailed qualitative methods for assessing risk management is the methodology COSO ENM - - an integrated model that allows identifying problem blocks, eliminating incorrect procedures, obtaining a sufficiently complete description of the risk management system.

1. The methods of aggregate qualitative assessment of the effectiveness of FRMS are the most operational, they do not imply the consideration of any blocks of FRMS, but study the system as a whole, the correspondence of its elements to the "best practice."

Within the framework of an enlarged qualitative assessment method, one can single out.

The method of evaluating the effectiveness of the company's management. It is based on the process approach to management and on the assumption that positive management of the company and accordingly a competent policy in managing financial risks lead to an increase in the value of shares in the stock market. A significant disadvantage of this method is that the growth of the company's value does not always reflect the true position, and may be due to inflation, psychological expectations of investors.

Analysis of the positioning of the risk management system and its construction within the organization

In general, two approaches to the positioning of risk management systems are used in the economic theory and practice of companies. The first approach (traditional) does not consider FRMS as part of the internal control system (JMC). The second approach (systemic) considers FRMS as part of the JMC. A comparative analysis of these two approaches is given in Table. 3.1.

Table 3.1

Comparative analysis of FRMS

Performance criteria

Approaches to risk management



Persistence, continuity of risk management

The process of risk management is not constant, but at the request of the top management of the organization

The process of risk management is part of the enterprise management system and does not depend on the wishes and attitudes of individual managers

Integration into the company management process

Risk management is carried out within individual departments that manage their types of risks: accounting, treasury, etc., is not complex. With organizational isolation at the company level, risk management is often relatively isolated, not integrated into the company's management process

Risk management is a system related to the internal control system and is implemented at all stages of enterprise management, is integrated and is an integral part of the management system

The breadth of coverage of risks

The management is mainly property risks, which is often associated with legal requirements

Risks are managed throughout the population

A significant drawback of the traditional approach is that risk management here is considered as highly specialized activity aimed at identification and subsequent quantification of the most significant risks, supplementing the main activities in the planning of the investment process. Such positioning of the FRMS does not fully take into account the dynamism of the processes occurring at the enterprise and in the economy and can lead to inefficiency of the system itself. In addition, this approach is not beneficial for the enterprise, since the relatively isolated operation of the JMC and the SSSF sharply reduces the effectiveness of the management system as a whole. In particular, there is a problem of access to information when making a decision in a risk situation, monitoring the level of risk.

Analysis of Table. 3.1 shows that the system approach is preferable, since it assumes a more efficient functioning of the company in the enterprise, allows to reduce the risks of financial transactions.

2. Methods of detailed qualitative evaluation use as a criterion of effectiveness the compliance of the main elements of risk management systems "best practice". This approach is applied in the methodology COSO ERM. In accordance with this methodology, the effectiveness of the risk management process is subject to judgment, which is formed as a result of the assessment of the existence and functioning of the eight components of risk management:

• The internal environment;

• setting goals;

• Identify potential events;

• Risk assessment;

• Respond to risks;

• control procedures;

• information and communication;

• Monitoring.

It is necessary that all components are present and function effectively, and the risk must be within the risk-appetite of the company's management.

Quantitative methods for assessing the effectiveness of the FRMS

1. The method of evaluation of the control system, proposed by R. Dodge . This method allows you to combine preliminary subjective assessments with the results obtained, improve the effectiveness of the developed control procedures.

In this method, the risk of control is understood as the result of the action of two factors:

• the risk that there will be significant deviations (Ph.D. off);

• The risk that some significant deviations that have occurred will remain undetected after the completion of the control procedures (Pneupn).

Then the aggregate risk of HRMS (Rsufr) can be considered using the formula

Psufr = Incremental × × Pneupple

2. The approach built on the analysis of NPV in general but to all projects , given its change depending on the functioning of the SUF P, is used as one of the methods of quantitative evaluation of the effectiveness of FRMS. In this case, the evaluation of the effectiveness of FRMS is carried out in several stages.

Stage 1. For non-systematic risks, the following analysis is performed:

• the financial risks of the project are calculated in the absence of FIU in the company Pi;

• The changed value of each type of financial risk (P /) after the introduction of the FRMS is calculated, which allows to reduce the risks of projects, i.e. Pi & gt; Pi ';

• The initial and final project risk is calculated taking into account the weight coefficients.

Stage 2. Experts evaluate the systemic risks (Rsist), which form the environment for the operation of the project and are not amenable to management by the company.

Step 3. Determine the overall financial risk of the project, which is the sum of systematic and unsystematic risk.

Step 4. Two discount rates are calculated: taking into account the risk of the project in the absence of FRMS and taking into account the fact that the FIU is implemented and functioning. The calculation is based on the CAPM model

Step 5. The calculation of NPV is performed with and without taking into account the FRMS.

Stage 6. The effectiveness of the introduction of FRMS is defined as the difference between NPV, calculated with and without accounting for the FRMS.

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