As a result of studying this chapter, the student must:


o essence of investment risks and their classification;

o methods for determining investment risks;

o ways to reduce investment risks;

be able to

o evaluate investment risks;

o Find possible ways to reduce investment risks;


o conceptual apparatus within the framework of this chapter;

o methodology for assessing investment risks.

9.1. Investment risks and their classification

Any business activity involves a certain risk. This fully applies to investment activities.

Investment risk is the probability that actual investment income will deviate from the expected value: the more volatile and broader the range of possible earnings fluctuations, the higher the risk, and vice versa.

Investment activity as a variety of commercial has a number of features that must be taken into account when determining investment risk, this is:

1) investments can be sent to a variety of investment activities, which vary significantly in terms of both profitability and risk, so there is a need to optimize the investment portfolio, but these criteria;

2) the results of investment activities are influenced by a variety of factors that differ from each other both in terms of the degree of influence on the level of risk and uncertainty;

3) the life cycle of the investment project can be quite significant, calculated in several years, and in these conditions it is very difficult to take into account all possible factors and their impact on the profitability and the magnitude of the investment risk;

4) to determine the investment risk in most cases, there is no representative statistical information for the previous period, based on which it could be predicted when implementing a similar investment project.

Any commercial organization in its activity must take into account the possibility of the appearance of investment risk and provide for its reduction or non-admission, i.e. the organization must manage risks.

In a general plan, risk management is reduced to the following:

o Risk analysis for the previous period (frequency and probability of their occurrence, mathematical expectation);

o analysis of emerging economic trends at the macro and micro levels and scientific foresight of their development;

o identification of possible risks in the implementation of an investment project and their economic consequences;

o Estimation of the project's sensitivity to possible changes in the most important factors and their impact on the financial condition of the enterprise.

In order to take into account, analyze and manage risks, they need to be classified according to certain criteria. There are a lot of risk classifications in the scientific literature, but unfortunately, there is no common, generally accepted, including investment risk, approach.

The most common classification of risks, proposed by IT Balabanov (Figure 9.1). The advantage of this classification, firstly, is that all risks are brought into a certain logical system; secondly, the signs of risk classification are well chosen:

o depending on the consequences of the risks;

o depending on the underlying cause of the risk;

o by structural sign;

o depending on the purchasing power of money.

Fig. 9.1. Classification of investment risks

Depending on the consequences risks are divided into two large groups: pure and speculative. Net risks mean the possibility of obtaining a negative or zero result. Speculative risks are expressed in the possibility of obtaining both positive and negative results.

Depending on the degree of influence on the financial situation of an enterprise, identify admissible, critical and catastrophic risk. For an acceptable risk, they usually take a threat of a complete loss of profit by the enterprise. Critical risk is associated with the loss of anticipated revenue. The most dangerous is the catastrophic risk, which leads to loss of all property and bankruptcy of the enterprise.

In our opinion, the most successful classification of investment risks is given in the book by VL Chernov.

In it for the classification of investment risks used two signs:

1) sources of risk;

2) the reasons for the occurrence and the possibility of elimination.

Depending on the source of investment risk, they are divided into: business risk; financial risk; the risk associated with purchasing power; interest rate risk; liquidity risk; market and casual risk.

Business risk is the degree of uncertainty associated with generating income from investments that are sufficient to pay off all investors who have provided funds.

Financial risk is the degree of uncertainty associated with a combination of debt and equity used to finance a company or property: the larger the proportion of borrowed funds, the higher the financial risk.

The risk associated with purchasing power is due to inflationary processes and a decrease in the purchasing power of the national currency.

Interest rate risk - the degree of uncertainty in the level of the exchange rates caused by the change in market interest rates; with the growth of interest rates, the prices of securities, especially fixed income, decrease, and vice versa.

Liquidity risk is associated with the inability to sell an investment instrument for cash at the right time and at an acceptable price.

Market risk - the volatility of securities rates under the influence of factors that do not depend on the activities of the issuing companies (political, economic and social instability, etc.).

Random risk is a risk arising from an event, mostly or entirely unexpected, that has a significant and usually immediate impact on the value of the respective investment.

Depending on the reasons for the occurrence and the possibility of elimination distinguish between diversified (unsystematic) and non-diversified (systematic) risk, the combination of which gives the aggregate risk

Diversified risk is associated, as a rule, with internal factors, i.e. depends on the activities of the organization itself. It can be eliminated as a result of diversification. Diversification means a conscious and justified selection of investments in such projects that will ensure their reasonable profitability.

Undiversified risk is due to external factors (war, inflation, political events, etc.), i.e. does not depend on the activity of the organization.

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