BASIC RISK ASSESSMENT METHODS

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By the way, providing financial support to entrepreneurs in the field of tourism during the pandemic, first of all, the restoration of domestic tourism in Azerbaijan, in general, planning the gradual restoration of tourism, the State Tourism Agency to develop a medium-term development strategy for 2020-2023 kept in the spotlight. At the same time, in order to minimize the possible impact of COVID-19 on tourism, it is planned to implement projects to maintain jobs and strengthen the activities of entrepreneurs in the existing field.

Prior to the pandemic, there was a significant increase in the number of visitors to Azerbaijan. Last year, a record number was recorded - more than 3 million foreigners visited Azerbaijan, and foreigners spent $ 1.5-2 billion annually in the country. The sector actively invests in this area, and the state supports it. Annali d’Italia №11/2020 During the pandemic, the state provided financial support to people working in this field, as they were virtually unemployed.

References

1. Akif Musayev. Innovation economy and tax incentives. Baku, 2014. 184p. 2. Tagiyev A.H. Aslanzade IA Innovation management. Textbook. Part II. Baku, 2017.352p. 3. Alirzayev A.Q. Tourism economics and management. Textbook. Baku, 2011. 494p. 4. Hüseynov İ. Efendiyeva N. Basics of tourism. Textbook. Baku, 2017. 442p. 5. Karimova TI Investment potential of the economy, mechanisms of formation and use (Monograph). Baku, 2008. 225p.

BASIC RISK ASSESSMENT METHODS

Shurda K.E.

Doctor of Economics Ukrainian Scientific Center of Ecology of the Sea

Abstract

Risk is an integral part of any process, therefore its study and analysis occupies an important place in economics, ecology and other areas of human activity. This article is devoted to topical issues of risk assessment methodology that arise in the management process, which is dictated by the need, first of all, to analyze and assess the risk for the subsequent optimal management of economic activity.

Keywords: risk, risk assessment, risk analysis, risk management.

At present, the problem of developing a specific convenient risk management toolkit has become more relevant, since the ability to assess risk is an important part of managing risks arising from economic activity. In the conditions of market relations, the problem of risk analysis and assessment is becoming increasingly important as a significant component of the theory and practice of management. The need for scientific research in this area is not only relevant, but also of the essence increases during the period of dynamic changes in the economic and social development of Ukraine.

Assessing the level of risk is one of the most important stages of risk management, since in order to manage risk, it must first of all be analyzed and evaluated.

There are many definitions of this concept in the economic literature, but in the general case, risk assessment is understood as a systematic process of identifying factors and types of risk and their quantitative assessment. That is, the risk analysis methodology combines complementary quantitative and qualitative approaches. Risk assessment is a quantitative or qualitative determination of the value (degree) of risks. Risk assessment is one of the stages of risk analysis. Risk analysis consists of a procedure for identifying risk factors and assessing their significance. In essence, it is an analysis of the probability that certain undesirable events will occur that will negatively affect the achievement of the set goals. Risk analysis includes risk assessment and methods of risk mitigation or reduction of negative consequences from risks.

Risk analysis can be subdivided into two mutually complementary types: qualitative and quantitative. The purpose of a qualitative analysis is to determine (identify) factors, areas and types of risks. Quantitative risk analysis makes it possible to numerically determine the size of individual risks and the entire risk as a whole. The final results of the qualitative risk analysis, in its turn, serve as input for the quantitative analysis. However, the implementation of a quantitative assessment also encounters the greatest difficulties associated with the fact that a quantitative assessment of risks requires the corresponding initial information.

The most common environmental risks are:  emissions into the atmosphere and discharges into water bodies;  the proximity of settlements;  waste storage.

These types of risks will negatively affect the expected profit, since the costs of treatment equipment must be taken into account for emissions into the atmosphere and discharges into water bodies; the proximity of settlements implies an increase in the costs of treatment facilities and the accounting of costs for environmental impact assessment; when storing waste, the cost of production increases.

Risk assessment is the comparison of the level of risk with the level of acceptability. The basis for attributing to the group of acceptable risks is a system of parameters that is different for each certain risk.

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The assessment methodology must meet the following requirements: reliability and objectivity of conclusions; accuracy; economic feasibility (the cost of the analysis should not exceed additional income from the use of the results of valuation activities). The choice of risk assessment methods is influenced by: the ability of quantitative assessment; the possibility of a qualitative assessment; simplicity of calculations; availability of information; the ability to assess in dynamics.

Risk assessment is carried out in order to determine the probability and amount of losses characterizing the value (or degree) of risk, and evaluating by various methods.

Mathematical modeling methods allow us to propose and study a variety of risk assessment methods. Two types of methods are widely used –statistical, that based on the use of empirical data, and expert, based on the opinions and intuition of specialists.

The main task of a qualitative analysis is to identify possible types of risk, potential areas of risk and factors influencing the level of risk, which can be divided into external and internal. External factors include the political and economic situation in the country and abroad, the legal framework for economic activity, the tax system, competition, natural disasters, etc. Internal factors include the economic strategy of the industry, the degree of use resources in production 51

Theory and practice have developed many methods for determining the value of risks. All these methods can be grouped into two groups: qualitative methods of risk analysis and quantitative methods, which in turn are divided into subgroups (Fig. 1).

Risk assessment is an assessment of probability, point or integral, according to statistical data or expert. In this case, for risk management, limits are set on the probability of unwanted events. Sometimes, a decrease in risk is understood as a decrease in the variance of a random variable, since this reduces the uncertainty. In decision theory, risk is a payment for making a decision that is not optimal, it is usually expressed as a expected value. In economics, fees are usually measured in monetary units, that is, in the form of a cash flow (payments

Fig. 1. Methodology for assessing risks.

and receipts) in conditions of uncertainty. and economic activities, the qualifications of workers, the quality of management, etc.

In a market economy, there are five main areas of risk in the activities of any industry: risk-free area - no risk, profit, at least calculated; area of minimum risk: there is a risk of losing part of the estimated profit; area of increased risk: in the worst case, the costs will be covered, and in the best case, the profit will be much less than the calculated one; area of critical risk: in addition to loss of profit, non-receipt of expected revenue. The scale of activity is reduced, working capital is lost and debt arises;

Annali d’Italia №11/2020 area of catastrophic risk: activity leads to bankruptcy (enterprises, industry in general). In practice, to assess the risk of individual operations, simplified coefficient methods for determining risk are used, for example, using the risk ratio R r , which is calculated by the formula: R r = L / A (1) where L –the maximum possible loss from the operation being carried out in the course of production activity (UAH); A –the amount of own financial resources, taking into account exactly known receipts of funds (UAH). Risk assessment consists in a qualitative or quantitative assessment of possible losses (damage, losses) and the possibility of their occurrence. A qualitative risk assessment is carried out mainly by expert methods in conditions of uncertainty and is used when comparing a limited number of alternatives to the decisions made. A quantitative risk assessment involves a mathematical assessment of the measure and degree of risk. The obtained values are included in the calculations that justify the economic efficiency of the decisions made. Methods for assessing risk parameters are used in international practice (Tab. 1).

Depending on the purpose of the study, the problems solved in the theory of risk are divided into direct, inverse, and sensitivity research problems. Direct tasks make it possible to assess the level of risk based on a priori given information about the risk situation. Inverse problems are associated with the determination of constraints on the variable parameters of the initial situation from the conditions for fulfilling the specified constraints on the level of acceptable risk. Sensitivity research tasks play the role of internal feedback that ensures the quality of decisions made. Sensitivity research allows you to assess the reliability of the results obtained, refine the parameters of the model, change the methods of data processing, correct the problem statement, or replace the quantitative risk analysis with a qualitative one.

Assessment of the consequences of risk R is carried out by various mathematical models, which are generally described by the expression:

R = f (P, I) (2)

where P –the probability of a risk event; I –potential consequences of the risk factor.

Depending on the availability of the initial information and the conditions for choosing the estimation model (certainty, stochasticity, uncertainty) when setting the problem for assessing the consequences of risk, the following mathematical models can be used (in decreasing order of information content): deterministic, stochastic, non-stochastic (game). Deterministic models are used when the nature of the causes and risk factors is known and the outcome for each action taken is known. In this case, classical methods of analysis and programming, mathematical logic, etc. are used. Sto

Table 1

Risk assessment methods.

Risk assessment methods Risk type

Marketing research + + +

Testing + +

Business process analysis + + +

Event tree + +

Fault tree +

Strengths, weaknesses, opportunities and threats + + + +

Statistical analysis + + +

Modeling existing options + + +

Measurement of major trends and variances + + +

Error tree + +

Strategic Operating Financial Non-financial chastic models are built on the basis of statistically significant information about past implementations, when the nature of the causes and risk factors is random and the risk is described by a probability distribution over a given set. Linguistic models use the apparatus of fuzzy logic and are used for conditions when the nature of the risk is not clearly expressed. Here, to construct membership functions, expert estimates are used on the possible outcomes of the implemented decisions. Non-stochastic (game) models describe many consequences of a possible risk event and are based on the methods of strategic and statistical games, utility theory, etc. System of heuristic rules –used in situations where it is impossible to describe uncertainty and it is impossible to describe the risk.

Risk analysis is usually carried out using the following methods.

Probabilistic analysis –the probability of losses occurrence is determined on the basis of statistical data of the previous period with the establishment of the area (zone) of risk, the adequacy of investments, the risk ratio.

Expert analysis –the method is used in the absence or insufficient amount of initial information and consists in attracting experts to assess the risks.

Method of analogues –involves the use of a database of already implemented similar projects to transfer their results to the project under development.

Analysis of indicators of the limit level –the degree of project resistance to possible changes in the conditions of its implementation is determined.

Sensitivity analysis of the project –the effect of the values of various initial variables required for the

Annali d’Italia №11/2020 calculation on the change in the resulting indicators of the project is assessed.

Analysis of project development scenarios –involves the development of several variants (scenarios) of project development and their comparative assessment. A pessimistic variant of a possible change in variables, an optimistic and most probable variant is calculated. The method of constructing decision trees –involves a step-by-step branching of the project implementation process with an assessment of risks, costs, damage and benefits. Simulation methods –based on the step-bystep finding of the value the resulting indicator by conducting multiple experiments with the model.

Conclusion

Risk is an action performed in conditions of choice (in a situation of choice in the hope of a happy outcome), when in case of failure there is a possibility (degree of danger) to be in a worse position than before the choice (than in the case of failure to perform this action). This definition is the most complete and reflects the content of the risk.

Investing in enterprise development carries the risk of not delivering the expected results within the desired time frame. To survive in a market economy, enterprises need to decide on the introduction of technical innovations, on bold, non-trivial actions, and this increases the risk. In this regard, it becomes necessary to analyze and assess the degree of investment risk so that in advance, even before making an investment, potential investors, including the company itself planning an investment project, could have a clear picture of the real prospects for the return of funds and profit. It follows that enterprises need to be able to manage risk in the process, seeking to reduce it to the lowest level. Correctly obtained estimates of investment risk have value 53 not so much in themselves, but in connection with the need to make investment decisions in specific situations.

In real investments, a number of factors can be influenced: the essence of technology, the production of goods, the structure of the enterprise and methods of managing the production of goods, the qualifications of management. For effective risk management, it is important that all possible factors influencing the overall level of risk are identified, identified, analyzed and ranked in order of importance.

References

1.Балдин К.В., Передеряев И.И., Голов Р.С. Управление рисками в инновационно-инвестиционной деятельности предприятия: учебное пособие. М.: Издательско-торговаякорпорация«Дашков иКо», 2012. –420 c. 2.Гончаренко Л. П., Филин С.А. Риск-менеджмент. –КноРус, 2010. –216 с. 3.Ермасова Н.Б. Риск-менеджмент организации. –М.: Издательско-торговаякорпорация «ДашковиКо», 2010. –380 с. 4.Иванов А.А. Олейников С.Я., Бочаров С.А. Риск-менеджмент: учебное пособие. –М.: Евразийский открытый институт, 2011. –304 c. 5.Титович А.А. Менеджмент риска и страхования: учебное пособие. –Минск: Высшая школа, 2011. –287 c. 6.Шапкин А.С., Шапкин В.А. Теория риска и моделирование рисковых ситуаций: учебник. –М.: Издательско-торговая корпорация «Дашков и Ко», 2014. –880 c. 7.Эриашвили Н.Д., ТепманЛ.Н. Управление рисками в условияхфинансовогокризиса: учебное пособие. –Юнити-Дана, 2012. –295 с.