Theoretical framework of risk management - Part 2

The judgments that determine our actions in everyday life and determine the decisions of entrepreneurs responsible for the functioning of the economic system have little to do with conclusions drawn from comprehensive analysis and accurate measurements. The thought processes occurring in these two cases are completely different. In everyday life, they are mostly subconscious. Decisions in the field of economic system activity indicate rare cases, and they cannot be subordinated to statistical groups to determine the approximate probability of a particular outcome. It is simply inappropriate to use an objectively measured probability here. AS. Koshechkin, like F. Knight, believes that it is necessary to distinguish between the concepts of "risk" and "uncertainty." First, it only creates risk when a decision has to be made (otherwise there is no point in risking). In other words, the need to make decisions in the face of uncertainty is a risk; in the absence of such a need, there is no risk.

Second, risk is subjective and uncertainty is objective. For example, the lack of objective information on the volume of potential demand for manufactured products creates a number of risks for the project participants. For example, for an individual entrepreneur, the risk of uncertainty due to the lack of market research becomes a credit risk for the investor (the bank that finances this individual entrepreneur), and if the loan is not repaid, it becomes a liquidity risk. It becomes the risk of losses and subsequent bankruptcy, and for the recipient, this risk becomes the risk of an unexpected change in market conditions, and the manifestation of risk for each of the participants individually, both qualitatively and quantitatively.

Speaking about uncertainty, A.S. Koshechkin notes that it can be expressed in different ways:
— in the form of a probability distribution (the distribution of the random variable is known exactly, but it is not known what the specific value of the random variable will be);
— in the form of subjective probabilities (the distribution of a random variable is unknown, but the probability of individual events determined by a specialist is known);
— in the form of discontinuous uncertainty (the distribution of a random variable is unknown, but it is known that it can take any value in a given interval).
It should also be noted that the nature of uncertainty is determined by many factors:
— temporary uncertainty is associated with the inability to accurately predict the value of the future factor;
— the uncertainty of the exact values of the parameters of the market system can be characterized as the uncertainty of the market situation;
— The unpredictability of the actions of participants in a conflict of interest also creates uncertainty.
Thus, the concepts of "risk" and "uncertainty" differ from each other, although they have many common features, more precisely, uncertainty is one of the conditions for the existence of economic risk.

Risk in the economy is associated with the concept of "benefit", the likelihood of its loss and harm. Responsibility for economic risk means responsibility at the expense of profit. An entrepreneur who wants to make a profit takes economic risk and quickly discovers that he is a constant companion and that his ability to handle risk is highly dependent on the position. If an entrepreneur does not consider taking risks, eventually he will have to realize his mistake: if he is willing to take risks and consider it, this will increase his company's chances of survival and growth. Therefore, the manager must predict risks, analyze them and manage them in order to minimize losses.
J.M. Keynes believed that the economic agent did not have a clear idea of what benefits would be obtained; he drives only a few hypotheses with varying degrees of accuracy.
F. Knight also noted, “Profit (in terms of entrepreneurial income) is also partially formed as a reward for successful production management in the face of risks and uncertainties inherent in a market economy”.
Determination of risk, or rather its assessment, is of great importance for a more complete understanding of the category of economic risk. 

The main problems in determining the magnitude of risk are:
1. In real economic activity, it is not always possible to quantify risks;
2. The content and volume of information about an economic entity may not always be sufficient. 

Thus, J.M. Keynes argued that the value of a product should include costs that may arise because of unexpected changes in market prices, equipment obsolescence or destruction due to natural disasters.
Keynes argues that entrepreneurial risk is "necessary social costs, although they can be reduced both by equating risks to each other and by improving the accuracy of forecasts".
Thus, we can conclude that the supporters of the classical risk theory associated this category only with losses and losses, while the representatives of the neoclassical school associated it with the expected deviation of profits, and both schools agreed that there is economic risk.
From the point of view of political economy, “risk is a state of uncertainty in economic relations, which implies obtaining both positive and negative results”.

Given the nature and content of risk, the concept of risk can be defined as follows:
— reality through the reflection of vital economic relations;
— historical, because it has characteristics of different economic formations.

As a historical category, risk is the potential risk taken by a person. This indicates that, historically, risk has been associated with the entire process of social development. The danger arose at the lowest stage of civilization with the emergence of the fear of human death as a historical category. Later, with the development of civilization, commodity-money relations arose, which led to the emergence of risk as an economic category.

As an economic category, risk has three characteristics:
• Mode;
• The form;
• Appreciate.

Let us try to analyze the economic risk associated with these three positions.
The essence of economic risk is the uncertainty of economic processes and their consequences. The probable structure of the economic environment, the variability of business activity, randomness — all this forces an economic entity to conduct activities in a risky or less risky and / or completely safe way. In the process of choosing an alternative solution, an economic entity is faced with various uncertainties. In general, all of these types of uncertainty create a significant uncertainty called the hazard element.

Excessive profits are a form of economic risk. What appears to be content-level uncertainty is in the form of surplus on the surface of events or lack of profit as a price to pay for risk.
The entrepreneur's risk and the amount of his income are directly related. Additional income received by the organization from participation in the project, the result of which is not determined, is defined as the risk premium.

It is necessary to clearly define the concepts of "risk" and "risk management" in order to effectively and efficiently act in the context of alternatives, uncertainty and various variability of the strategy of the economic system's development, as well as to take into account the existing and emerging elements of economic risk and uncertainty.

There are different directions in the interpretation of economic risk. This is often defined as probability, risk, activity, or harm. These discrepancies are associated with the specifics of the areas of application of the category of "risk" — economic, legal, political and sociological and others.
The current situation with the definition of the economic nature of the category "risk" is discussed in his book "Risk and its role in social life" Algin A.P. is described as follows: “In the public consciousness and in a number of scientific publications, two opposite views on the nature of risk prevail. On the one hand, the risk arises in the form of failure, risk, material or other losses that may arise because of the implementation of the developed solution; on the other hand, the risk is determined by the expected success.

Economic risk is a multifaceted, complex phenomenon with many incompatible and sometimes contradictory real causes. This is what allows us to live with many definitions of economic risk.
Another Russian economist I. Balabanov gives the following definition: “Risk as an economic category is an event that may or may not happen. When such an event occurs, there can be three economic consequences: negative (loss), zero and positive (profit, profit).
A.N. Horin argues that risk is the deviation of the identified data from the typical, stable, mean, or alternative value of the estimated score.

In all approaches aimed at defining risk as an economic category, the authors emphasize its important features, elements and characteristics.

The concepts discussed above define risk from a conflict theory perspective. In other words, the concept of "risk" arises when there is a problem that needs to be solved. The author proposes to consider this concept from the point of view of the theory of chaos, that is, to take into account not only the problem that may arise, but also its subsequent development, its influence on other indicators of the system and the activities of all humankind.

Thus, risk should be considered as an economic category, which is an integral part of all socio-economic processes occurring in the organization, and can balance the system and, therefore, improve or eliminate its effectiveness.

Khokhlov N.V. risk management” is a multi-stage process aimed at reducing or compensating for damage to an object in the event of an accident. It is important to understand that minimizing damage and reducing risk are not adequate concepts. Second, it means a reduction in potential damage or the likelihood of an adverse event. There are various financial management mechanisms, such as insurance, that provide compensation for damage without affecting its size or likelihood of occurrence.
R.M. According to Katchalov. "In strategic planning, risk management includes the development and implementation of cost-oriented recommendations and measures aimed at reducing the initial level of risk for the enterprise to an acceptable end level."

To a certain extent, risk management can be described as a set of methods and measures that make it possible to predict the occurrence of risk events and take measures to eliminate or reduce the negative consequences of such events.
Risk management is a system of risk management and management of economic, or rather financial relations, arising in the decision-making process. 

It is recommended to define risk management as a system of economic relations aimed at reducing uncertainty in a given choice environment, as well as predicting and assessing the prospects for the strategic development of an organization under the influence of risk factors. In such a situation, it is possible to assess the likelihood of achieving the desired result (additional benefit), failure (loss) and deviation from the existing goal in the selected alternatives, as well as measures to reduce the likelihood of risk events.