UDC 657.44.3

Zhytnyy Pavlo Yevhenovych Doctor of economic sciences, professor

Lukyanova Olena Yuriyivna Philosophy doctor in economic science

Financial and industrial system management structures interaction

Financial and industrial system management (FIS) terms transfer pricing has two levels. The first one is transfer pricing within each FIS involved structure (e.g., bank). The second level is transfer pricing between FIS structural units (e.g., enterprise – enterprise, enterprise – bank, bank – insurance company).

The approach which is suggested below is the most appropriate for banking institution transfer pricing in FIS conditions.

Responsibility centers bank internal circulation resources’ planning is based on strategic plan. Bank treasury makes financial plans that contain assets and liabilities as parts of united banking portfolio in responsibility centers management. Financial plans period must be less than strategic planning one. Active operations funding plans are made to manage interest costs in accordance to financial plans. Assets and liabilities are grouped by funding urgency there.

Responsibility centers costs calculation is made for each funding period. Also support segments are chosen for each funding period based on active operations resource base.

Main monetary capital markets are these ones which are marked as principal credit sources by bank strategy for each term.

Resources transfer prices calculation is made for each funding term by alternative market costs method applying. Transfer price determines center direct marginal costs that are calculated in accordance to bank financial plan.

Bank treasury accrues revenue to profit centers that accumulate resources in external surroundings and transfer expenses to costs centers that place resources to external surroundings in the end of financial plan period. Planned and actual data are taken into calculations.

FIS effective functioning great importance point is transfer pricing between FIS structures.

Fig. 1 presents schematic version of financial and industrial structures interaction chain in FIS conditions.

Fig. 1. Management structures interaction in FIS conditions

Transfer pricing formation requires control in each FIS participant structure and management costs.

Costs calculation is based on such basic concepts as costs types and costs centers. Management control is made by responsibility centers.

Than specific matrix (table 1) is formed for costs analysis. Its rows are responsibility centers, columns are profit-oriented industrial business programs.

Table 1

Costs variants matrix

Cost centers / resource type	Wage	Consumables	Bank services	etc	Total
Cost center 1	а 11	а 12	а 13	а 1m
Cost center 2	а 21	а 22	а 23	а 2m
Cost center 3	а 31	а 32	а 33	а 3m
Cost center 4	а 41	а 42	а 43	а 4m
etc	а n1	а n2	а n3	а nm
Total

Costs information in the matrix that was given above is summed by rows. Result is responsibility centers costs data. This information describes program cost that is necessary to determine services price and profitability assess.

United codification of cost (profit) centers (each center is FIS structural unit) makes possible to consolidate different businesses total cost. Result optimization has such variants as:

Variant I. Positive results increase at lower costs.

Variant II. Positive results increase at costs maintaining.

Variant III. Positive results increase faster than costs rise.

Variant IV. Positive results are the same, costs are reduced.

Variant V. Results decrease rate is lower than costs.

The variants point that FIS functioning goal is results increasing.

In the best variant each structure is profitable but it is difficult to achieve in practice. E.g.: coal mines, ore-dressing enterprises, separate services (repair, etc.) operate with losses under normal market pricing, steel plants, pipe plants have profit. Transfer pricing should be directed to FIS weak links maintenance and development in this situation. It gives possibility to these structures innovative progress and FIS technological cycles self-sufficing.

These research results can be used as risk management practical recommendations for large-scale business structures.

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