Экономические науки/ 6. Маркетинг и менеджмент.

RD Doszhan

PhD student at Kazakh National University named after Al-Farabi, Kazakhstan

Prediction technique of project realization risks by the subjects of small and medium business.

In this article we analyze not only the measures of optimization and efficiency of the project risks management system functioning but either the elements of the risks prediction.

If in the basis of project risks lays a choice of method of their determination with a following identification of the risk’s quantitative and qualitative characteristics thus the basis of their monitoring is a control. In whole according to the projects there are three types of control are performed which let appreciate the efficiency of realization of an investigated project: targeted, organizational and financial.

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Table 1 -The performed types of control in the limits of project risks management.

The targeted control and employees’ stimulation according to its results are performed with a definite regulation when the Curator / coordinator (from the Customer) checks a progress of the project implementation and makes an analysis of the project possibility and practicability of the goals achievement. If required the project Curator requests from the project manager the information about the reasons of the project, plan realization target parameters deviation and measures took for its elimination. On the results of analysis the decision of project correction necessity is made or of necessity to initiate the procedure of the project realization reconsideration. Here on the basis of the project manager’s information and the targeted control results the Curator makes a decision about stimulation (bonus award) of the project manager and the members of project team according to the results of passed period.

The organizational control is made for the purposes of the project processes optimization and its participants’ functions’ split. Under the deviations disclosure of some work term execution which exceeds the limit of allowed deviation the project manager within not less than a control term of work execution passes to the Curator an analytical report with a reason of the deviation appearance, problem-solving proposals and projected time indication of work execution and places a copy of an analytical report to the file-project. Upon the receipt of the analytical report the Curator is obliged to provide the acceptance of effective corrective measures.

The financial control is made in purpose to control the project’s appropriate expenditures, determine and localize the “narrow places” and localize the risks. Whereby the project risk measurement and monitoring are made the distinctive feature of which is the determination of corridor of allowed parameters of the project realization and the three realization project scenarios are provided. The corridor lower bound is the quantitative indicator values which were estimated according to the pessimistic scenario of the project realization and the higher bound is the analogue values which were estimated according to the optimistic scenario. Whereby, a violation of the corridor lower bound shall be the basis for immediate project completion.

If the actual expenses for localization of some risk exceed the fixed by project expanses more than on 5% the project manager directs to the Curator an analytical report with reason of the deviation appearance, problem-solving proposals and such deviation influence prediction on to the total sum of the project budget. The Curator checks the project budget for the following report period and makes a decision of the additional expenses inclusion in to the budget or the decision of the project completion. If the actual sum of the project budget exceeds 20% of the planned budget sum the Curator shall make a decision of the progress of the project implementation on the basis of an analysis of the work performed, financial flows and prediction of the progress of the project implementation which was made by the project manager.

The process of risk control stipulates the actions of management decisions making and execution which are intended to unfavorable result appearance possibility decrease and minimization of possible losses caused by its realization. The efficient project risk management stipulates the development of optimistic and pessimistic scenarios of the unfavorable result appearance, the possibility of execution of which is estimated on the basis of the theory of probability and well-known mathematic models.

The estimation of two risk management scenarios allows receiving a peculiar corridor which features the lower and higher bounds of the investigated enterprise’s risk field. There is nothing to do but to form the system of indicators of the unfavorable result appearance and to make a technique of long-term project realization risk prediction.

Nowadays the development of information technology allows finding and/or getting the important data for the risk prediction system functioning quick enough as during planning and during realization of projects. In the prediction system it is necessary to use not only data but more practical instruments of risk identification either which are able to increase the quality of this system (Table 2).

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Table 2 - The scheme of basic sources functioning

According to the scheme of the Table 2., below the basic sources of information are represented which are required for the long-term risk prediction technique creation for the investment projects realization of the industrial enterprise from the point of view of an innovative orientation of its perspective activity:

-the documentation complex of an enterprise and documents coming in it from outside which are the documents of the sphere of the technologies transfer;

-the interview of the enterprise’s employees and other persons who can know the information about the manufacturing process condition on the enterprise;

-the questionnaire of the enterprise’s employees and other persons who can know the information about the manufacturing process condition, conditions of development and implementation of innovations on the enterprise;

-the brainstorming, conferences conducted according to special techniques basically directed on generation of the most quantity of ideas in the sphere of innovations development and implementation on the enterprise;

-the guidebooks, dictionaries and databases on the question and organization of innovative activity on the enterprise. The websites of many associations, government agencies and consulting firms contain useful for the enterprise’s innovative activity organization databases in the matter of projects execution. An entrance to the most part of them as a rule is limited by some conditions: payment, registration in address-advertising base, entrance to the association, etc.

-the informational ratings-boosting bureaux of different profiles could be very useful source as of methodic and factual information for development of the innovative process of the enterprise. Some of them for example Standard and Poor's as a separate type of activity make a prediction of the big projects’ risks of the enterprise under the innovative orientation. The usage of their techniques and examples of rating-boosting of the specific projects could be a useful base for their prediction risks’ execution;

-the mass media: common, business, industrial and special risk-relevant which is quite numerous especially on English carries information by a constant flow which is useful for the project risks’ management.

Besides it is necessary to note that the development of the long-term risks’ prediction techniques for the projects realization is impossible without a complex of business investigations oriented on the effective projective activity organization conditions detailization according to the modern conditions of unstable economic growth.

It is necessary to consider that the long-term risks prediction is a quite difficult specific procedure. Some of techniques of business investigations are provided by a quite powerful mathematical apparatus, some are more oriented on the expert methods, experiment and objectivity under the development and realization of projects risks prediction. The financial instrument of the project activities’ risk prediction has the most developed mathematical apparatus. The dynamics of these risks are the most carefully followed because it influences a flow of capitals.

The development of the prediction technique of long-term project realization risks shall determine how the risk management work is performed in preventive activity and post factum when an unfavorable event already happened, i.e. it shows how the special programs of a complex project risk management should work. Under the project manager's authority a work of arising or transforming project risks management services on the enterprise should be organized. For the methodic support of this work a phased long-term activity in the sphere of development and approbation of the prediction technique of long-term project realization risks is required.

Let’s describe the phases of the prediction technique of long-term project realization risks development. The first phase in the bounds of the prediction technique of long-term project realization risks development is a composition of a detailed profile risk card of the enterprise. This card contains the risk profiles of every direction of the project activity of the enterprise.

Below you can see an order of such card composition from the point of view of the prediction technique of long-term project realization risks development. In whole such technique is shown in a kind of scheme (Table 3).

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Table 3 - The scheme technique of the long-term prediction system composition

Block 1. The situational constituent of the prediction technique of long-term project realization risks.

The horizon of risk prediction which is determined by a periodicity of achievement of strategic targets of the enterprise development and performance of measures, a program of complex management of the enterprise’s risks accepted on planned period should be chosen.

Actually the created here technique of long-term risks prediction is not an inherently valued instrument but only necessary for the complex of varied aims of the enterprise achievement. The efficiency of a long-term risks prediction in time is not always equal to period on which the strategy of the enterprise management is planned. The larger this depth the more expensive the technique of long-term risks prediction development but the cheaper the risk management for each month, quarter, etc. The larger this depth the smaller its accuracy.

The enterprise organizational structural scheme is built for optimization of which the prediction technique of long-term project realization risks is developed. The organizational administrative structure of the enterprise should be described visually, consistently and fully. For this the organizational structural scheme should fully correspond to all the rules. An optimality of got risks’ predictions depends on strictness and clearness of this part. This is a common frame which provides an efficiency of the technique – a tree model. The scheme (in this case for the purposes of a long-term risks prediction) should contain only those modules (divisions, function and persons) which are connected to risks.

Every module independently from the fact on what level of an administrative hierarchy it is located has a separate column in all the future interrelated matrix tables of risks. For example the director is not only indirectly represented through his subordinates but also directly has his own column. It is necessary because every module has its own risk spectrum and profile which differ from the analogue characteristics of headed by them departments. The position of director could be occupied by a talented person the loss of whom has a special color of a personal risk. And the same position could be occupied by an ordinary professional administrator who could be easily changed. An employee of the risks management services works with particular information and specific risks that’s why he needs to consider not only formal modules’ characteristics but also their current individual features which should be considered under the long-term risks prediction.

The list of all values shown as risks is made which the enterprise has in the frame of the prediction technique of long-term project realization risks development. Here it is not easy to predict the list of all the possible risks taken from a manual or a guidebook. On the basis of a theoretical generalized risk spectrum of business or an industrial lists or classifications of risks a specification of an actual risk spectrum of the particular enterprise is made which is required for prediction of the particular factors. One of the most simple, quick and accurate enough instruments is a brainstorming for revealing and ranking of risks which is performed in the group which consists of 7–10 competent employees of the enterprise and external experts.

Block 2. The resource constituent of the prediction technique of long-term project realization risks.

The lists of relevant and actual risks of every value are made. The predictions regarding compound and structure of the enterprise’s resource base changes are formed. The strong instrument which allows preparing the information for risks prediction is a brainstorming which reveals all such risks when possible.

In every division to every type of risk and to every type of values the cost change of which is connected to risk appearance a volume of possible losses is considered in the frame of the prediction technique of long-term project realization risks. These volumes are considered directly or on an expert basis. Whereby the full calculations are placed in separate files the hyperlink to which is located in the same risk card.

In the frame of the prediction technique of long-term project realization risks development a volume of required expenses on recovery after suffering the particular losses is considered or estimated. This volume in many cases differs from the cost of losses because the last additionally has various overhead costs and changes in market prices.

The tension of every risk in every division and every exposition is predicted. It is possible to do by means of using an expert estimation, brainstorming and sometimes direct estimation of a particular exposition realization possibility.

The results estimation of the risks included in the risk card and predicted in its frame. Summarizing according to the types of risk predictions made allows building a common risk profile of the enterprise and predicting an average risk tension for appreciation of the complex risk management formed program optimality. This spectrum is useful for the prediction of the situation of the enterprise development and organization of perspective project activity in whole. The report of the types of risk predictions should be summarized because many measures in the frame of complex risk management program are dedicated for particular risks and could be applied as a special group. The consolidation of predictions of risks and management instruments to groups allows getting an economy.

Block 3. The substantial constituent of the prediction technique of long-term project realization risks.

Basing a card it is necessary to sum the enterprise’s expositions according to the types of the predicted risks. It is necessary in order to make decisions specific to each risk prediction. After that it is necessary to count a required resource risk pooling according to each prediction from every available source of financing and to study the possibilities of integrated risk pooling and to balance the necessity of the risk position influence with the opportunities and measures of the complex risk management program. During the risk predictions making according to their types it is necessary to receive in such a way the risk profiles of the enterprise in whole and of every division. For this purpose it is necessary to make the following steps.

The plan of measures is developed in order to manage every type of risks according to prediction made. These plans should contain the measures of required availability principle taking in mind that from one side the resources of the enterprise are limited and from the other it is necessary to provide a quite reliable effective project risk management. Under the resources lack exactly this prediction technique of long-term project realization risks constituent should be corrected first of all excluding the secondary measures of risk management.

The budgets are developed taking into account every risk prediction made.

A proper consolidated budget is formed by means of summing the proper budgets from the separate risk management measures under the existing predictions of these risks. Thus during the separate budgets forming a single electronic format is used this summing doesn’t represent any difficulty.

A summary plan of risk management measures under the accepted risk predictions is composed. This is also is not difficult. Whereby it is necessary to take into account a possibility of the one-type risk management measures consolidation for different divisions into the single measures and campaigns for the whole enterprise. After this stage you’ll have all the data for projecting a scheme of the resource provision of the summery plan of risk management measures with regard to the represented risk predictions.

Block 4. The project constituent of the prediction technique of long-term project realization risks.

The opportunities of the resource and investment provisions of every risk are measured in accordance with its prediction made. The sources of investment provision are known as the same as any other business project has. The risks could be financed from the own additionally invested means of the enterprise’s owners, from the borrowed funds, from the sale of financial instruments, from the equity capital, from the undistributed profits and from the potential estimated economy which will bring an effective realization of the complex risk management program according to the facts of the risk predictions made.

The possibilities of the enterprise’s financing are summed according to the common risk prediction of its long-term development. If the necessary financing exceeds the available greatly thus the approach to the project risk management process accepted to the present moment should be reconsidered significantly with regard to the project activity measures realized.

The possibilities of group (unified and joint), umbrella (common for risk group) and integral (general for the entire risks complex) system of permanent project risk prediction for the reviewed period are analyzed. This is an art stage which again returns an employee of the risk management services to the comparison of risks interconnection between themselves, to the risk ranking, to the nonlinear dependence of different risks investment results.

The program of investment provision is reconsidered in the limits of the project risk predictions made. It is necessary to prepare the declarations, contracts, credit agreements, schedules, orders and other organizational / management, advertising, agitating, demonstrative, instructional documents and other materials which should provide the complex risk management program measures performance under the represented long-term predictions. This is an organizational part of the prediction technique of long-term project realization risks development support. There is a lot of work but it doesn’t differ from the managing prestarting work of any other project activity.

Block 5. The value oriented constituent of the prediction technique of long-term project realization risks.

The preparation of the enterprise’s employees training program performance to all what they should know and be able to do in order to predict the project risks. The employees’ training to the changing needs of the enterprise and the conditions of the unstable economic growth is a constant work which has its own specific. It is necessary to train the employees in order to develop their professionalism in the sphere of risk prediction. Otherwise many measures of the complex risk management program won’t be performed or will be preformed incorrectly.

The control of the project risk prediction program accuracy is organized. The success of the prediction technique of long-term project realization risks usage depends on it significantly. The main here is to distribute the obligations and rights in the enterprise management institution correctly. For the consequent coordination of such distribution the technique of linear cards of responsibility and competency distribution suites quite enough and to separate predictions in regard to the risks of perspective innovative and investment activity organization.

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