PhD, Associate Professor Kuzenko Tatiana B., PhD, Associate Professor Ignatenko Larisa A., Postgraduate Plakhotnaya Nataliia V.

Simon Kuznets Kharkiv National University of Economics, Ukraine

Classification of the threats to financial security of a business entity in current economic conditions

In current economic conditions a lot of business entities are very vulnerable to inner and external adverse events, which can harm their financial security or even lead to insolvency. The risk of realization of such events is especially real in conditions of instability or crisis in a country. However, even in relatively stable periods in the economy, some companies become insolvent exclusively due to shortcomings in the system of financial security ensuring that is carried out by the management of a business entity. So the issue of planning of such system appears extremely important for successful and safe operation of business entities.

We believe that the most complete and informative definition of financial security is suggested by I.A. Blank. Financial security a business entity is quantitatively and qualitatively determined level of its financial state, which provides stable protection of its priority and balanced financial interests from the identified real and potential threats of internal and external nature, parameters of which are determined on the basis of its financial philosophy and create the necessary conditions for sustainable financial support of its growth in the current and prospective period [1, p. 32].

Some authors believe that financial security is a financial state that is characterized, firstly, by balance and quality of the set of financial tools, technologies and services which are used by a business entity, secondly, by resistance to internal and external threats, thirdly, by the ability of financial system of a business entity to ensure the realization of its financial interests, missions and tasks with sufficient financial resources, fourthly, to ensure the development of the financial system [4, p. 65-67].

According to some researchers, the essence of financial security is a business entity’s ability to design and conduct the financial strategy in accordance with the objectives of the corporate strategy in an uncertain and competitive environment. Consequently, financial security is a state of a business entity that:

1) allows ensuring financial balance, stability, solvency and liquidity of a business entity in the long run;

2) meets the needs of enterprise of financial resources for sustainable expanded reproduction of a business entity;

3) provides sufficient financial independence of a business entity;

4) is able to deal with existing and emerging threats that seek to inflict financial damage to a business entity or change desired capital structure, or forcibly liquidate a business entity;

5) ensures sufficient flexibility in making financial decisions;

6) protects the financial interests of the owners of a business entity [5, p. 101].

Thus, one of the key points of financial security ensuring of a business entity is to identify internal and external threats and to create effective mechanisms to counteract them. Let us consider the broad classification of threats that may affect financial security.

1) All the threats can be divided into external and internal by the source of occurrence. The external threats include, for example, industrial espionage, illegal actions of competitors, the instability of the economy etc. Internal - low qualification of specialists who develop contractual documents, inefficient work of financial or economic security service etc. The greatest danger, as a rule, is external threats. The detailed classification of the threats to financial security of a business entity by the source of occurrence will be considered further.

2) By the level of the severity of consequences all the threats can be divided into threats of high, large, medium or low severity of consequences. High severity means that these threats can lead to a sharp deterioration of the financial performance of a business entity that causes immediate termination of its activities or cause irreparable harm that will result in such consequences later. In this case, the liquidation of a business entity can happen. A significant level of severity of the impact of threats suggests the possibility of applying such financial losses to a business entity that negatively affect the main financial indicators of a business entity and its activities in the future. Average severity means that overcoming the effects of these threats requires spending (causes a loss), comparable to the current expenditures of a business entity and doesn’t require considerable time. The consequences of threats of low severity have not any significant effect either on the strategic position of a business entity, or even on its current activity.

3) By the level of probability threats can be unlikely and highly likely.

4) Threats may differ by manifestation at particular stage of activity. There are threats which are most likely and dangerous in the construction phase of a business entity, and threats which are typical for its operation. In the first case, it may be illegal actions by corrupt officials who prevent the organization of a business entity. At the stage of operation threats may arise in the preparatory phase (prevent normal supply of raw materials, equipment), the production stage (destruction or damage to property, equipment, theft of "know-how"), the final stage (interference to sales, restriction of competition, illegal advertising restrictions).

5) The threats may differ by the object attacked. The object attacked is, especially, resources: labor (staff), physical, financial, informational. Staff threats are blackmail to obtain confidential information, theft of employees, extortion etc. Material resources threats are damage to buildings, facilities, communications systems, equipment stealing. Financial resources threats are fraud, falsification of financial documents, currency, theft of cash. Information resources threats are unauthorized connection to the information network of the company, removal of confidential documents etc.

6) By the subjects of threats: threats from criminal organizations; threats from unfair competition; threats from contractors; threat by employees.

7) By the mode of the damage - threats, implementation of which has a direct damage and threats, the implementation of which will result in loss of profits [6, p. 121-122].

Many authors emphasize the threat classification by the source of occurrence, that is, division of threats to internal and external. It makes sense, since such classification covers the most common and therefore the most important threats to financial security. So let's consider in details what threats relate to external, and what threats relate to internal (Fig. 1).

Thus, analyzing the threats to the financial security of a business entity, let’s list the tasks that need to be resolved for financial security ensuring:

1) the identification of hazards and threats to a business entity;

2) identifying indicators of a business entity’s financial security;

3) development of financial security monitoring system;

4) developing measures to ensure a business entity’s financial security (both in the short and in the long run);

5) monitoring the implementation of the activities taking place in a business entity;

6) analysis of the performance of measures and their assessment and adjustment;

7) identification of hazards and threats to a business entity and updating of indicators based on changes in the state of the environment, the goals and objectives of a business entity [2, p. 116-117].

The most suitable methods of analysis for identification and evaluation of threats to the financial security of a business entity are: SWOT-analysis, PEST-analysis, SNW-analysis, method of development of scenarios [2, p. 119]. Features of these methods can be used as material for further research of threats to financial security of a business entity.

Thus, the article summarizes the definitions of financial security and proves that one of the key points for ensuring financial security of a business entity is to identify internal and external threats and effective mechanisms for resistance to them. The article defines tasks which need to be resolved to ensure financial security of a business entity. The article shows a classification of threats as well as detailed threats classification by source of occurrence.

Threats that could threaten the financial security of a business entity

Fig. 1. Threats that could threaten the financial security of a business entity [7, p. 33; 2, p. 116].

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