Almaty Management University

PhD, Senior lecturer, Aiman M. Kazybayeva

Master of economic sciences, Lecture,

Vladislav V.Ostrovskiy

Concept of "risks in the realization of investment construction projects" and the mechanism of their management

In the mass consciousness it is often stated that the risk is possible danger or failure. So the great definition dictionary of the Russian language (Kuznetsov S.A., 1998) defines “risk” as:

1) the possible danger of something;

2) action in a promiscuous manner, requiring courage, fearlessness, hoping for a happy outcome.

In the formation of commodity-money relations risk is an economic category, which extends to all levels of management, and get great importance on the issues of economy and finance, where risk is managed, i.e. the development of risk events is predicted and measures to decrease the full extent of loss are assumed (Mierin L.A., 1998).

The variety of situations, in which the concepts are used, closely related to the word "risk", used in different contexts, implies the diversity of interpretations of this word . There are two main approaches to the definition of this category: let's call first one "only losses", risk is defined as the possibility of losses, and let's call the second one "loss/ profit" - as the possibility of loss and profit. The comparison of these approaches as well as the assessment of the wide range of values of the phenomenon under study are illustrated in Table 1, which presents a number of examples of the definition of risk, encountered in the literature on risk management.

Table 1 – The comparison of approaches to the definition of the concept “risk” (Kolchin V.G., 1998, Mierin L.A., 1998, p. 15, Chernova G.V., 2000, Balabanov I.T., 1996, Chovushyan E.O., 1999, Grabovyi P. G., 1999, Kozin M.N., 2000, Vasiljev V. М., 1997, Project Management Institute, 2000)

Approach	Definition of risk
Only losses	1. The risk of project realization in the modern literature in some way is a whole complex of ideas about the possible failures of its implementation that is to say about possible non-achievement of project aims or noncompliance of design constraints. 2. The risk is recognizing danger (threat), the occurrence on any negative event in any system with certain consequences during time and space. 3. Economic risk is the possibility of some kind of loss, measured in monetary terms. 4. Risk is possible danger of losses. 5. When talk about the risk, usually mean the possibility of negative incident in the future and the severity of its consequences.
Losses/ profit	1. Risk is the probability of obtaining economic benefits (profits) or appearing of additional unexpected losses (expenses) by construction organization taking into account characteristics of sector, in the process of the implementation of its construction activities in the freedom of the active entrepreneurial search, dynamics, and mobility of the economic environment. 2. The risk in the activities of a construction company is the possibility (probability) of the economic benefits (profits) or occurrence of contingent additional losses (expenses) compared with the forecasted and alternative variants of the development of economic situations. 3. Risk is the probability of achieving the desired (undesirable) outcome of the decision. That is to say, under certain conditions, the result of a decision made with risk, either win or loss, damage are possible. 5. Project risk - is uncertain event or condition, the occurrence of which has positive or negative effect on the aim of the project.

The mistake is to define risk as the possibility of loss and profit. In Russian language, the word risk is accompanied by the possibility of losing something, but not purchasing.

Modern researchers believe that the risk is the reverse side of freedom of choice - and the lack of alternatives means no risk. Thus, entrepreneurship cannot exist without risk, and the operations with excess risk tend to bring the greatest profit. The problem is not to look for business without risk, with the cernainly foreseen outcome to avoid the risk, but to forecast it and long to decrease to an acceptable level (Seregin E.V., 1998).

Risk is present in virtually all spheres of human life, so it is not possible to state it accurately and clearly, because the definition depends on the scope of its use.

When considering the process of realization of investment construction projects in the aspect of the riskiness of this activity, there is a need for a comprehensive study of the concept of "the risk of the investment construction project."

Investment construction projects are complex systems, elements of which are isolated from the environment for a certain characteristic, forming a unified, stable and consistent framework. The investment process is carried out in dynamic environment, which has immediate impact on the investment construction projects and consequences of this impact can be determined.

It speaks about the functioning of each element and a system as a whole in terms of uncertainty, which is understood as incomplete or inaccurate information on the conditions of the project realization, including - the associated costs and reults. The uncertainty, associated with the possibility of in the appearing the adverse situations and consequences during the project realization, is characterized by the concept of risk.

Thus, officially the risk of realization of the investment construction project is defined as the possibility of adverse situations and consequences, appearing in the process of project realization.

The key elements here are three risk characteristics: firstly, the uncertainty of conditions in the project realization is related to the possibility of negative situations and consequences; secondly, the degree of possibility, that is to say the possibility of adverse situations and consequences; thirdly, these very unfavorable situations and the consequences.

The first aspect is related to the uncertainty that always accompanies the risks of investment construction projects, and has the following properties (US Department of Defense, Defense Acquisition University, 2002):

- The risk exists only in relation to the future and is indissolubly tied to the forecasting - there is no past risks.

- The risk assumes the occasionality of unfavorable situation and consequences, forecasted or not, that is to say adverse situations can either occur or not.

- The forecasting of adverse situations and consequences is the presence of a risk management mechanism.

The practical difference between the categories of risk and uncertainty is that in the first case, the distribution of the results in the group is known, (which is achieved by preliminary calculations or study of statistically prior experience), and in second is not. It is more often caused by the inability to make grouping of the cases, as considered situations are unique to a great extent. Thus, the actual uncertainty relates to specific uncertainty, where no calculations or assignment of a numerical probability, even though subjective are possible.

Another aspect of the risks of investment construction projects is associated with the assessment of the degree of possibility, that is to say the probability of adverse situations and consequences. Probability is a certain number, which the hogher is the more possible is adverse situation in future. The existence of the possibility of a large number of adverse situations in future does not mean that they all have a certain level of risk.

That is to say, the probability of appearing of the adversity, and the consequences have to be above zero and less than one. At zero probability there is no risk, and at one hundred percent probability- during the realization of investment construction projects there will be a controversial issue, crisis, problem, incident with consequences, but there will be no risk (Integrated Computer Engineering, 2002).

The probability is divided into subjective and objective (Wentzel E.S., 1999). The concept of objective probabilities is based on the interpretation of the concept of probability as the limit frequency meaning at infinitely large number of experiments and the estimated probability is made by calculating the frequency, with which this event occurs.

Bibliography

Stakhanov, V. N., (1998). Commercial risks in regional economic streams. Rostov n/d: General and the prof. education.

Sparrows, S.N. and Baldin, K.V., (2009). Risk management in business activity. Third prod. Moscow: Dashkov and To.

Smith, S. A., (1998). Big explanatory dictionary of Russian. San Francisco: Academy of Sciences.

Stoyanova, E.S., (2000). Financial management: theory and practice. Petropavlovsk: Prospect.

Titov, V.V., (1999). Organizational and methodical questions of risk management in the Russian business. Obninsk: IATE.

Trifonov, S.V., (1999). Model of optimization of the price of risk at justification of real investments. Moscow: SPb.

Vasilyev, V.M., (1997). Management of construction investment projects. St. Petersburg: Publishing house of DIA.

Vasilyev, V.M., (2001). Management in construction: The textbook for higher education institutions. St. Petersburg: Publishing house of DIA.

Venttsel, E.S., (1999). Probability theory. Chalyabinsk: High school.

Vishnyakov, Ya.D. and Radayev, N. N., (2008). General theory of risks. 2nd edition. Moscow: Akademiya.