Matrix Assessment Method for Financial Risks

Abstract

In the present-day business environment, the impact of financial risks on the efficiency and performance of the organization's financial security system as well as on its financial security level becomes increasingly important. The issues related to the approaches and methods of financial risk assessment, designed to prevent the negative consequences were addressed in the works of Russian and foreign scientists. However, certain schemes, algorithms, methods, models and, approaches to the analysis and assessment of financial risks still remain to be poorly developed. In this view, there is emerging need for the development of a mechanism which would allow assessing the existing financial risks based on the available information sources. The above-mentioned factors render the topic of the current work highly relevant.In the present work we define in detail the concept of financial risks and provide the classification of financial risks. The approaches and methods currently used to assess financial risks are analyzed. We report further the development of the integrated matrix assessment method to estimate the risks of financial equilibrium disturbance. We highlight the potential advantages and drawbacks of this method, describe the key steps in the development and implementation of the discussed matrix method, and justify the choice of the indicator system on which the method is based.The practical relevance of the work is determined by the versatility of the proposed matrix diagnostic analysis method which may be used both in financial risk management to forecast financial insolvency and assess the risk of bankruptcy and in audit to provide support for the continuity assumption when carrying out the analytical review procedures.The results of the work were applied to 15 vine producers in the Krasnodar Krai. A more close analysis is provided for Lefkadia LLC. Keywords-risk; financial risks; method for the analysis of financial risks; matrix; system of indicators; matrix methodI.

Financial Risks Assessment and Control of the Bankruptcy Probability of a Company

“…The following correlations are offered for risk zones: the zone of minimal riskthe rate of change of the indicator is greater than 1, the zone of acceptable (medium) riskthe rate of change of the indicator 1, the zone of critical riskthe rate of change of the indicator is less than 1. Regulatory approach based on the use of average values of the indicator (for the industry, the region, national or global economy, depending on the specifics of the company), it is recommended if there is a similar indicator in the official statistical databases [11].…”

Evaluation and Prediction of the Business Continuity Risks

“…Conformities are offered for risk zones: the minimal risk zone -the indicator rate of change is greater than 1, the acceptable risk zone -the indicator rate of change is 1, the critical risk zone -the indicator rate of change is less than 1. A normative approach based on the use of indicator's average values (for industry, region, national or global economy, depending on the specifics of the company) and is recommended if there is a similar indicator in official statistical databases [20]. The final assessment and determination of business continuity financial risk level is carried out on the basis of the following scale: up to 8 points -low risk; 9-16 pointsmedium risk; 17 -24 pointshigh risk.…”