ISSN 0798 1015

Vol. 39 (Number 39) Year 2018 • Page 28

The development of risk-management techniques in order to improve the quality control-supervisory activities

El desarrollo de técnicas de gestión de riesgos para mejorar las actividades de control de calidad y supervisión

Vladimir I. AVDIYSKIY 1; Vyacheslav M. BEZDENEZHNYKH 2

Received: 04/04/2018 • Approved: 18/05/2018

Content

1. Introduction

2. Materials and Methods

3. Results

4. Conclusion

Bibliographic references

1. Introduction

Improvement of control and supervisory activities on the basis of a risk-based approach (RBA), particularly the Executive authorities, is today an urgent task requiring further scientific and methodological developments. In practice, used a variety of different systems, models, interpretations and approaches to the implementation of oversight activities. Even one of the most rigorous in the methodological attitude of Supervisory organizations – the FATF does not prescribe the organizations to use a particular Supervisory model. However, what would be the Supervisory system is not selected organizations, it should ensure the effective identification and reduction of risks of different nature, corruption, money laundering and terrorist financing in the financial sector and other offences, and not to reduce the content of RBA only to the number of inspections in the organizations, as is sometimes even enshrined in the methodical developments on RBA.

The concept and content of the risk-based approach set out in the requirements of the FATF standards (recommendation 1, "Risk-based approach") on the need to assess policies, procedures and controls companies and organizations to identify and manage risks, and, if necessary, to apply corrective measures, i.e. the formation of the risk management system (FATF…, 2014). It should be emphasized that standards for risk management, other normative documents, for example, "Methods of anti-corruption" of the Ministry of labor, also include the same set of methods, measures and actions.

This approach requires individual risk assessments and understand the characteristics and situation of each organization. In the case of identifying deficiencies in the risk management program, or violations of laws or regulations, the Supervisory authorities should apply proportionate corrective action to correct identified deficiencies.

For effective work of risk management in organizations we examine the understanding of risk as an object of regulation. The question is not idle, because the experiences of the regulatory and Supervisory agencies in various organizations showed significant differences, as will be shown, in understanding threats, vulnerabilities, hazards, risks in their activities depending on the prevailing practices (Asyaeva et al., 2016). This issue is dedicated to main content of this article.

The development of the theory and practice of risk management led to the recognition of the need to develop more clear guidance in the conceptual apparatus of this science and practice.

In two far apart countries, the USA and Australia and New Zealand almost simultaneously was developed and adopted documents, which have become a guideline for professionals in many other countries. It is in the United States in the 1992 “Internal Control – Integrated Structure, ICIF”, and Australia and New Zealand in 1995, the standard of risk-management of the enterprises "Risk management". Many scientific and academic centers contributing to the study of problems of risk management and promotion of this field of knowledge is already two to three decades (Avdiyskiy and Bezdenezhnykh, 2017; Williams and Hiens, 1989).

Considerable scientific and factual material allows to determine the main development trends . According to the authors of the work "Risk Management Firm. Program of Interactive Management," ( Vyatkin and Gamza, 2006) the world and society are in the beginning of the era of dramatically accelerating changes in general, and in business features. Among the main reasons for these changes – increased price volatility, globalization of markets, increased competition, increase in tax and legislative regulation, the increasing availability of databases and other factors. This historical overview emphasizes the urgency and relevance of addressing issues of theory and practice of risk management at the present stage, without which, apparently, it is impossible to further increase the effectiveness of risk management as a comprehensive management concept.

Major, still unresolved problem is the scientific definition of the concept of "risk" that is not particularly surprising. The history of the interpretation of this term is the history of finding out the fundamental quality of the relationship of man and nature, and develops with the development of the relations of nature and society. About the concept of "risk" being quite a long discourse, in various scientific sources and documents (guidelines, methodologies and standards for risk management) are the most different points of view and approaches to the interpretation of the concept "risk". The most common definition, are the following, given in the already cited paper "Risk Management Firm" (Vyatkin and Gamza, 2006): "risk is understood as life with the possibility that some future event may cause, but not necessarily harm." And further in the same paper (p. 40) the authors state that "in fact the risk as a phenomenon much deeper than the mundane-application definitions ". We emphasize that, nevertheless, applied understanding of risk is important for practitioners of management of the organization (business and management). They have little interest in the historical evolution of interpretations, but interested in the practical assessment of the possible implementation of those or other methods of decision-making in the various possible circumstances of the probability of events, deviations from expected results, possible impacts, adverse impacts, etc.

Considering risk as a person's choice in the category of utility, the proposed definition of "risk" as "... a feeling of satisfaction with respect to expected changes in the quality of life in the future and the corresponding expected change in the prevailing quality of life, which may have expected to sacrifice for the sake of the future." This definition is useful in that, firstly, introduces the person (organization, as a product of human activity) in the system of relations (the risk that human activities). Secondly, we have significantly expanded the range of goals of the human (organizational) activities. But as shown in their works, the winners of the Nobel prize in Economics R. Thaler, D. Kahneman, the individual often makes his choice in spite of its use. In this case, the risk as the satisfaction difficult to identify and measure the results of its possible manifestations. But it is precisely the dimension of risk (more precisely, the results of its implementation), is one of its distinguishing features, according to one of the first developers of this theme F. Knight.

Risk is a basic feature of human activities, and thus, the basic property of economic relations. This is the understanding of risk as an economic category, i.e. characterization of the relations of production on the production, accumulation, distribution and consumption of the products of labor. In this sense, the enterprise according to Th. Schumpeter and the authors already quoted monograph is "... is a conscious assumption of risk in expectation of obtaining anything desired (the influence of status, profit, winning the election over competitors, etc.)", but not only because it will cause economic losses.

But, in our view, this definition is not sufficient to define and implement the program of action for the management of risks in the organization. Consider the content of the concept through the study of the essential part of the risk as a phenomenon of human relations. This will specify that our consideration has a more specific focus (of risk management). Namely risk management and is the content of many management decisions at all levels of the organization. However, the concept of "risk management" has become not only convenient and widely accepted in theory and in practice, but useful to justify the selection policy risk management strategy. Apparently, either we cannot talk about controlling (or regulating) risk in its understanding as the possibility of damage, or if we say you need to change the object-subject relationship. The subject – observer and the controller remains the same, therefore, the object must be specified more carefully, accurately and in detail. Trying to remove this contradiction by introducing the possibility of fixing quantitative risk parameters, a number of works complement the interpretation of "risk" by reference to its probabilistic nature. In a number of standards for risk management, for example, in the first version of the standard Australia and New Zealand the notion of risk is revealed as "... the combination of probability and outcome." Though often persists previously mentioned pessimistic "down to earth-hands-on" approach to risk as probability of negative and undesirable for the economic entity of deviations (variance) of the possible implementation of a risk event in reality from those projected in the future. In our opinion there is a substitution of concepts of risk and risk events that are not the same.

The content of risk in our understanding can only refer to the person acting, the seeker, make your choice or just living and trying to realize his purpose (as he understands it). Risk management in such a setting is one of the mechanisms of conflict resolution and their harmonization is not only socio-economic but also legal nature. Thus, this category needs to be a holistic system analysis to take into account the objective and subjective begin with, internal and external relationships that characterize the inherent features and properties of economic and legal relations. The risk is realized under condition of interaction of elements of a complex system, comprising: operating in their view of the subject; managing and changing in time; the external environment of functioning of the subject, also changing in time, as the system of higher order.

Decision-making and actions for its implementation in conditions of uncertainty-the result of implementation decisions, which in this model approach is considered as a risk factor in the formation of a new quality.

 The risk, therefore, lies in management actions (process decision-making and its implementation). But the given definition is only part of the concept. The other part of this definition is that in order to take action, you need to identify, describe (identify), to estimate or measure the consequences of these actions (risk consequences), to rank on the seriousness of the consequences. Otherwise, you manage the risk will be very difficult (if even possible to control not identified by object). Management methods may be different, but the general approach is aimed at overcoming conflict and lowering uncertainty of future events.

Thus, we can formulate the following definition expanded understanding of economic risks in the activities of the economic entity through its three complementary essential components (Avdiyskiy and Bezdenezhnykh, 2011). Risk is:

- (1) the existence of a situation of uncertainty, risks and threats to the external and internal environment;

- (2) the presence of the subject and awareness of the situation of threat (risk and its quantitative and qualitative assessment);

 - (3) decision (purpose and method) on the basis of risk perception and its implementation in order to reduce the uncertainty of realization of future events.

This definition also has an important limitation related to the fact that the activity of the subject is managerial in nature, but differs from the management of the organization as a whole. The difference is primarily in the ratio of levels of management: risk management is a subsystem in the control system of the organization providing the information component of top management. The second difference relates to the scope of analysis and evaluation. Risk management deals with uncertainty of future results, of course, important and significant for the organization, but not exhaustive of all management tasks. The next difference is the risk management uses an independent methodological and instrumentation unit of analysis as any other special model of management analysis. It is also important to emphasize that the subsystem of risk analysis are not isolated from the whole system of control, and immanently present in all management processes within the organization and outside, permeating all processes in the organization, but affecting only those matters that are specified in the definition of risk.

Concluding the consideration of the content "risk" as an economic category should correlate with the concepts "danger", "threat", is semantically related to the concept of "risk" as they are often considered as synonyms, or similar in content. But these terms have different meanings: danger – characteristics deviation (undefined) from the normal state of the environment or situation, the threat is a direct factor or cause unwanted (uncertain) impact on the processes, risk and control human activity in the conditions of threat of external and domestic environment under the influence and endangering its activities threats. Thus, the risk of forms a variety of threats, which if implemented, would result in undesirable operation of the organization consequences. The risk is the adoption and implementation of decisions about the future in a threatening uncertainty environments. Risk assessment is the evaluation of the consequences of a possible realization of a situation of risk due to the adopted solutions.

We made the content of the term "risk" allows you to build a logical relationship and the transition from the state of the environment (hazards) to the motives and reasons (threats) possible versions of the future development (risk, i.e. associated with solutions) of events and the need for responsible choice-making in these conditions of uncertainty.

Based on the model of a complex in a synergistic sense, the socio-economic system was considered risk management (activities to decrease uncertainty) and the uncertainty of the environment of functioning of business entities as parameters of the procedure was formulated the theorem about the ratio of levels of risk and uncertainty of complex socio-economic system.

 Any socio-economic regulated system corresponds to a certain level of risk, as a condition of its development. Uncertainty is a characteristic of the market complexity and instability, that is a factor of a plurality of path selection of a development, but not a feature of development. With this correction, we can formulate the theorem on “Ratio of limits of uncertainty and risk complex economic system” (Avdiyskiy and Bezdenezhnykh, 2011), based on the following provisions describing the evolving socio-economic system:

 1. Any socio-economic process has a specific value (measure) of uncertainty of the environmental conditions in which this process occurs and the amount (measure) of risk of functioning, and which act as control parameters of synergetic system – characteristics of the complexity of the evolving system;

2. Any socio-economic process is characterized by a certain appropriate stability of functioning of system of interval (range) risk management (controllability, based on their measurement, assessment, regulation, monitoring) - characteristics of controllability of the evolving system;

3. Socio-economic process characterize both minimum and maximum levels of uncertainty of the environment and risks of the operation (handling) within which it is cost-effective and safe operation of the underestimation leads to the termination of the development (negative dynamics), and the excess - to the destruction of the system – the characteristic stability of the evolving system.

Based on this theorem we can draw some specific conclusions and make recommendations, including to assess the current socio-economic situation in the Russian economy.

First, the narrower the range of uncertainty levels, the less risk of any nature from criminal and corruptive to public socio-economic.

Further, you can also predict that the minimum levels of risk (e.g., corruption, social) may not be the same in different countries, with their intervals of uncertainties and risks. Therefore, the comparison of indicators, such as corruption, financial crime in different countries is not quite correct, if you do not take into account the characteristics of the environment (context) of the operation.

 Further, it is possible to notice an inverse relationship with the growth of the level of risk (e.g., social) you can talk about the growth of uncertainty (the range extension threshold). Thus, the growth of social unrest, for example, in Ukraine, USA, France may indicate increasing uncertainty on the level of choice of strategy of development of a particular country.

In conclusion, it should again be emphasized that whatever Supervisory system is not chosen by the organization, it should ensure the effective identification and reduction of risks of different nature, financial, corruption, laundering of money and financing of terrorism and other offences. And accurate understanding of the content of basic concepts, in particular, risk, threats, hazards in the functioning of the organizations will enhance the effectiveness of risk-based control method.

Asyaeva, E.A., Chizhankova, I.V., Bondaletova, N.F., Makushkin, S.A. (2016). Methods for Assessing the Credit Risk of Leasing Assets. International Journal of Economics and Financial Issues, 6(S1): 96-100.

Avdiyskiy V. I., Bezdenezhnykh, V. M. (2011). Uncertainty, variability and inconsistency in the objectives of the risk analysis of behavior of economic systems. Effective crisis management, 3.

Avdiyskiy V. I., Bezdenezhnykh, V. M. (2017). Theory and practice enterprise risk management. Moscow: KnoRus.

FATF. (2014). Guidance on the application of a risk-based approach for the banking sector, FATF, Paris, France. Available at: www.fatf-gafi.org/documents/documents/risk-based-approach-banking-sector.html

Vyatkin, V. N., Gamza V. A. (2006). A risk Management company. Interactive program management. Moscow: finances and statistics.

Williams C. A. and Hiens .M. (1989). Risk Menagement and Insurance, McGrow, N. Y.: Hill Book Company.

1. Dr. Jurid. Sciences, Professor. Department of Risk Analysis and Economic Security. Financial University under the Government of Russia. Moscow. Russian Federation. E-mail: VTrushanina@fa.ru

2. Dr. of Econ. Sciences, Professor. Department of Risks Analysis and Economic Security. Financial University under the Government of Russia. Moscow. Russian Federation. E-mail: VBezdenezhnyh@fa.ru