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3.4. Management of risks during realisation of investment projects. A technique of an estimation of risks.


Risks in the course of realisation of investment projects are evaluated on three groups: crediting, realisation of investment projects, return of money resources of an urban bonded loan.
For maintenance of the comprehensible income on invested means the call money rate under credits should be based on the bank extra charge over a value used for crediting of incomes.
The extra charge includes expected costs on formation of a portfolio of credits and the certain income on the invested means for the bank owner. Expected expenses include extra charges for risks of crediting and working costs on mobilisation of means and issue of credits. These expenses include credit risk, risk of the interest rate, risk of an alternative choice, risk of change of conditions of mobilisation of funds, liquidity risk, administrative costs and the income on the share capital.
Administrative costs - limiting expenses on mobilisation of means, issue of credits and their service.
The income on the share capital - the established size of the income under investments of shareholders, net profit over expected losses and the expenses necessary for covering of risk of investors in connection with discrepancy of costs estimates and losses, and also non-uses of an alternative rate. The income is defined, how the sum of a usury limit of percent on the credit and components of the bank extra charge on risks.
Credit risk - potential losses in case of defaults of payment of the borrower. Losses for the creditor in case of defaults of payment happen several kinds. The creditor sustains losses, if the sum obtained from sale of a subject of maintenance of a reflexivity less, than not paid part of the credit (the age sum of percent). Besides, there are also administrative costs for management of the not paid credits and the confiscated maintenance. The costs connected with a non-return of the credit, include as loss of percent or the credit capital amount, connected with time delay concerning imposing of sanctions on the debtor, or re-structuring of not paid credits and time necessary for reception of property of the debtor as a result of loss or a call future (reception) of a cover of credit.
Risk of the interest rate - the potential losses caused by financing at imbalance of periodicity of revision of call money rates under credits and extra means (i.e. if the call money rate under credits is corrected less often, than rates of percent on borrowed funds in the conditions of an interest rate development).
Risk of an alternative choice - losses at reinvestirovanii, caused by the early credit repayment with the fixed call money rate (risk of preschedule settlement) and losses at financing of the credits, the call money rates connected with definition for the borrower before the beginning of financing of the borrower (risk of advance commitments).
The risk of preschedule settlement arises, when the borrower has the right not to extinguish the credit before the termination of the credit period. If the market rate falls below the contract rate under the credit, the borrower receives stimulus to the credit repayment by means of the new credit received under a market call money rate.
The risk of advance commitments takes place, when the creditor undertakes the commitment to grant the loan under certain percent before the credit finance beginning.
This risk is similar to risk of preschedule settlement except that the period of time of application of such choice is shorter.
Risk of change of conditions of mobilisation of funds - the potential losses caused by change of cost of funds (the base rate) at crediting with the financed extra charge (concerning the base rate). This kind of risk arises at long-term crediting at a variable call money rate when the percentage extra charge under the credit is fixed, and the percentage extra charge on extra means - a variable. If the bank advances a credit with the income equal to the financed percentage extra charge to month rate Moskomzajma, he risks that the extra charge which he should pay Moskomzajmu on extra means, can after a while (quarter, half a year, year) to be changed.
Liquidity risk - cost of maintenance of necessary level of liquidity or the losses caused by sale of securities for cashing of means. It arises in connection with difficulty of mobilisation of cash by asset sale under the prices market or close to them. Banks keep a definite volume of cash and short-term securities (a liquidity portfolio) for monitoring of short-term fluctuations of a cash. The portfolio of liquidity and reserve means have rather low interest rates and thus involve certain costs for the creditor.
Return of money resources of an urban bonded loan transmitted by bank for financing of realisation of investment projects has following risks:
Reflexivities - potential losses in case of delay of payments or defaults of payment of an authorised bank or bank of agent Moskomzajmu;
Yields of securities - potential losses Moskomzajma at imbalance of periodicity of revision of call money rates of return of extra means authorised banks, rates of bonds of a loan and rates under equity market securities;
Advance payments under bonds arises at a preschedule presentation of certain quantity of bonds of a loan for payment in the presence of such right at investors of advance commitments it is similar to the same bank risk.
The liquidity risk is defined by the possible sum of the obtained means from realisation of maintenance of a reflexivity of extra means and realisation time.
Risks of realisation of investment projects are defined at the stage of selection of projects for financing and at separate stages of its realisation. It first of all:
The risk of security resources makes expenses for indemnification of possible failures for deliveries of materials, the equipment and other resources used in the course of realisation of investment projects;
Risk of non-observance of terms of realisation of the investment project - the possible losses connected with delay of realisation of the project in the market and reception necessary for return of extra means of the income.
Criteria of risks at realisation of investment projects within the limits of investment system of urban bonded loans differ from traditional bank estimated indicators. Potential losses from performance of projects are not reduced for the Government of Moscow to narrow financial understanding of a parity of quantity of the enclosed money supplies with their physical return and gain size on a vested capital. Interest of controls of the subject of federation (the urban power) in investment of extra means is based on plans:
Attraction in a city of high technologies;
Creations of new jobs;
Loading and rational use of the established capacities in city territory;
Adjustments of production of the perspective goods and services:
Increases in urban tax base owing to growth of turn-overs at subjects of business in which projects means from funds of bonded loans have been invested.
As risks constantly penetrate all activity, the management of Committee activity is required to conduct with allowance for abilities of the general control system regularly to execute functions of revealing of risks, their analysis and reduction. For this purpose the account of risks should enter as one of a component of any activity in Committee and supervisory personnel functions. But it insufficiently the specialised system also is simultaneously necessary for management with allowance for risks.
The system offered further provides creation in Committee of the commission on the risks, having the status equal to the Commission on credits, and also creation in central office of specialised division (management or department) under the analysis and the control of risks (fig. 7).
Creation of the indicated structures does not exclude the responsibility of top level of a management of Committee to consider in the decisions a risk factor, and should help to a management to execute this responsibility better.
At level of divisions where it is expedient, specialised groups can be created or the post of the expert in risks is entered. In cases when it is not expedient, works in the field of risks can be only a part of activity of the experts having wider functions and problems. Groups on risks in divisions can form both on a constant, and on a time basis. Irrespective of the fact which the form of the organisation of works on risks will be chosen at local level, with formation in bank of the Commission on risks and divisions (management, department) under the analysis and the control of risks, arises not only specialised division at Committee top level, but also the whole service penetrating activity of Committee on a vertical. \"\"\"\"A Fig. 7. The basic scheme organizatsiiupravlenija risks in bank.
The commission on risks
The commission on risks forms for the purpose of a regular estimation from the point of view of risks of a situation as a whole, in separate directions of activity, structural divisions, projects, programs of Committee and on the basis of it development of a policy and the major actions for the control and management of risks.
The primary goals of the Commission are definition of a policy and development of the basic measures concerning:
Liquidity and solvency maintenance;
Appointments of interest rates;
Decrease in danger of a rate fluctuation of currencies;
Formations of a credit and investment portfolio;
Restrictions of dangerous concentration (connected with the balance sheet, costs and incomes) concerning separate clients and branches;
Reductions of negative consequences of inflation;
Prevention of crisis situations, transition to special management in crisis situations;
Approval of new initiatives;
Collisions of interests and reputations;
Property insurance and bargains;
Examinations of plans, projects and bank programs with allowance for risks;
Examinations of risks of significant organizational and other innovations in Committee work;
Estimations of quality of clients, partners and agents, definitions of structure of desirable and undesirable agents and Committee partners;
The analysis and preparation of reports in each case of unforeseen losses because of what they have occurred also development of measures that the risks revealed as a result have been taken under the control at development of actions of bank in similar situations;
The tax and processing of the information for an estimation of risks, including the special information concerning safety of bank;
Structure of the Commission on risks.
It is expedient to include chiefs of the senior link in Commission structure - Committee bases, and also divisions of internal audit, tax planning and accounts department. The commission should be headed by the Committee chairman or the representative nominated as him.
The information regularly represented in the Commission on risks should include following reports:
The report on a condition of assets and liabilities
The condition of assets and liabilities should be defined on the basis of the information generalised together in the general scale. The commission should have possibility in case of inquiry to receive the information on each division and the project.
The report about bystrolikvidnyh assets
The report includes data about bystrolikvidnyh assets, i.e. about those assets which can be within one day or during other is possible shorter period of time are transformed before maturity expiring on them into the means transferable in any part of a network, unexpected shortage of means testing at the moment.
The report on stocks and obligations on currency
It is required to receive the information on balance sheet maturities on each currency. In this report those cases when limits and obligations on operations with the currency, established by the Commission have been infringed should be allocated also.
The report on an actual and predicted difference between assets and liabilities because of possible growth or falling of bank rates
This report should consider those parts of balance which are connected or with a flexibility of prices (for example, credits by which granting it is possible to increase on
To the discretion levied interest rates), or, on the contrary, with inflexibility of the prices (for example, loans, in a case with which the price is fixed before maturity payment). In this report situations when the installations of the Commission connected with risks are infringed, including consequences of such infringements also should be considered.
The report on investments
In it the total amount of investments made in projects is given. In the report the current market value of investments with allocation of those investments, which cost below market quotations is underlined. The commission should have also the information on personal investments of staff of Committee.
The report on credits and investments, credit and investment portfolios in a cut of clients, branches and programs
The form of account should be flexible, but necessarily include breakdown of credits and investments on level of risks, in particular, to allocate volume of problem credits.
The report on the percentage difference received on kinds of assets and on sectors of the financial market
This difference should be shown on an annual time interval with allowance for buildings up reserves on cover of bad debts. The report should contain the analysis of work with loans by comparison of their cost with wholesale cost of means on an interbanking market, and also the analysis of loans and other assets at their cost in comparison with wholesale cost of means.
Business plans of the basic projects and operations with an estimation of key risks
The corresponding information should be granted the Commission for the control over risks and to undertake necessary actions in case threat of risks becomes rather probable.
The report on cases of losses, and also threats of losses
It is important, that chiefs of divisions preferred to inform bad news, instead of to hide them. In each case of significant losses the report, for generalisation and conclusions should be made. In this report the question on should be considered, in particular, whether it was possible to avoid these losses, if precautionary measures have been applied or (as, for example, in a case with some hopeless debts under credits) it is inevitable in activity.
The annual report on activity from the point of view of risks and losses, and also the forecast of risks for the next planned year
The report should contain the analysis of the next annual plan from the point of view of risks with recommendations to services and divisions on restriction of risks.
Other reports at the discretion of the Commissions on risks
The indicated reports are prepared by specialised division on management with allowance for risks with the assistance of other services and divisions of Committee Division under the analysis and the control of risks
For committee work maintenance on risks there is the specialised division named Management or department under the analysis and the control of risks (or division on management with allowance for risks) which urged to supply the Commission on risks, a management, services and divisions of Committee by the information and the analytical material necessary for formation and realisation during a life politicians in the field of risks. To this division access to the accounting information, other operative and planned information should be supplied, and also possibility to receive as required the special information on separate questions is given. In position about the given Management (department) and other divisions of bank connected with it instructions on an order and rules should be introduced
Access and use of the information for the analysis, and also authority in the field of realisation of actions for restriction of risks and to investigation of their consequences.
Into number of the primary goals of division under the analysis and the control of risks enters:
The tax and the information analysis, preparation of reports;
For the last periods so that planned operations and projects, the possible brave situations connected with them, it would be possible to interpret management databases in a context of already accumulated experience, the similar situations, the revealed tendencies and recurrence of events;
Maintenance with the information of the Commission on risks, fulfilment of other functions of working division of the Commission, including realisation during a life of its decisions and the control over their performance.
Number of division under the analysis of risks should be small, but its employees should be allocated by the significant authorities, giving the chance access to the information and influences on preparation and realisation of operations and projects. A part of employees can work in a matrix mode, remaining employees of other divisions.
The management of division is assigned to the employee, by the position included in number of the top management of bank, it is desirable, the officer of board of Committee. The name of a post of the chief of division under the analysis and the control of risks will depend on the status of division and can to be referred to, for example, so: the head of department - the officer of board or the Manager on management of risks.
The variant is possible, that the status of the chief of division will be more low, for example, the head of department, but in this case it will be allocated by the Committee chairman and the chief of the Commission on risks the special additional
Authorities for access to the information, influences on made decisions and investigations of consequences of approach of situations with risks.
The chief of division under the analysis and the control of risks bears responsibility before the Commission on risks. The given chief should have an information line \"to the day \" with chiefs of economic planning administration and accounts department. These divisions should be responsible for satisfaction bolshej parts of queries of the Commission on risks, but thus the chief of division under the analysis and the control of risks has the right to request the information of all departments and managements on the basis of authorities from the Commission on risks.
Division under the analysis and the control it is brave responsibly for:
Maintenance with the information of the Commission on risks for acceptance of corresponding decisions by it and an objective estimation of a situation from the point of view of risks;
Specialised projects under the tax, processing and management the information on risks according to installations of the Commission on risks;
Preparation of analyses of a state of affairs from the point of view of risks, developments of recommendations about insurance, the credit, investment, percentage policy.
In process of accumulation of an operational experience the division should be guided well in area of a policy and the management theory with allowance for risks to make recommendations on introduction of new management methods with allowance for the risks, capable to improve all work concerning risks.
Key functions of the Chief of division under the analysis and the control of risks consist in the following:
Division creation under the analysis and the control of risks, including a set of staff with a wide professional knowledge and abilities in bank and
Accounting profession, economy, the matematiko-statistical analysis, management databases and other necessary branches of knowledge;
Sharing in long-term and activity annual planning with allowance for risks; a management of projects under the tax and processing of accounting and other information for preparation of reports for the Commission on risks, including the report on assets and liabilities from the point of view of their susceptibility to risks;
Management of the project on improvement of a portfolio of liquid assets;
Management of the project of comparison of interest rates in the balance sheet and corresponding operations for the regular control from the Commission on risks;
Sharing in the project under the tax and information processing under credits and investments, the information tax by preparation of credit agreements, data on dangerous concentration of credits and investments in sectors and at separate clients, about bad debts, the analysis of these data from the point of view of acting and arising tendencies, risk factors;
Management computer databases on problems of risks;
Fulfilment of examinations and analyses of planned projects and operations;
Management of investigation of consequences of display of risk.
On the basis of practical experience of processing of empirical data during realisation of investment projects within the limits of investitsionno-extra system of urban bonded loans of Moscow in Moskomzajme it is developed, approved and the Technique of an estimation of risks of investment projects is applied now, allowing to analyse and correct parametres (financial, time, naturally-volume) investment projects prior to the beginning of their realisation. Result of use of a technique is the economy of investment resources of financial funds of urban bonded loans.
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A source: KRIVOSHEIN ANDREY NIKOLAEVICH. MANAGEMENT of INVESTMENTS In the SUBJECT of FEDERATION (ON the EXAMPLE of Moscow). The DISSERTATION on competition of a scientific degree of a Cand.Econ.Sci. Moscow. -199

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