Nino Paresashvili, Irine Maisuradze, Ivane Javakhishvili Tbilisi State University, Georgia.
e-mail [email protected], [email protected]
Abstract. The role of the risk while implementing a project in general and in particular
situation is under review of the present article. In modern unstable situation management of risk is the matter of actual importance since it is the significant tool in the arsenal of modern global world. If we deliberate the example of Georgia we will see that creation of the risks management structure and its development is especially intricate task. For Georgian modern realities while the project implementation the risks management is going on rather at the expense of experiments and failures.
Keywords: risks administration, project adjustment, optimal decision, the risk analysis and
evaluation, efficiency of project regulation.
Introduction
Economic and social advance of the state significantly depends upon the peculiarities of the processes of the project current adjustment throughout various fields, the risks forecast while implementation of any project and elaboration of the activation system for their eradication. The manager responsible for risks should cover all preventive measures serving to minimize the undesirable outcome resulted from any unexpected features connected with the project..If we take into account the environment when the organizations coordinate their activities in permanently changing and unexpected conditions, provision of economic sustainable development of the state becomes especially actual, and this depends upon classification and analysis of the various hazards standing before different current ongoing projects in numerous fields of the state. Successful overcoming of the crisis covers financial stability of the organizations, inculcation of positions in the market and numerous positive tendencies. The agenda for combat crisis involves the most important issues including: the hazards analysis and selection of evaluation strategy; systems approach towards management of hazardous situation; definition of a response to the risk and criteria regulation; usage of methodology to calculate the risks marginal values; to take the optimal decision and etc.1
The risk and Evaluation
The risks adjustment and the analysis for searching the decision is rather important issue of modern business relations. In any process and the organizational structure is considered to be necessary to deliberate the hazardous situation as the phenomenon and to carry out corresponding activities for their prevention. At the same time we should recognize the complicated structural phenomenon that is based upon numerous factors. While implementation of any process the comprehension of the risk management is the important factor. In conditions of appropriate realization and consecutive regulation, the right policy of the risk-management will reveal not only undesirable events but may determine the profitable and successful perspectives of development.
list of activities to be fulfilled; however the plan doesn’t take into account the serious potential hazards of the project. The risk implied in the project is a probability of all results and undesirable events. The risks connected with the project developments may be resulted in stoppage or destruction of the project. Some undesirable cases may be revealed until the project starts but others are not subjected to the forecast and can’t be foreseen.
All projects involve the hazards like exceeding the expenses, breach of terms, low capacities, disappointment of customers, dismantling of business and other. Therefore the hazards management and their definition are rather significant issues. The risks regulation is oriented towards the fact that it is necessary to elucidate many possible negative events, to minimize their impact, to make attempts to prevent them, however if they occur we should provide the appropriate means to cover unforeseen charges.
Taking into account the methods of principles and implementation of the risk management it is necessary to pay ordinary attention to each stage. Following of the content statement the identification and definition of a potential risk is the necessary process. The processes involving risks may consider all events that while their original rising cause problems. So the risks identification may be undertaken from their initial source or from the problem itself.
The manager should pay regular attention to the analysis of the source. The hazardous sources may be placed inside or outside of the system to be surveyed. The objects of risky sources may involve the partners, users, employees and natural situation.
Exposure of possible risks connected with the project and their analysis are formally connected with the problematic areas of detection, evaluation and analysis before the project undertakes. This is rather practical process than reactive. In other words it is preventive process aiming to minimize any unexpected failure or undesirable results. It is definitely the project leader active readiness before the hazardous effects. The successful coordination of risks connected with the project gives opportunity to the project manager to better supervise future and increase possibilities to achieve objectives of the project in the framework of approved estimate according of technical requirements.2
The main components of the risks regulation process are following: identification of reasons caused risks; the risks analysis and evaluation; definition of a response to risks; planning of expenses while emergencies; creation of reserves in case of emergencies. Identification of reasons of risks starts with definition of the description which may hinder the project working or prevent its implementation. The problematic areas are created by the works which earlier have not been done. In the activities connected with detection of problems should take part all members of the project leading team? It is better to start from the risks which are completely adjusted to the project as a whole and not to some specified section. The members of the project team should be given opportunity to deliberate in multi-lateral way and their focus must not be limited by the concrete section of the network.3 Among the issues on the agenda are mostly significant the following: how much the specialists qualification is in conformity with the requirements rising from the project implementation; in comparison with the majority of the project the innovation quality of the present project – high, average or low; according to your viewpoint which factor of the project is connected with the biggest risk – expenses, time or functional fulfilment and why it is so.
In the process of the problems analysis may be reviewed the risks connected with the specified threats (threat to losses, threat of infringement of personal information confidentiality, accidents and other incidents). Threats may come from various directions but mostly from depositors, clients, lawful authorities and official structures as well.
If the source or the problem is known, the threat and the hazards may be studied how they may be caused. We may bring the example: exemption of the partner from the project that may
from even closed network; the risk may have system feature or sovereign depending of the sphere we are working in and the processes we coordinate.
The selected method of identification depends on traditions, sphere of activities and their adjustment. The identification methods are made by general format or the source through definition of the problems and events.
Creation and development of the risk-management structure in Georgia represent especially complicated task, since the project governing the responses to the questions on revealed risks should be made immediately followed by eradication actions. Or in better case the risks must be forecasted in prior according to analysis of tendencies and possible sources.
For the last years in Georgia actually have not been established the fundamental researches in direction to the risk management. The scientific literature don’t involve the historical traditions of ample scientific analysis, the managers are less aware of foreign experience and traditions. Thus, in Georgian modern reality coordination of projects and risks in most cases happen at the expense of experiments and mistakes.
There are number of tasks before the projects managers, from which are important : to define needs for necessity of the risk management and analysis; to select the risk management methods and the sources; to implement formation of organizational structure of risk management and the analysis; identification of the risks, selection-experience of the best trends of their management and reduction; to define the risk value, margins and control ; analysis, monitoring and evaluation of the project regulation efficiency.
Despite implemented researches over risk management and analysis there is no fundamental definition of the risk management analysis in the project. Thus, selection of the studies trends such as the risks coordination in the project management and definition of analysis for searching solution are defined by not only processes of Georgian projects coordination but also by foreign theories based on the best practical examples, analysis and systematization.
In modern conditions the issue of the projects risks management is diverse and complex structure which is changeable in swiftly developing environment taking into account time and conditions. Exactly for this reason elaboration of the whole standard is a hard task, the number of problems include discussion features and require further elaboration.
We considered justified that attempts of Georgian scientists in this sphere directed to studying and deliberation of the risk and the processes connected thereof, like the phenomenon or present world economics or of other spheres priority and significant target of research. Working out of risks search, definition, analysis and their adjustment system; elaboration of instruments and mechanisms through which the risks will be reduced, the efficiency of the system of risks regulation and probability of losses should be evaluated.
In modern unstable conditions management of risks is actual task as much as it represents the important tool in arsenal of modern world arsenal. While implementation of each project should be stated which outside and inside threats exist in different entities and focus attention to the methods which will help managers to reduce or avoid threats. The risk management study is targeted to: statement of legal environment and political risks connected with financial, market, business, currency exchange rate, inflation, operation and human recourses. The article also covers gauging and evaluation methodology and estimation of the costs limits being under risk (V). The practical examples in various entities will reflect important issues and provide us with successful tools and methods used for the risk coordination.
taking decision for financial managers, principles of management responsibility and obligations coordination, the theory for selection of evaluation strategy, criteria for financial risks, methodology of calculation of risks value limits.
In process of the projects coordination the focus should be directed to the inter-relationship between subsystems and basic elements because we should take into account possible risk of each sub-system involved in implementation of the project which stipulates the basic elements.
Aiming to observe the market rules the companies should retain transparency in order for the market representatives could evaluate the risks existence. This scope the efficiency may not be achieved if is not formed the inner system of risks calculation and inner system of adjustment and description-fixing of documentation. Reduction of all kind of risks is an ultimate strategy of the project management. The right management and appropriate team of managers, this is the main factor for risks elimination.
Let’s take Georgian example, in 2010 was held millennium program by Georgian statistics national service in the framework evaluation project concerning the program efficiency. The project represented the innovation study on description of village infrastructure. All stages of activities were accompanied by the risks definition, analysis and reduction process. Description covered 3529 Georgian rural settlements excluding occupied territories. 4 Based on selected data the information product was created which was helpful and necessary either in Georgia for decision makers over rural infrastructure, wide community or international organizations. As a result of description of infrastructure was established the database in which are given up-to-date information about existing situation in Georgian villages. In particular, provision of natural gas, power energy, drinking water, sewage system, intensity of natural calamities, irrigation system and access to other important services.
Moreover as a result of the implementation of population list it became possible to define existence of such rural units as: healthcare, education entities, banks, mixed entities, or specialized markets, the enterprises processing agricultural products, other objects which are necessary for the people welfare.
Other than deficit of qualified personnel, separate isolation of respondent made us to focus the risks; sending respondents selection-makers for each field working; creation of different teams for working caused loosing of some information; the date of interview which is acceptable for respondent may turned to be not useful for interview since the other interview may be planned at the same time in another village.
Correspondingly update the respondent selection scheme became necessary. In order to diminish risks was recommended planning to be implemented by one person who would be responsible for the quality of conducted interviews. So for the respondents selection-makers was necessary to have following features: the respondents selection maker should have been aware of the study essence, objectives and tasks for making respondents agree on interview.
The selection-maker should be well aware of the certain region specification, placements of the rural area and accessible roads in order to define rationally the date and time of interviews in selection process.
The selection makers are required to present high social capital.
Owing to a.m. specification selection of respondents should be implemented by zonal supervisors. The zonal supervisor was selected according to regional specificity. Each supervisor was appointed for each region. The exception concerned big regions where were sent two supervisors and small regions which according of geographical distribution will be united by zonal supervisor. Selection of the respondents implemented by zonal supervisor had the following positive sides conditioning the risks reduction: the zonal supervisors was well aware of the region
community Sakrebulo (Board) representatives. Correspondingly, the process of the respondents’ election made by them was coordinated in more operative and high profile.
Owing to the fact that the interviews distribution plans was compiled by zonal supervisor, aiming to avoid dissemination of information it was better to select respondents only by one unit to implement the respondents selection, consensus on interviews days and further planning.
In order to reduce risks and neutralize possible negative attitude of respondents for each respondent were prepared letters which were handed them before starting of interviews. The letters clearly defined description objectives, tasks and importance of their participation while process of description of infrastructure. For provision of listing quality for recording of interviews were used dictating machines – technical gadgets. Recording by dictating machines served the following aim – the interviewed person had expectation to check perfectness of records quality. As a result all questions were guided by the instruction. As well the practice showed that the method of control and analysis of interviews quality represent more perfect mechanism.
Though recording by dictating machine was accompanied by negative factors that arose new risk, in particular: possible negative attitude from respondents – respondents estrange – recording by dictating machine somehow “restrain” respondents, especially in rural area with non - Georgian speaking population.
In order to reduce risks and to neutralize the possible negative attitude for each respondent were prepared letters where along with listing description was made focus to confidential issues, the letters and questionnaires for non-Georgian speaking people were prepared in corresponding language.
Regular consecutive comprehension of above risks and solution made positive effect on the process of listing and the survey aims were achieved in perfect way.
In the framework of the project on evaluation of impact of millennium program by Georgian national statistics service is one more current innovation, inculcation of monitoring control of the field under survey and the process of analysis of which successful implementation is directly in proportion with provision of survey quality and reflects all risks of all stages of study, its positive sides and setbacks.
Managers very often focus towards conception of governing risks, the strategy of administration risks, the analysis of financial risks when in the process of the project implementation usage of the forecast methods is very important as well, « naturally – indefinite » forecast of situation and behavioural risks.
While the process of project administration it is desirable to deliberate decline from average, square decline showings and deliberate variation ratio along with the calculation methodology of average level of hazards. The managers often give the risk zone grading but it would be more reasonable to review the risky zone with more specified classification represented by ultimate and inadmissible zones and to make more appropriate statements.
Examples of Georgia evidence that even in massive projects implementation process managers pay attention to the negative events of the project and they reflect the measures to eradicate them. It would be desirable if managers deliberate in advance other successful or disadvantageous foreign and local projects in the process of the project implementation and based on thereof define the similar risk-factors system of reasons of advantages and disadvantages and elaborate this risk-factor in complex system consisting of advantages and disadvantages.
While the managers have talks over marketing strategy would be more wishful for them to connect the marketing study role with the process risk-factors detection.
the planning process and the matrix of response to risks.
While regulation of financial recourses we often face the task of fighting uncertainty and ambiguity. This indefiniteness involves two types: it is impossible to clear up the current situation of the financial system with admissible specification; it is unknown or non-definable (or can’t be stated with required specification) the financial indices of future period and its concomitant parameters. Non-precise multiplications in this case plays the role of uncertainty modelling instruments, which from their side base on human cognition ability and by features categories operation and logical statement possibility of formation with featuring forms.
The great importance is conferred to the right calculation of the cost limits of hazards because inappropriate estimation may cause regulating press and additional sanctions from central or local structures and expenses of the cost remuneration of the bank guaranties; excessive estimation of the risk costs will cause surplus insurance costs and will increase the bankruptcy probability.
If we talk about future importance of financial factors in this case is possible and helpful