A system of risk measurement principles in MNC performance management

Статья нацелена на выявление признаков транснациональных компаний. Определить эффективность корпорации не всегда представляется возможным, поскольку мнения ученых на этот счёт расходятся. Сложно отрицать влияние эффективной системы управления рисками на работу ТНК В статье были рассмотрены основные риски. Был проведён анализ системы управления рисками в компаниях "Северсталь" и "Норникель"..

Ключевые слова: транснациональные компании, эффективность транснациональных компаний, управление рисками.

TNCs can be defined as enterprises (financial and industrial associations) that own production or service complexes located outside the country in which these corporations are based. These complexes can only be controlled by a corporation without ownership. Such corporations transform the world economy into international production, ensure the acceleration of scientific and technological progress and actively use the tendencies of the international division of labor. A single decision-making center is located in the home country, while the corporation's branches are also located in other countries (two or more). [3]

In other words, TNCs are corporations that were able to carry out their activities outside the state where the company was located, where it originated.

TNCs are inherent in the relative independence of the international movement of capital from the processes taking place in the home country of the parent company. Also among the features can be identified centralized management. At the same time, each branch has a certain degree of independence.

There is still disagreement in the scientific community about which organizations can be considered TNCs. It is not always possible to establish the fact of using an international approach in managing a company. For this reason, narrower definitions exist. transnational risks management

For example, the UN methodology suggests the following criteria:

Asset structure (the percentage of sales sold outside the country where the parent company is based).

The annual turnover of the company must be more than 100 million dollars, branches must be in at least six countries.

The final version of the criteria provided by the UN Commission on TNCs [4]:

o branches, representative offices, subsidiaries in at least one country other than the country where the parent organization is based; at the same time, the form of organization and the field of its activity in a foreign country does not matter;

o the company operates within a decision-making system that allows for a coherent policy and implementation of a common strategy through one or more command centers;

o individual units of the TNC are connected through ownership or otherwise in such a way that one or more units can have a significant impact on the activities of others, as well as share knowledge, resources and responsibility between the units of the TNC.

Comparing the definitions from the beginning with these criteria, we can conclude that there are no strict rules for classifying an organization as a TNC. It is enough to have a representative office in one country in addition to the state where the head office of the company is based. The leading center of the company may be not one, but several, depending on the organization of activities within the TNC. In other words, a TNC is not necessarily a company with a single center and representative offices in several countries.

Unlike national companies with foreign representative offices, TNCs have special sources of financing for economic activities, including:

* access to natural resources, capital and knowledge, R&D results (as opposed to companies that receive foreign resources through export-import transactions);

• the possibility of locating enterprises, taking into account the size of the domestic market of the country where a separate branch or representative office is located, as well as taking into account the pace of economic development, the state of the labor market, and the development of infrastructure;

• the possibility of competent distribution of capital, including the use of borrowed funds in the countries where branches are located;

• awareness of the conjuncture of commodity, currency and financial markets in various states (allows you to quickly transfer flows to countries where conditions are formed for obtaining maximum profit);

• international management experience;

• production diversification.

Summing up, there is no universal definition, because the criteria are rather vague. However, a number of mandatory conditions can be identified. The company must have branches in at least two countries. All structural units in other countries must have a certain level of independence, but at the same time be interconnected (decision at one point affects all others). The company should have centralized management, it is possible to have several points for managing the activities of branches and representative offices.

The concept of the effectiveness of TNCs is also not defined, opinions on this matter vary. The approaches of scientists have changed with the development and evolution of transnational corporations.

Different views on the concept of the effectiveness of a TNC: [5]

P. Buckley, M. Kesson, J. McManus (1960s) saw the effectiveness of TNCs as the maximization of the profits of the corporation as a whole, and not its individual links, as well as the presence of a global strategy.

R. Robinson in 1966 thought that efficient TNC operates in the interests of the home country. In the same year the measure of diversification of its production activities was noted as a measure of the effectiveness of TNCs by K. Christensen, B. Scott, E. Lerid, K. Andrius, J. Stopford, W. Guth.

J. Diebold in 1970s constructed the list of features of an effective TNC which is based on the balance of the following points:

1) Access to resource sources; 2) Identification of global economic trends; 3) Gaining access to foreign markets; 4) Prevent competitors from capturing foreign markets and sources of raw materials; 5) Bypassing the national antimonopoly legislation of the home country of the TNC; 6) Minimizing the impact of cyclical fluctuations in the economy in the country; 7) Realizing the benefits of a fully integrated system for conducting large-scale economic transactions.

J. Rosenau, R. Keohan, J. Knight (1972): "An efficient TNC is characterized by a lack of connection with sovereignty." Same year, W. Dumeza: "The effectiveness of TNCs is caused by the special structure of TNCs."

N. Hood and S. Young (1979) believed that the efficiency depends on high level of technology; industrial organization; managerial personnel of a wide profile; access to sources of capital in various financial markets, the ability to profitably maneuver and use fluctuations in exchange rates; access to sources of raw materials.

Moving to the 1980, C. Bartlett, S. Joshal, D. Birkinshaw made association between increase in efficiency and its structure: "The increase in the efficiency of TNCs is associated with an increase in its structure - from multinational to transnational." From point of view of A. Scott, M. Stolper and R. Walker (1988), effective TNC creates the conditions for successful activity by itself. I. van Staveren, 1990: "Efficient TNC minimizes resource use and associated environmental damage."

Based on various definitions of efficiency, a number of conclusions can be drawn. First, attention is paid to completely different aspects of the activities of TNCs. Secondly, scientists focus on some features of the work, losing sight of others. Also, most of them mention the monopolistic nature of corporations and hence the resulting competitive advantage. This is happening due to the lack of an integrated approach in the analysis of the main factors that affect efficiency.

In their activities, transnational corporations (TNCs) face risks more often than companies operating only in national markets. This circumstance makes risk management in the course of international financial management especially relevant. Risk is one of the most complex economic categories. We believe that a clear distinction between uncertainty and probability leads to understanding the essence of risk. Uncertainty is not quantifiable, being immeasurable. On the contrary, probability, which is the possibility of obtaining any result, is measurable. Distinguishing between the concepts of uncertainty and probability allows us to characterize risk as a probabilistic event, that is, a quantifiable probability of a particular outcome.

Transnational corporations in their financial activity face both risks common for all business areas and specific risks typical for international operations.

Industrial safety is the countermeasure of choice at any hazardous facility, such as oil and gas and nuclear power plants. They are used to protect people, industrial plants and the environment in case a process goes beyond the permissible control limits.

Hazards in the workplace and employee safety are always on a plant manager's mind, including what can be done to prevent workplace injury. A significant factor towards enticing employees to work for you is providing a safe environment to work in and the promise of support if something should happen. With OSHA (Occupational Safety and Health Administration) conducting random inspections of the workplace, safety and consistent workplace conditions are fundamental for continued employee safety and passed regulations. There are countless situations that can be hazardous for manufacturing companies, following are the top five: falls; machine guarding; Powered Industrial Trucks; electrical hazards; lockout

Shortage of raw materials. Raw materials are important to all companies that have anything to do with converting raw materials into products. For all companies, however, the availability of raw materials is important. If there are problems with the supply of raw materials, the market mechanism can shift demand to other products. These changes can lead to financial damage in any company. Unfortunately, the ex post facto response is limited by the far-reaching impact of resources. It is resources that set the possible structure of the supply chain as well as the appropriate production technology. The magnitude of these effects means that a purely reactive response will be limited and may not be productive.

Changes in price. Raw material prices have risen sharply over the past year, mainly due to the global pandemic and the trade policies of the previous administration that threatened the manufacturing sector, which has not reduced the risks associated with rising material prices. This is a very important risk that should not be underestimated. Prices can change because of various events and even because of the highest percentage of growth. Even the largest corporations suffer from high material prices because COGS go up, but you can't raise prices much.

Strategic risks. Strategic risks are the risks that arise from the fundamental decisions directors make about the organization's goals. In essence, strategic risks are the risks of not achieving those business goals. Strategic risks are determined by the board's decisions regarding the goals and direction of the organization. Therefore, the board's strategic planning and decision-making processes must be thorough.

If risk management is to be effective and efficient, the board must understand the major risks that are associated with its strategies and the major challenges that may arise in its operations. Risk and initiative cannot be separated from business decision-making; however, directors can provide a broad view of risk management and thereby limit the trouble that risk can cause.

Legal risk is the likelihood of financial or reputational loss resulting from a lack of knowledge (or misunderstanding) of how the law applies to your business, or operating with a reckless indifference to the law and how it applies.

Legal risk management starts with identifying possible threats, which could cause loss or disruption to your business, enabling you to implement processes to minimize or negate them.

First, compile a list of potential legal risks. Once identified, analyze each risk to determine how likely it is to impact your business, and how severe the impact would be.

Impact is typically measured and prioritized by financial impact, with priority given to the most potentially expensive risks. However, other factors such as reputational damage and cultural impact are also important.

Information security risk is the potential for vulnerabilities in assets to be exploited by a specific threat to cause damage to the organization.

Most data leaks are due to employee misunderstandings of the possible consequences of an IS breach. Example: sending commercial information over an unsecured communication channel. Network attacks are usually deployed to steal business secrets, spy on competitors, disable critical resources for the victim, etc.

The human factor includes not only human error, but also deliberate actions that cause confidential information to spread. An IS incident can severely damage the budget and reputation of a company, up to and including bankruptcy. In order to minimize the likelihood of incidents, a set of preventive measures is taken to reduce risks.

It is worth considering risk management at PJSC Severstal in order to better understand how and for what purpose it is carried out. Severstal is a Soviet and Russian steel and mining company that owns the Cherepovets Metallurgical Plant, the second largest steel plant in Russia. Severstal's activities are subject to certain risks. Effective risk control is one of the most important elements of the company's work and strategy. Accurate and timely identification, assessment and risk management support the decision-making process at all levels of management and ensure the achievement of strategic goals and key performance indicators.

Severstal's risk management system is aimed at identifying, managing and reducing the risk of failure to achieve the company's strategic goals. Senior management, managers and employees of the Company at all levels participate in risk management on an ongoing basis and perform the relevant duties assigned to them within the framework of this process. In their work, the Board of Directors and all employees are required to strictly adhere to the Company's risk management policies and standards. The company has implemented a formalized risk management structure that provides for a clear division of functions and responsibilities and an accountability procedure for the Board of Directors, Audit Committee, Executive Committee and Risk Management Service. [1]

Identification and assessment of risks