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Chapter 1
COMPOSITION AND RISK ASSESSMENT IN THE AIRLINE BUSINESS
(for example “International Airport Vladivostok”)
Студент гр. 551 ________ Н.П. Жовтун
08.06.2015
Консультант кафедры «Иностранные языки и межкультурная коммуникация»
Канд. истор. наук, доц. ________ Л.В. Иванова
08.06.2015
1 Composition and assessment of risks in the activity of the airline
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Risk as an economic category
Significant changes in post-Soviet Russia have brought the economy and market relations to the fore. Now more and more attention is paid to the study of risk and risk assessment, which greatly affect the activities of companies.
The importance of the problems of economic risks in the Russian economic science is increasing.
First, the problem was poorly studied in modern literature.
Second, small businesses, which substantially prevail in the structure of economic activity at the moment, are most exposed to economic risks.
Third, the variety of business dimensions is constantly changing. New types of businesses, trade appear regularly. Economy is getting to a qualitatively new level where most of transactions are made in the web space.
Transport, a “support through-passage” of economy, is most affected by the economic risks. Interacting with all elements and levels of surroundings transport is affected by changes any of those elements.
Risk increase is also related with scientific and technological progress since the development of new equipment, computerization and informatization of society brings not only positive but also negative economic effects.
The other reason of getting the topic more important is increasing volatility and unpredictability of economic and political situation in the country.
The current literature is characterized by ambiguity in the interpretation of features, properties and principles of risk, its subject matter, the ratio of the objective and subjective elements. The diversity of the opinions about the nature of the risk is explained by its multidimensionality, almost total neglect by economic legislation, insufficient use in practice management. Various sources determine the category of "risk" in different ways:
- risk is the possibility of loss or insufficient payment of the return compared with expected one
- risk is commonly understood as the probability of the company to lose some of its recourses, to receive less profit than was expected or to arise of additional expenses as a result of certain operating and financial activity of a company
- the possibility of negative variance between planned and actual results, in other words risk is a threat of unfortunate consequences of an expected action
- risk is an action to be performed under conditions of choice (in a situation of alternative with a hope for a happy outcome) when, in the case of failure, there is the possibility to get into worse position than before the choice (than in the case of omission of this action)
- risk is an activity associated with overcoming the uncertainty in a situation of inevitable choice when it is quantitatively and qualitatively possible to evaluate the chances of expected results, failure probability, deviation from goal. The definition is the most complete.
Risk as a phenomenon includes some components. The relationship of the elements is its essence:
- the possibility of deviation from the intended goal for the sake of which the selected alternative was put into practice
- the probability of achieving the desired result
- lack of confidence in achieving this goal
- the possibility of financial and other losses related with realization of the selected alternative under conditions of uncertainty.
An important component of risk is possible deviation from the selected goal. But deviation could be both positive and negative.
These components, their relationship and interaction reflect the nature of the risk.
Not only there are a lot of different definitions of risk in current literature, but different opinions about the objective and subjective nature of risk.
Risk associated with the selection of specific alternatives and assessment their outcomes. Moreover people differently perceive the same level of economic risk according their psychological, ideological orientations, values, mind sets. This is a subjective aspect of risk.
Objectivity of risk manifests itself in the fact that this concept reflects real-life events, processes and activities. Moreover risk exists even though people aware it or not, take it into consideration or ignore it.
Risk is directly connected with availability of uncertainty which is inhomogeneous in forms of display and content.
The main causes of uncertainty and risk is:
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The unpredictability of natural processes and phenomena, natural disasters. Displays of forces majeure of the nature – earthquakes, flooding, storms, hurricanes, as well as unpleasant natural phenomena – the frost, ice, a hailstones, a thunder-storm, etc. can render serious negative influence on results of entrepreneurial business, to become a source of unforeseen expenses.
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Accident. The likelihood essence of many social, economic and technological processes, multivariance of material relations which subjects of business activities enter, lead the same event to different outcomes under similar conditions. So the element of chance takes place. It means it is impossible to predict the expected result clearly.
The following things have significant and not always predictable influence on the results of business activity:
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various sort of accident such as fires, explosions, etc.
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the equipment failure
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the traffic accidents, accidents at workplace and some others.
| As practice shows, despite of the taken measures to reduce the probability of their occurrence and decrease the size of damage caused by the above-mentioned accidents, the accidents remain possible, the most expensive technical and engineering measures cannot exclude them.
So, as a result of military actions the enterprise can collide with an interdiction on export or import, confiscation of products, a capping of foreign investments, freezing incomes abroad, etc. Competitors can increase the range of products, to improve its quality, to reduce the price, etc. Furthermore there is an unfair competition. In this case a competitor makes the others more difficult to realize their business activity by illegal, dishonest actions, including corruption of officials, blemishing rival’s name, drawing to it of direct damage. As a result, the presence of counteracting and confronting trends in social and economic development brings in a social brings in a social and economic life elements of uncertainty, creates situations of risk. 4. Probabilistic nature of scientific and technical progress affects the reproduction process of uncertainty and risk. (Вероятностный характер научно-технического прогресса влияет на процесс воспроизводства неопределенности и риска). Technological progress is not feasible without the risk because of its probabilistic nature, as the costs and especially the results of distant in time. (Технический прогресс неосуществим без риска из-за его вероятностной природы, так как затраты и особенно результаты отдалены во времени). 5. The existence of uncertainty is also associated with incomplete, insufficient information about the object, process, phenomenon in relation to which a decision is made, disabilities in the collection and processing of information, with the constant variability of this information; 6. Sources contributing to the emergence of uncertainty and risk: - Limitations, lack of material, financial, labor resources in making and implementing decisions; - The impossibility of clearly cognition of the object under the level and methods of cognition, established in these conditions; - The relative limitations of conscious human activity, there are differences in the socio-psychological attitudes, ideals, intentions, estimates, stereotypes behavior. In the normal course of business economic entities face a variety types of risks, which differ in location and time of occurrence, the aggregate internal and external factors affecting their level, and their method of analysis, specification. Generally, all kinds of risks are interrelated. These circumstances make it difficult to take a decision on the optimization of risk and require in-depth analysis of the composition of the specific risks and also the causes and factors of their occurrence. The identification of the risk factors and their future prediction plays an important role in the success of the enterprise. Risks can have, both positive and negative effects on the activity, depending on their changes. In addition to the different economic situations will prevail various risk factors affecting the organization. The structure of the risk factors affecting the air transport market will be different from the general economic (picture 1.1) |
Picture 1.1 Risk Factors on air transport market
The risk is commonly defined as probability of adverse event with specific consequences and uncertain size of damage. Industrial, financial, commercial, social and other activities of aviation enterprises are subject to risks.
If to consider problems of economic risk it is necessary to pay attention to correlation, proportion ( ratio, balance, interrelation) of concepts "risk" and "uncertainty". From the situations of uncertainty such ones can be seen as risk situations which are highly likely to happen and can be assessed. A force majeure can be a clear example of such situation.
In the overall structure, the factors affecting the activities of air carriers can be divided into the exogenous (external environment) and endogenous (internal environment).
Exogenous and endogenous factors equally influence the activities of air carriers.
Exogenous factors have an impact on the company from the outside, which makes it difficult to control the degree of influence of these factors.
Working environment factors have a direct impact on the activities of organizations.
Suppliers can both positively and negatively affect the cost of manufactured products and services. Interacting with them directly, you should regularly seek new, more favorable conditions, ways of delivery, carefully maintain contract work. The policy of competitors is capable both to raise demand to our production, and to deprive us of consumers. It is important to continuously monitor the activities of competitors, for their technology, marketing and pricing policies, regularly monitor the number and degree of influence on the market.
Consumers are our ultimate goal.
Interacting with them it is necessary to monitor their needs, consistently improve the quality, to develop the flexible price policy and various bonus programs. The interests of consumers, their purchase ability and the number of solvent population can constantly change under a number of other factors. In this connection, it is necessary to count and predict the given risk factor on a regular basis.
Partners of the organizations help operate successfully and create a comfortable infrastructure. Partnerships can reduce the costs of production, to create a comfortable environment for development and enrich collaborative experience and new technologies.
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