The risk-oriented approach to the process of financial results budgeting

Abstract

Introduction. The subject of this article is to study the peculiarities of financial results budgeting by the national business entities which operate in conditions of risky environment.

The purpose of the study is to examine the current trends of budgeting process of financial results within the risk-oriented management and, on that basis, to build the author model of budgeting process of financial results using modern approaches to the organization of this process.

Results. It has been found out that in recent years the quite new approach of “risk-based budgeting” becomes popular for domestic business entities. This approach involves the construction of budget in way that defined input parameters in it appear not only by one digit, but by the range of values with the assessment of their probability. Taking into account the peculiarities of using this approach, the model of budgeting process of financial results within the risk-oriented management of enterprise has been worked out. The management concept Target-Profit System and motivation system Key Performance Indicators (KPI) have been taken as the basis of the proposed model of budgeting process of financial results. According to the concept of Target-Profit System the overall expenses of the enterprise is determined by the difference of projected revenues and profit of business entity. The use of motivation system KPI allows to set the levels of responsibility of personnel for budget accomplishment in order to monitoring in case of significant deviations of actual indicators from planned. It has been proposed to carry out the calculation of input parameters of budget of financial results through the use of methods of mathematical statistics and calculating the historical volatility of the total income of the enterprise based on an analysis of similar parameters achieved in previous reporting periods. In conditions of risk-oriented management the reflection of separate article for unforeseen expenses in terms of the probable expenses caused by the risk and expenses for measures to eliminate the effects of risk has been proposed for the budget of total expenses. On the basis of analytical calculations and scenario approach the examples of budget of unforeseen expenses and summary budget of financial results have been worked out.