A NEW APPROACH TO FORMATION OF RATING OF PARAMETERS OF INVESTMENT PROJECT IN TERMS OF THEIR RISKS
Abstract
Formation of rating of parameters of investment project by decreasing of their risk is useful for effective project management , since the parameters of the project from the top of such a rating (i.e., riskier) need more attention. Project parameters with high risk are characterized by drastic changes in their values, which can adversely affect the course of investment project. Therefore formation of rating of parameters of investment project is an important procedure when analyzing its risks. The article proposes a new approach to formation of rating of project parameters in descending their risk of loss-making investment project. The approach is based on finding the dynamic break-even points of the project for each of the project parameters and analyzing the relative reserves of investment break-even of the project by these parameters. The larger the relative reserve of investment break-even of a project is by parameter, the lower is the risk of a project unprofitability by this parameter. Therefore, if project parameters are placed in ascending order of their relative reserves of investment break-even , then we get the desired rating of parameters of investment project by decreasing the risk of its unprofitability. Compared with the classical sensitivity analysis of the project's effectiveness criteria, the proposed approach is more simple and transparent in calculations, natural from an economic point of view. When using a new approach, it is not necessary to calculate the values of the elasticity of the project efficiency criteria for each of its parameters. The ratings of parameters, formed by using the new approach, coincide with the ratings, formed by using traditional sensitivity analysis. The fact that ratings coincide is demonstrated in an article on a model example.Besides, the approach, proposed by the authors of the article, can be generalized to multifactor risk analysis methods for investment project (for example, the scenario method).
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