Tolerance to risks in the methodology of assessing the economic security of an enterprise

Economy and management of enterprise and complexes

In an unstable and volatile external environment, increased economic sanctions and competition, economic security issues come to the fore for every business entity. The need to develop a methodology for assessing the level of economic security is associated with the need for enterprises to respond to the manifestations of various influences, including risk determinants, and as a result adapt and change under the influence of external and internal environmental factors. The analysis of existing methods for assessing the level of economic security allowed us to identify a number of methodological problems. Among them, there is belittling of the importance of the risk assessment procedure, including the lack of consideration for the acceptable level of risk acceptability, which reduces the degree of accuracy of risk assessment, and as a result, affects the value of the level of economic security of the enterprise. The purpose of this article was to develop a methodology for assessing the level of economic security of an enterprise from the position of tolerance to risks arising in the course of its activities. The proposed methodology for determining the level of economic security of an enterprise is based on focusing on the identification, risk assessment and determination of the critical boundaries of the "acceptability" of risk – the zone of tolerance of the enterprise to risks. The article proposes a method for constructing a tolerance line based on the Cobb–Douglas utility function. According to the methodology, the tolerance line is determined based on the risk appetite established by the enterprise: the losses, damage that the enterprise is ready to incur. The use of this technique allows a more objective assessment of the acceptability of risks for each enterprise. Building a line of tolerance in the risk management process makes it possible to better understand the materiality of the occurrence of a particular risk entailing damage, and the ability of an economic entity to survive in the conditions if the risk is realized. Based on the application of a scenario approach to determining risk tolerance, an enterprise can make certain management decisions that allow both to prevent the occurrence of damage and to increase profits, which generally increases the economic security of the enterprise.