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PERFORMANCE MANAGEMENT OF INVESTMENT PROJECTS

diplom
Ryzhenko Irina, associate professor, candidate of technical sciences

Kyrgyz-Russian Slavic University, Kyrgyzstan

Championship participant: the National Research Analytics Championship - "Kyrgyzstan";

the Open European-Asian Research Analytics Championship;

In the conditions of the instability of developing their national economies (natural and manmade disasters, the political situation, etc.). When developing the investment project performance indicators of the project, should consider the risks and uncertainties of the project, i.e. incomplete and inaccurate information about the terms of the project, and risk, i.e. the possibility of such conditions that lead to negative consequences for all or individual participants.

Thus the traditional approach to the solution of this problem is based on development of scenarios of implementation of the project that cause certain positive or negative deviations from the baseline scenario, corresponding to the values of performance indicators. The risk associated with the occurrence of certain conditions of the project depends on whether, in terms of whose interests it is estimated.

The project is considered stable if at all possible scenarios it is effective and financially realizable, and possible adverse effects are eliminated by measures under the project activities.

In order to assess the sustainability and effectiveness of the project in the conditions of uncertainty is recommended to use the following methods:

  • 1) the aggregative assessment of sustainability;
  • 2) calculation of the break-even levels;
  • 3) the method of variation of parameters;
  • 4) evaluation of the expected effect of the project, taking into account the quantitative characteristics of uncertainty.

All methods except the first, include the development of scenarios of the project in the most likely or most dangerous conditions to the participants and the assess  the financial implications of such scenarios. This makes it possible for the need to include in the draft measures to prevent or redistribution resulting losses. If these measures do not ensure sustainability of the project implementation, a more detailed study of the effect of uncertainty on the feasibility and effectiveness of the investment project is necessary.

If there is information on the various scenarios of the project, the likelihood of their implementation and on the values of basic parameters of the project for each of the scenarios, the general indicator of performance can be defined - the expected effect of the integral (expected NPV). Evaluation of the expected performance of the project, taking into account the uncertainty is being produced in the presence of information about different scenarios of the project, the likelihood of their implementation. Calculations are made in the following order:

  • - The entire set of possible scenarios for the project is described;
  • - For each scenario the cash flows of the project is examined;
  • - For each scenario, each step of the billing period the summarizing performance indicators are determined;
  • - The financial feasibility of the project is checked. Breach of feasibility is seen as a necessary condition for the termination of the project (this takes into account losses and gains of participants associated with the liquidation of the company by reason of its insolvency);
  • - Background information on the uncertainties is presented in the form of probabilities of individual scenarios, or intervals of the change of these probabilities. This defines a class of admissible (consistent with available information) of probability distributions of the performance of the project;
  • - The risk of not feasibility of the project is estimated - the total probability of scenarios under which violated the conditions of the financial feasibility of the project;
  • - The risk of failure of the project is assessed - the total probability of scenarios in which the integral effect (NPV) is negative;
  • - The average damage from the project is estimated if it is ineffective;
  • - Based on the performance of individual scenarios the generalizing performance indicators of the project are defined, taking into account uncertainties.

The main indicator used to compare different projects (design options) and select the best of them, is an integral indicator of the expected effect (NPV). Methods for determining the parameters of the expected effect are depended on the available information on the uncertain conditions of the project.

The probabilistic description of the conditions of the project is applicable when the effectiveness of the project is caused, first of all the uncertainty of natural - climatic conditions (weather, soil characteristics and mineral reserves, the possibility of earthquakes or floods, etc.) or operation and depreciation of fixed assets processes (decrease in strength of structures buildings, equipment failure, etc.). Fluctuation in the prices of made production and consumed resources alsocan be described byprobability distribution.

In the case where there are a finite number of scenarios and their probabilities are given, the expected effect of the integrated project is calculated as follows:

                                                    (1)

where NPVож- expected integral effect of the project;

pk- the probability of the scenario;

k = 1,2, ... - the number of scenarios;

NPVk- the integrated effect of the scenario.

The risk of failure of the project and the average loss from the project if it is ineffectiveare determined by formulas:

                                                                (2)

,

where pнэ- the risk of failure of the project;

Унэ- the average loss for scenarios with negative values of integral effects.

Let's consider the option, when at a certain stage of the project - the project is terminated due to unforeseen circumstances (natural and man-caused disaster, changing market conditions, political events, wars, etc.). Accordingly, in the formula (1), we introduce additional terms and conditions of an integral evaluation of the expected effects of the project:

,                                 (3)

where pH- the probability of termination of the project.

The condition of the project is defined the minimum possible damage in the event of unforeseen circumstances:

                           (4)

Finding the parameters of the investment project in conditions of uncertainty of the project is interfaced to difficulties to describe the analytical expressions of the interdependence of the parameters of the project. Lack or insufficient information about the occurrence of various events. Simulation modeling using Monte-Carlo method provides the ability to analyze scenarios in a lack of information on the project. The result of this analysis supports the probability distribution of possible outcomes of the project.

Simulation modeling by the Monte Carlo method allows us to construct a mathematical model for a project with uncertain parameter values, knowing only the probability distributions of the parameters of the project and also the relationship between changes in parameters (correlation), to obtain the distribution of profitability of the project.

At formation of scenarios with use of simulation modeling are used the following steps:

  • 1) are defined intervals of possible changes in the original variables, within which these variables are random variables;
  • 2) are determined types of the probability distribution within specified intervals;
  • 3) are established the correlation coefficients between dependent variables;
  • 4) multiply the resulting figures are calculated;
  • 5) the received resulting figures are treated as random variables to which there correspond such characteristics as expectation, variance, distribution function and probability density;
  • 6) is determined the hit probability of the resulting performance in this or that interval, the exceedance probability of  the minimum permissible value, etc.

Analysis of the resulting parameters at the generated scenarios allows to evaluate the possible range of their variation under different conditions of the project. Probabilistic characteristics are used to:

  • - Investment decisions;
  • - Ranking projects;
  • - Justification of the formation of reserve funds.

As result of this comprehensive analysis acts the probability distribution of possible results of the project. Decision-making level for low-profit projects, if the risk analysis determines is improved that the chances to get a satisfactory income exceed the probability of unacceptable losses.

Literature

  • 1. Chetyrkin A. M. Financial Mathematics.- Moscow: Delo, 2005.
  • 2. Ryjenko I.N. Aspectsof investment projects. /Collection of Scientific Papersof the XII International Scientific-Practical Conference «New InformationTechnologies in Education»,-Moscow: 31 January -1 February 2012.
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Your rating: None Average: 6.6 (11 votes)
Comments: 6

Isaeva Lyudmila Evgenyevna

Большое количество обстоятельств и условий, обеспечивающих положительное решение возможных процессов, рассмотрены в работе весьма подробно. Установлены уровни препятствия решений о качестве тех или иных проектов. Применимый подход в решении этих вопросов полезен для различных проектов. Публикация данной работы полезна и заслуживает положительной оценки.

Taratin Vjacheslav Victorovich

В статье в числе прочих методов указывается метод агрегатной оценки устойчивости. Почему он далее не комментируется и не рассматривается? В целом работа заслуживает одобрения и высокой оценки.

Rodionova Zinaida Valeryevna

Использование имитационного моделирования для оценки влияния рисков является достаточно трудоемким. Какую информационную систему вы предлагаете использовать для моделирования?

Ryzhenko Irina

Ведется разработка совместимости графических методов моделирования в приложении к ERP-системам.

Ignatova Anna

скажите, а чем ваши методы отличаются от уже существующих? ведь известно не мало универсальных методов оценки рисков и других параметров проекта

Ryzhenko Irina

существующие медоды в данной области исследований, а также и в других с течением времени и изменений окружающей среды нуждаются в совершенствовании и разработке новых методов оценки состояния объектов
Comments: 6

Isaeva Lyudmila Evgenyevna

Большое количество обстоятельств и условий, обеспечивающих положительное решение возможных процессов, рассмотрены в работе весьма подробно. Установлены уровни препятствия решений о качестве тех или иных проектов. Применимый подход в решении этих вопросов полезен для различных проектов. Публикация данной работы полезна и заслуживает положительной оценки.

Taratin Vjacheslav Victorovich

В статье в числе прочих методов указывается метод агрегатной оценки устойчивости. Почему он далее не комментируется и не рассматривается? В целом работа заслуживает одобрения и высокой оценки.

Rodionova Zinaida Valeryevna

Использование имитационного моделирования для оценки влияния рисков является достаточно трудоемким. Какую информационную систему вы предлагаете использовать для моделирования?

Ryzhenko Irina

Ведется разработка совместимости графических методов моделирования в приложении к ERP-системам.

Ignatova Anna

скажите, а чем ваши методы отличаются от уже существующих? ведь известно не мало универсальных методов оценки рисков и других параметров проекта

Ryzhenko Irina

существующие медоды в данной области исследований, а также и в других с течением времени и изменений окружающей среды нуждаются в совершенствовании и разработке новых методов оценки состояния объектов
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