Cost management model under conditions of global economic crisis

Abstract

Due to the global economic crisis, cost management and cost cutting have once again become central concerns for many companies. The main objective of this paper is to propose a cost reduction model that would ensure maximum benefit and minimum damage to the company. The cost reduction model in a crisis is based on three criteria: cost impact on revenue (costs without significant impact on revenue are cut first), cost reduction difficulty (costs that are easier to reduce are cut first) and percentage share in total costs (costs with higher relative share are cut first due to their considerable influence). Cost ranks by reduction order are calculated using a multi-criteria decision-making mathematical model. Future event scenarios are forecasted using probability under conditions of uncertainty.