Development of a system of financial risk indicators based on logistic regression and the CorporateMetrics methodology

Abstract

Business entities in their practical activities are constantly faced with the presence of various risks, manifested in the negative impact on them of factors of both internal and external environment. The most important for any financial manager are financial risks (market, credit, fiscal, currency, etc.), the management skills of which in a crisis period reveals genuine professionals in their field. To simplify the management process, algorithms or models are being developed that allow increasing the efficiency and speed of the management decision-making process. The subject of this study is the development of a methodology for assessing and forecasting financial risks. The purpose of the development is to simplify the process of selecting mechanisms for influencing risk, which allows maintaining the stability of cash flows over time and achieving the target financial indicators of an economic entity. The research methodology is based on the use of a combination of logistic regression tools and the CorporateMetrics methodology. These systems of financial risk indicators are highly sensitive to changing market conditions due to unfixed thresholds determined by the average values of the indicators used by the industry. The novelty of the study lies in the fact that the joint use of various indicators and indicators allows to comprehensively assess the exposure of an organization to each type of financial risk and monitor changes in the values of risk indicators. The scope of application of the results is presented on the example of the evaluation of open data on the economic activity of MTS PJSC for the period 2016-2018, the mechanism of using the methodology is shown. It is worth noting that the ability to adapt the indicators and indicators used in the methodology allows it to be applied to any economic entity of the non-financial sector of the economy.