HIERARCHY ANALYSIS METHOD IN THE DECISION-MAKING SYSTEM OF AN ENTERPRISE

Abstract

The article examines the managerial perceptions of and the attitudes toward financial risks in small and medium-sized enterprises. The process of assessing the financial risk in small and medium-sized enterprises can be completed by various means and through implementation of different methods. However, a common issue for all approaches remains the lack of quantitative information that can ensure a reliable risk assessment. The purpose of the article is to provide practical recommendations with regard to the use of hierarchy analysis method in the decision-making system of an enterprise. The paper proposes to employ a risk assessment methodology based on an analytic hierarchy process which allows obtaining a set of optimal options. The effectiveness of the model has made it popular in many instances that may require defining multiple criteria for the decision-making process, which includes risk assessment and management on the basis of quantitative and qualitative criteria. Nonetheless, the primary drawback of the mentioned method lies in the complexity of calculations for making decisions with multiple alternatives. Data was collected through the use of a questionnaire adapted from previous studies. The questionnaire was divided into two parts. The first part collected socio-demographic information from the respondents, whereas the second part covered the owner’s/manager's risk perception in respect of a list of six financial risks based on two risk characteristics: consequences and probability. The paper incorporates the developed hierarchical structure of the task of making a choice with regard to the impact of the types of financial risks of the enterprise: low or no profit, low or no cash flow, revenue deficit, financing issues, problems with customer payments, increase in bank fees. The values of the consistency ration for both criteria were under (<0.10). Accordingly, the current of analytical hierarchical process analysis has reached an acceptable level of expert judgment. As a conclusion, the calculated weights of the risk components demonstrated that the magnitude (51.5 %) was considered by the executives/managers of enterprises as the most important risk assessment criterion, while the probability (45.5 %) was the second in importance. In the course of the analysis the financial risks were ranked. It was determined that the top three position in the ranking were taken by the following types of financial risks: increase in bank fees – 18,7 %; increase in problems with customer payments – 18 %; low or no cash flow – 16.8 %.