Contents and Ways of Organizational-Financial Risks Reduction among Managing Subjects in Housing and Utility Service

Author Name(s): Margarita D. Miroonova*, Svetlana V. Markova, Zulfira N. Zapparova, Ekaterina A. Kameneva
Author Email: marg.mironova2011@yandex.ru

Abstract

This work identified, summarized and systematized the organizational and financial risks inherent in managing entities within the housing and communal services in the modern conditions of Russian economy. In order to carry out the research, the authors of the article used the methods of structural, comparative and statistical analysis. The study revealed the content of organizational and financial risks that affect the financial performance of managing subjects of the housing and communal services. Using the example of the cost management model to minimize the risks of managing subject within the housing and communal services, an effective cost value was calculated. The study showed that the value of the cost-effectiveness ratio is sharply reduced with the increase of cost volume to minimize the consequences of industrial and technological risks. At that, the choice of the optimal value for the cost-effectiveness factor, provided that production and technological risks are minimized, will be realized in conjunction with the level of losses acceptable to the enterprise due to the implementation of the risk event. The work also examined the content and the factors of specific risks for the housing and communal services sector, such as the risk of non-payment for the population, the risk of budgetary defaults and the risk of bankruptcy. The materials of the article are of practical value for the management of housing and communal enterprises interested in reduction or complete avoidance of industry specific risks and the increase of economic entity financial stability.

Introduction

Housing and communal services as the most important branch of the economy ensures the continuous production of housing and communal services, forms quality indicators of the human life support environment. The effectiveness of economic transformations in the housing and communal sector is largely determined by the strategic focus of the management system, which allows the utility enterprises to adapt to changing market conditions. The problem of risk, considered at first as a hidden effect, is perceived currently as a basic component of economic entity management mechanisms at all levels of the economy.

According to the sociologist U. Beck [1], the features of risks are demonstrated in society which is not able to react quickly to the emerging risk situation and, as a consequence, either intensifies the risk factors or generates new ones. At present, understanding has come concerning the need to develop rational approaches to risk phenomenon [2.3]. In this regard, the practice of management develops and applies various risk minimization methods that are aimed at damage reduction from the consequences of risk implementation in the form of adverse events or the avoiding of the latter [4-7]. New approaches to the management by an organization are developed based on risk prevention. In particular, such concept as “circumspection” is introduced into the strategic management of an organization [8].

As an important direction of the study concerning the essence of risks in the housing and communal sector, one can single out the studies in which risks are considered as the events that destroy a managed system [9,10]. This approach originates from the theoretical foundations of historical and technological development. During the development of the latter, the main focus was on the study of destructive risk patterns and characteristics [6].

Conclusions

Due to a stable demand and a low elasticity of housing and communal service consumption the enterprises of the industry are extremely attractive for large businesses, which can become a real driving force for market reforms in housing and communal services, which provides institutional changes in this sector of the economy.

Summary

Based on the results of the work, the group of specific risks, largely inherent in housing and communal services, and significantly affecting the results of financial activities of the managing subjects within the housing and communal services was reviewed and analyzed.

Using the example of the management model of costs to reduce the risks of a managing subject within the sector of housing and communal services, it is shown that with the growth of costs for the carrying out of measures to minimize production and technological risks, the value of the cost-effectiveness ratio decreases. The studies specific to the housing and communal sector of risks such as the risk of population non-payment, the risk of budgetary defaults and the risk of bankruptcy disclosed their content and the nature of the impact on financial results of the industry governing subjects. The paper presents practical recommendations to minimize the consequences during the implementation of each group of these risks.

The materials of the article are of practical value for the management of housing and communal enterprises interested in the reduction or complete avoidance of industry specific risks and in financial stability of economic entity increase.

The paper shows that the enterprises of the industry are an attractive sphere for big business due to stable demand and low elasticity of housing and communal service consumption.

A full payment for housing and communal services by population creates financial prerequisites for private investment in housing and communal services. However, in this case, appropriate restrictions are necessary, since the activities of municipal organizations are monopolistic, which can determine the nature of their activities in the management of multi-apartment buildings. In this regard, the development of a closer interaction of business, government and population can balance the interests of all stakeholders in the processes of housing and communal service provision and consuming.

Acknowledgements

The work is performed according to the Russian Government Program of Competitive Growth of Kazan Federal University.

References

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