Valery Alferov, Oleg Shakhov, Valeryevna Vashalomidze, Elen Reznik, Anna Yurieva Economic Security of Entrepreneurship: Specifics of Management in the Context of Financial Instability

International Journal of Recent Technology and Engineering (IJRTE)

ISSN: 2277–3878, Volume-8 Issue-3, September 2019

Valery Nikolaevich Alferov, Oleg Fedorovich Shakhov, Elena Anatolievna Reznik, Elena Valeryevna Vashalomidze, Anna Anatolyevna Yurieva

Manuscript published on 30 September 2019

* Correspondence Author

Valery Nikolaevich Alferov*, Financial University under the Government of the Russian Federation (Financial University), Moscow, Russian Federation

Oleg Fedorovich Shakhov, Russian Presidential Academy of National Economy and Public Administration (RANEPA), Moscow, Russian Federation

Elena Anatolievna Reznik, Russian Presidential Academy of National Economy and Public Administration (RANEPA), Moscow, Russian Federation

Elena Valeryevna Vashalomidze, Research Institute of Labor and Social Insurance, Moscow, Russian Federation

Anna Anatolyevna Yurieva, Market Economy Institute of RAS (MEI RAS), 47, Nakhimovsky Prospect, Moscow, Russian Federation

© The Authors. Published by Blue Eyes Intelligence Engineering and Sciences Publication (BEIESP). This is an open access article under the CC-BY-NC-ND license http://creativecommons.org/licenses/by-nc-nd/4.0/

Abstract: The efficient development of the national economy largely depends on the level of support for its economic security (ES) because an independent external and internal policy that meets national interests can be pursued only in this context.

The purpose of the study is to analyze the features of managing the ES of a business entity in the context of financial instability (FI).

The relevance of solving the problem of ES for entrepreneurship as a factor of the state's ES is revealed in the article; various theoretical approaches to understanding the essence of ES for entrepreneurship, as well as FI of a business entity as a threat to ES for entrepreneurship are analyzed.

Expert opinions on priority models for assessing the financial condition of a business entity are generalized on the basis of an expert survey, and international experience in preventing bankruptcy of business entities is analyzed to compass the purpose.

Index Terms: bankruptcy, econometric model, economic security, entrepreneurship, financial instability.

I. INTRODUCTION

Shaping a favorable, transparent, and predictable legal and economic framework for citizens to realize their right to business is an integral component of the proper socioeconomic development of the state, a primary function of state bodies in the market economy, which is required for securing the well-being of citizens and the formation of a civilized competitive environment. As such, it is advisable to discuss the relationships among the support for free entrepreneurship, favorable economic and legal environment for business, socioeconomic growth of the state, and formation of a security system for the national economy [1].

The need to strengthen the ES for entrepreneurship (in particular, as a factor of the state ES) is relevant in the context of the market economic system, since it is a vital element for the efficient functioning of the socioeconomic system of society, the mechanism for managing it, and securing its protection and development. This, in turn, determines the basis for the mutual responsibility of business and state bodies for violating the principles of creating a safe economic environment [2]. The ES for entrepreneurship plays a decisive role in strengthening the security of the national economy and is a prerequisite for its stable development. There is an interdependence between the entrepreneurship development and the provision of such functional elements of the state security as financial, social, technological, food, foreign economic, demographic, power, and environmental ones [3]. Realization of the place of the ES for entrepreneurship in the security system of the national economy allows for more detailed approach to the justification of the content of this economic category and the specifics of its management in the context of FI.

II. LITERARATURE REVIEW

S.G. Simonov (et al.) [4], S.E. Lelyukhin (et al.) [5], and Yu.A. Burtsev [6] define the ES for entrepreneurship as the state of protection of the entrepreneurs' interests from the action of various sources of threats. At the same time, A.V. Rodionov and A.A. Krut focus their attention only on threats of the external environment, which constantly change in the market economy [7]. However, the ES for entrepreneurship is the ability of the economic system to ensure its sustainability in various conditions of both external and internal environment, including the adverse ones [8].

M.N. Dudin (et al.) [9], A.Yu. Pavlov, and V.N. Batova [10] support the approach according to which the ES for entrepreneurship refers to the ability to develop and reproduce, even despite various external and internal threats. At the same time, according to D. Schatz [11], the ES for entrepreneurship is determined by factors that reflect the independence, resistance to threats, and the possibility of improvement. The researchers (A.C. Bertay, D. Gong, M. Niemimaa, J. Järveläinen, S.R. Ronis, and others) believe that the ES for entrepreneurship should be understood as a set of controlled conditions of operation, under which a business entity is able to protect against internal and external threats, preserve and reproduce its financial, economic, industrial, human resource, scientific, and technical potential [12] — [14]. At the same time, the level of the ES for entrepreneurship depends on how the managers of the business entity and the responsible specialists are efficient, i.e., whether they can avoid or counter possible threats and efficiently eliminate the consequences of negative impacts of the external and internal environment [15]. FI of a business entity is one of such threats [16].

The financial stability at the macro level mainly refers to the state of equilibrium in the system operation, where the financial system efficiently performs its key economic functions, such as resource allocation, risk transfer, and making payments, and can do so in the event of shocks, stressful situations, and periods of profound structural changes [17]. The financial sustainability is primarily considered as a property of the financial system to return to equilibrium after cessation of the impact of certain negative factors [18]. According to V.N. Alferov, the financial stability of the company is the state and distribution of its financial resources, which ensure the company development, its solvency and investment attractiveness in terms of tolerable risk [19].

At the same time, T. Kovaleva equates these two concepts and explores them much broader, not reducing only to the state of the financial system. In particular, T. Kovaleva believes that the financial sustainability reflects the property of the entire economic system rather than the financial system in the narrow sense, and should be understood as the state of its operation, when a) it is in a dynamic state of financial equilibrium; or b) its deviation from equilibrium lies within the prescribed limits in case of exogenous or endogenous shocks, and it is able to return to financial equilibrium mode [20].

FI is primarily associated with a specific situation where "the economy operation potentially deteriorates with price fluctuations of financial assets or the inability of financial institutions to meet their contractual obligations" [21], when "prices of some key financial assets deviate sharply from their fundamentals, and the operation of credit markets is thrilled, due to which the aggregate expenditures deviate significantly from the normal level" [22]. As a result, the functioning of the key elements of the financial system is disrupted, and the latter is unable to withstand shocks and prevent their destructive impact on the real economy [23].

Kh. Minsky, whose opinion the authors also share, was one of the first to point out that the FI was in the very nature of the market economic relations. In particular, it is noted in his papers [24], [25] that the modern capitalist economy endogenously generates a financial structure, which is subject to FI by its nature. His "hypothesis" is based on the theory of debt deflation (I. Fisher) [26] and the mechanism of the investor behavior in the context of uncertainty (J.M. Keynes) [27].

Close attention to FI as an object of scientific interest at the micro level arose following the research aimed at analyzing individual economic entities [28]. Research in this area gradually approached the realities of business practice, which primarily contributed to the accumulation of statistical data and the improvement of information storage and transmission systems. Economists (A. Cesa-Bianchi, A. Rebucci, P. Aghion, P. Bacchetta, A. Banerjee, P.A. Ivanov, G.R. Sakhapova) focused their research on the nature and causes of crisis situations in the activities of economic entities [29] — [31]. As such, the idea of FI as a condition caused solely by external factors, such as competition and the cyclical nature of economic development, has gradually given way to more complex explanations.

According to Yu.S. Kalinina, an enterprise as a business entity in a stable financial condition is described by a high level of solvency, an absolute or slight dependence on borrowed funds and their rational use, and great performance of core activities [32]. In other words, the financial sustainability of an enterprise is conditions (prevailing at a certain point in time) under which there is not only support for the already existing level of operation, but also the presence of conditions for the enterprise to reach a quantitatively and qualitatively new level (increase in production capacity, entry to new markets, new technological level, increased investment activity, etc.). FI of the enterprise, according to the scientist, is primarily manifested in the deterioration of the conditions of its operation.

According to P.V. Trunin, the phenomenon of enterprise FI can be divided into two stages by its nature. The first stage, most often hidden, is the fall in the marginal efficiency of capital, company's performance, profitability, and profit volumes. The second stage of FI is unprofitable production. This problem is solved by means of strategic management and is implemented through voluntary restructuring of the enterprise. At the same time, it is proposed to expand the concept of FI of an enterprise and combine actual enterprise FI and the crisis state (which the author understands as regular defaults, overdue loans to banks, overdue debts to suppliers, and budget defaults) into one group and consider the failure of an economic entity as the last crisis point of FI [33].

The purpose of the study is to analyze the features of managing the ES of a business entity in the context of FI.

Hypotheses of research is as follows: FI requires timely diagnosis of the financial condition of an enterprise and the nature and depth of financial problems, which must necessarily include a forecast of the possible bankruptcy, in order to ensure the ES of a business entity.

According to the results of the research, it can be concluded that the purpose set in