Author(s)

A. Domnikov, G. Chebotareva, P. Khomenko, M. Khodorovsky

Abstract

Under conditions of the economic and technology-related risks growing in the contemporary society, the availability of an efficient risk management system represents a crucial factor of business competitiveness and rate of return. This paper presents a proprietary approach to risk management for oil and gas companies in the implementation of investment projects. A rating model for investment project risk assessment considering the numerosity of factors is presented. A method for economic capital assessment based on the Merton– Vasicek model was developed which allows establishing the operating targets for long-term sustainability management for oil and gas companies under conditions of investment risk. Practical aspects of the risk assessment and management for oil and gas business are considered, as applied to a company playing in the sector. The results of the study may be used by the management of oil and gas companies, investors and analysts in the course of financial decision-making.

Keywords

long-term sustainability, oil and gas company, investment project, investment risks, probability of default, logit model, Merton–Vasicek method