Financial Risk Management of the Release of New Products

High competition encourages companies to invest in new products to maintain and increase market share. Financial risk management is of key importance for business investment. A serious approach to assessing and managing possible risks when planning new company projects creates the basis for attracting investment, successful implementation of projects and sustainable and efficient operation of the company in the absence of market stability. However, in practice, such researches are practically not conducted. Statistical and econometric studies are rarely included in business planning due to the lack of available models. This paper aims to build an accessible statistically sound model for assessing the financial riskiness of new products. The research was based on the release of a new car Lada 4x4 Vision. The Russian automotive market is characterized by many unfavorable macroeconomic factors (economic instability, crises, price volatility, low incomes of the population). Therefore it is especially important to determine the influence of specific factors on the project success and draw up a plan to reduce its riskiness. The proposed risk management algorithm includes studying the impact of micro-and macro-economic factors on the achievement of the company's goals, then econometric modeling of sales volume, calculating the probability of obtaining a negative NPV of the project (as the most significant indicator of the financial riskiness of the project) using multiple Monte Carlo results generation and making recommendations for managing the identified risks based on the results of modeling. After applying the algorithm to the project of LADA 4x4 Vision car production, the probability of its payback was estimated at 81.15%, which indicates the feasibility of project implementation. In addition, measures to reduce the risk of the project were proposed.