Gaining the Rewards From Privatization Risks in Central and Easter Europe

Bodily, S.E. (1993). Gaining the Rewards From Privatization Risks in Central and Easter Europe. IIASA Working Paper. IIASA, Laxenburg, Austria: WP-93-042

Preview

Text WP-93-042.pdf Download (909kB) | Preview

Abstract

Enterprises in transition from state to private ownership in the emerging market economies of Central and Eastern Europe face massive risks. Here we analyze how they might have also the rewards that may, only with the proper management, accompany acceptance of risks. In this paper, risks are itemized and quantified for a typical situation from their many potential sources: BUSINESS (including accounting and control system, financial, operations, marketing, strategic, and management risks), LEGAL, ECONOMIC, ENVIRONMENTAL, GOVERNMENTAL SUPPORT, and POLITICAL. Because these risks are felt differently by the seller, namely the state, and the buyer, the comparative objectives of buyer and seller and associated measures of performance are identified. Potential sources of joint gains for both buyer and seller are evaluated, which reduces both the risk that the enterprise is not sold, and the chance of subsequent failure of the new firm. The effectiveness and practicality of a variety of techniques for risk reduction are analyzed, including some innovations in the privatization arrangement. The potential for reducing risk will be seen to be far beyond what typically is now in place. The analysis relies on an example model that represents a typical privatization situation in a Central or Eastern European country.

Actions (login required)

View Item