Statistical Approach to the Determination of Numerical Values of Risk-Benefit Ratio in Investment Processes

The purpose of this study was to provide an investor with practical tools to assessprobabilities and numerical values of the risk-benefit ratio in the investment process based ona statistical approach. Design/methodology/approach: Methods of probability theory and mathematical statistics areused to describe the investment process. The components of this mathematical apparatus areadapted to represent the investment project. The developed practical approach to determiningprobabilities and the risk-benefit ratio based on the analysis of statistical materials reflectingthe progress of capital investment projects over a five-year period should be considered as themethodological basis of a project management. Findings: The main result is the approach to calculating the costs of an investor in theimplementation of the investment project, taking into account probabilities of the risk-benefitratio, which is appropriate to use in determining running costs of investing in projects. Research/practical implications: The results of the study were piloted and put into practice ina number of organizations. This approach made it possible to assess statistic probabilities ofoverriding of running project costs over the planned initially by 1, 1.5 and 2 times. It ensurescost savings at all stages of the investment project by eliminating unjustified averaging of thedesign ratio that does not take into account the risk index depending on the type of objects. Itis appropriate to use the described method of determining the risk-benefit ratio of the project inthe practice of projects investing. Originality/value: The study presented uses a unique set of calculated values and contributesto the expertise of investment management in an investor's decision-making. On the basis ofthe developed methodology an investor is offered a model project management schemeallowing for risk, a successfully operating software package has been developed in the object-oriented programming environment Delphi.