DOI: https://doi.org/10.62204/2336-498X-2023-2-2

THE PECULIARITIES OF ECONOMIC SECURITY

MANAGEMENT OF AGRO-FOOD ENTERPRISES

Oleksandr Halych,

 Ph.D. in Economics, Professor,

Poltava State Agrarian University, Ukraine,

oleksandr.galych@pdau.edu.ua; ORCID: 0000-0001-6478-8309

Iryna Potapiuk,

Ph.D. in Economics, Associate Professor,

Poltava State Agrarian University, Ukraine,

iryna.potapyuk@pdau.edu.ua; ORCID: 0000-0002-1051-0114

Yuriy Larin,

Poltava State Agrarian University, Ukraine,

yurii.larin@st.pdau.edu.ua; ORCID: 0009-0007-2991-4884

Annotation. The article elucidates the most essential aspects of economic security management at enterprises in the agro-food sector. In particular, the economic security of an enterprise is interpreted as ensuring such a state of its functioning, which allows to achieve a positive socio-economic effect by obtaining higher profits and meeting the needs of both consumers and employees of the enterprise. The article argues that the economic security system protects the enterprise from external and internal threats, ensures reliable preservation and effective use of its material and financial potential.

Keywords: management, enterprise, security, economic security, danger, risk, management of economic security.

To ensure the country’s economic security in the conditions of globalization of the political and economic processes in the modern world, the economy of Ukraine needs to maintain an optimal relationship between the openness and transparency of the economy and the protection of national interests. The changes that are taking place have given rise to new approaches in the sphere of political and economic relations between the countries of the world community. In these conditions, ensuring the all-encompassing security of the state is closely related to the solution of the above tasks. Ukraine, like some other countries of the world, is trying to get rid of its dependence on the large economies of highly-developed countries and aspires to become a full-fledged subject of the international community. The goal is quite challenging at the current stage of state formation in Ukraine. The uncertainty of the state policy in the main spheres of activity for thirty years and the reluctance to ensuring the harmonious development of various aspects of activity are the basic factors that threaten the existence of an independent state.

Analysis of the current state of the Ukrainian economy indicates the presence of serious problems in the activities of individual business entities. The deterioration of the socio-economic situation and differences in economic development make the issue of ensuring the economic security of enterprises extremely urgent.

The agri-food sector ensures the security of the state in its several domains. First of all, it concerns the realization of our potential advantages in worldwide competition in solving global issues of food, environmental, and energy problems and thus, strengthening the economic potential and might of our native state. The modern development of market relations requires an urgent solution to problems in the field of agricultural production, which is the basis of the agro-food market. The most urgent issues concern the matters of increasing production efficiency and the level of competitiveness of the products of domestic agricultural producers, taking into account the state of their economic security [1].

Currently, the agro-food sector is a real driver of the national economy and a guarantor of Ukraine’s economic independence. It is a specific branch of the state’s economy, the development of which has a significant impact on the living standards of the Ukrainian people. The dominant feature of agricultural production is the factor that in agriculture land is the main, irreplaceable, and irreproducible means of production. Therefore, its results mainly depend on the quality of the land, its fertility, and its location. That is why the management of economic security of agro-food enterprises has not only a purely economic significance but also a deep social impact.

Ensuring the security needs of all enterprises, regardless of their ownership and scope of activity, is not an exclusive prerogative of some particular department, service, or group of people. Safety can be guaranteed only by using the entire arsenal of forces and protective equipment and having deep understanding of the importance of safety issues in all structural divisions of the enterprise.

It should be noted that economic security is the provision of such a state of the enterprise functioning, which ensures the achievement of a positive economic effect by making profits and satisfying the needs of consumers. [9]. The main goal of enterprise’s economic security is the guarantee of its stable and effective functioning now and in the future. An enterprise can achieve this if the system performs a sequence of the following functions: analytical, organizational, normative-legal support, administrative, planning, accounting-controling, and informational [8].

The current state of the enterprise’s economic security depends on how effective it is to counteract existing and potentially possible negative factors. These factors traditionally are divided into external and internal:

− external factors: the current state of the target market, fluctuations in the market situation, unfair competition, reputational losses on the part of third-party entities, industrial disasters, accidents, natural disasters;

− internal factors: personnel actions, leakage of information, loss of information resources, violation of control procedures, negligence, sabotage.

Specific threats to economic security, arising as a result of the above factors’ influence, may be different by nature and have various ways and means of manifestation. As a rule, they are determined by the branch specificity of a particular enterprise’s activity. The level of economic security of the enterprise depends on how effectively its management can prevent the emergence of internal and external threats and eliminate the harmful consequences of certain negative components of the external and internal environment.

The general meaning of the concept of a threat to enterprises in the agri-food sector is to be clarified given the objective specific conditions of the industry. Agriculture differs from other branches of the national economy by its greater dependence on weather and climate conditions, features of the production process, features of personnel potential, and, as a result, the threats to enterprises in this industry are also specific [3].

Thus, it appears that the main factor influencing the development and efficiency of agro-food enterprises is at the same time one of the principal threats to it. The yield of crops largely depends on the weather conditions of the current year.

In modern economic conditions, farmers must take into account the factor of uncertainty in the enterprise’s activity, possible risks, and threats to its economic security, with a focus on their specific features.

As the Ukrainian experience of previous years shows, the main threats to the development of the agro-food sector in the crisis period arise, first of all, due to a decrease in the income of the population and, as a result, a decrease in the solvent demand for food, which provokes the narrowing of the national food market. Consequently, this provokes a decrease in producers’ incomes and even the closure of production [5].

Having summarized the factors that influence the level of economic security of agro-food enterprises which can be calculated in quantitative terms, we grouped them into three basic groups (fig.1).

Thus, early identification, prevention, and neutralization of various types of factors and threats that destabilize the activity of the enterprise and threaten its economic interests, design of an effective system of economic security, search for appropriate mechanisms and tools of its effective functioning should become target tasks in the activity of every enterprise.

Agrarian reforms, the formation of market relations, and changes in the forms of ownership and types of management significantly increase the unpredictability of socio-economic processes in agriculture and, accordingly, increase the impact of risks on the agrarian business. The effect of macroeconomic decisions on the activity of each agricultural producer increases with the reforms. We argue that the agrarian reform itself is a risk factor [2].

The rational use of the economic resources necessary for an agri-food enterprise to fulfill its agrarian business mission can be achieved, first of all, by preventing threats of negative effects on security in the framework of the main functional goals of economic activity. It involves (fig. 2): [7]:

Fig. 1. Factors affecting the economic security of agro-food enterprises

The management of the economic security of an enterprise ensures the effectiveness of the enterprise activity as a whole, both in the current period of operation and for the long term. It is a fact of common knowledge that the effectiveness of management in any field of activity depends greatly on the formation of an integral system, which is designed to solve the main tasks of management. That is why a necessary condition for ensuring the viability of enterprises in a market economy is the formation of an economic security management system, which must be considered as a set of interconnected elements that are separated/independent from the environment and interact with it as an indivisible whole [6].

In Ukraine, in the relatively recent past, it was impossible to purchase land and pledge it to banks to attract money for investment. Europe’s corporate system made it possible for farmers to form agricultural credit unions, which later became one of the largest banks in the world, to pledge their lands to banks and receive good money. Despite the lack of such mechanisms in Ukrainian companies, they still invested in land improvement. Anyway, the success story of the agricultural sector of Ukraine took place because the Ukrainian companies, not relying on state support, worked as vertically integrated companies throughout the supply chain and raised their standards. They were more transparent, introduced more modern technologies, and sought every opportunity to attract international capital. During the 2019-2021 period, the largest share in the sales structure of agri-food products of Ukraine accounts for vegetable products: 78.85% in 2019, accordingly, in 2020 – 79.11%, and in 2021 – 77.33%. Ukraine’s economy, like many other economies in the world, has been severely affected by the outbreak of the COVID-19 epidemic. Overall, the GDP contracted by 11.4% year-on-year in the second quarter of 2020, bringing GDP down to 6.5% as compared to the first half of the previous year. However, the negative impact turned out to be less severe than it was originally anticipated, as the extended lockdown was only from March to early May 2020 and soon it was replaced by an adaptive lockdown that allowed many services to resume their work (except passenger transport). Internal consumption was also supported by a ‘recovery’ in real wages (+4.8% year-on-year in June compared to -0.4% in April) and owing to the continued inflows of remittances [10].

Fig. 2. Factors affecting the economic security of agro-food enterprises

The economic security of an enterprise in the agro-food sector is interpreted as such a state of its economic resources which ensures a rational sectoral and organizational structure of the enterprise, taking into account the geographical location, natural and climatic conditions of its activity. Studies, dealing with the essence of economic security, emphasize the complexity of this concept meaning. It comprises several possible components of the economic security of a business entity.

It should be noted that in terms of the diversity of views on the structural and functional sets of components of the enterprise’s economic security, according to some researchers, the basic set includes: financial, intellectual and human, technical and technological, informational and political, legal, logistical, energy, environmental, social, resource, market, and interface components. This classification seems quite logical, as it characterizes the most significant functional areas and elements of corporate activity.

However, the political, legal, market economy, socio-political, and interface components are more related to the aspects outside the economic security of the enterprise, so they can be used to identify risks and external threats. In addition, security functional components are often given the same meaning through different definitions [4].

The research into the nature of the enterprise’s economic security has revealed that it is a complex category. It is determined by almost all indicators of state and the efficiency of corporate activity and requires a systemic approach to its assessment. And only a complex and systematic approach to the organization of the enterprise’s economic security can ensure its reliable protection against possible threats and risks.

The study findings argue that agro-food enterprises have specific features of the economic security system formation, which are manifested via its basic components. Achieving a sufficient level of economic security for agricultural enterprises requires consideration of personnel, energy, market, information, legal, environmental, production, financial, and technical-technological aspects of security. The most essential component is personnel, as it provides an opportunity to intensify the work of other integral elements and has a complementary relationship. Systematic monitoring of all components of economic security involves the implementation of typical schemes, procedures, and actions, which allow agri-food enterprises to identify promptly the threats, develop preventive measures to neutralize them, and thus ensure the stable development of agricultural business entities in the future.

At agricultural enterprises, risks arise at all stages of their economic activity: sowing and maintenance of crops, harvesting, transportation, operation of technical means, attraction of investments, market infrastructure, employment of seasonal workers, and in many other cases. In addition, in agriculture, unlike other branches of the national economy, the factors of uncertainty or unpredictability quite often determine the security indicators. In most cases, this is caused by natural environmental factors that influence and determine the final results of management effectiveness. Therefore, to achieve the appropriate level of economic security, managers of business entities must consider the entire range of factors that affect and determine the effective development of the enterprise in conditions of fierce competition.

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