Financial risk in the activity of voivodships in Poland: Synthetic measure as an element of risk assessment in the activities of local government units in the years 2010-2020

Abstract

Objective: The article aims to analyse the spatial diversity of financial risk in the activity of voivodships in Poland and to use a synthetic measure to present selected factors that have a direct impact on the risk assessment. Research Design & Methods: The authors used literature and statistical analysis for the research. The technique for order preference by similarity to ideal solution (TOPSIS) was used to create synthetic measures. Empirical data were collected by voivodeships in Poland for the years 2010-2020. Findings: The synthetic rate of financial risk in 2020 ranged from 0.40 (Lubelskie) to 0.77 (Mazowieckie), and in 2010 from 0.37 (Opolskie) to 0.61 (Śląskie). Comparing 2020 to 2010, the voivodships Śląskie, Podlaskie, Warmińsko-Mazurskie, and Lubelskie showed a decrease in the value of the synthetic measure. The measure of financial risk was correlated, among others, with own revenues, operating surplus, income from participation in taxes constituting state budget revenues, level of current transfers, liabilities, number of entities and natural persons conducting business activity, and number of employees. Implications & Recommendations: The detected correlations in the area of financial risk of the voivodships show that the local authorities in their actions should take into account the risk assessment system. The voivodships should define probabilities and impacts in terms of risks, criteria for assessment, and risk analysis in the organization. Finance and economy are interlinked. The actions taken in this aspect must be based on analyses that facilitate comparisons and on current information necessary for effective ac. Contribution & Value Added: The value of the article is the indicated set of variables allowing us to assess the financial risk of the voivodships, the years of the presented analysis 2010-2020, and the synthetic measure as a basis for the assessment of financial risk.

Keywords

• risk
• financial risk
• voivodship
• synthetic measure
• sustainable finance