FINANCIAL COVENANTS AS A COMPANY’S RISK MANAGEMENT TOOL

The article is devoted to the study of the economic feasibility of applying financial covenants, which can become a useful tool for managing company risks. Financial covenants are agreements between a company and its creditors or investors that set out specific financial terms and conditions that must be met to maintain the financial condition of the company. These agreements may include restrictions on debt levels, interest rates, dividend payments and other financial indicators. If a company has a high debt level, it may be necessary to maintain a certain debt-to-equity or revenue ratio. This can help prevent excessive use of borrowed funds by the company and increase the risk of default. By setting these limits and limitations, companies can manage their risks more effectively. The purpose of the study is to localize the scientific and practical aspects of the impact of risks of violations of financial covenants on the company’s economic security indicators and recommendations for their identification based on monitoring methods. Financial covenants can also help ensure that a company makes informed financial decisions. The subject of the study is companies that attract external sources of financing using the mechanism of financial covenants. The subject of the study is a mechanism for monitoring and disclosing information within the framework of internal monitoring of compliance with the requirements of financial covenants. In the course of the research, methods of description, analogy, formalization and monitoring were used. The article reveals the basic approaches to the formation of a mechanism for applying financial covenants to manage the company’s risks. The economic feasibility of using monitoring decision-making is substantiated. The conditions for leveling the risk of internal financial control of the use of coverants are reasoned. The mechanism under discussion will expand the scope of possible application of covenant management as risk management methods in the activities of companies that are recipients of external financing.

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