New Approaches to Project Risk Assessment Utilizing the Monte Carlo Method

No

Reviewer Comments

Response

1

Despite providing good and convincing arguments that led to the statement of purpose of the article, authors failed to complete their efforts with the contributions their research has to offer. Authors should state what is apparently at stake and how their research diverges from that. Besides, the various ways which the article intends.

At the end of the Introduction, a paragraph was added about the purpose of our research and its benefits for businesses in the Slovak Republic. According to the requirements of other reviews, the direction of research in the future was presented at the end of the Discussion section and evaluated at the end of the article.

2

Rope 138 needs to be supplemented with literature.

A citation according to the list of references was added to line 138.

3

The literature review looks scanty. Is that all that has been written in relation to the subjected matter?  Moreover, author should create a paragraph at the end of the review to critique the existing studies and identify the gaps their work hope to fill. In addition, authors should update it with studies up to 2022.

Additional sources were added to the literature review. At the end of Introduction a paragraph was added which identifies gaps in practice and enables the application of our proposed approach in enterprises in the territory of the Slovak Republic.

In the Discussion, a paragraph was added in which our research was compared with other studies. At the same time, studies from 2022 were added to the literature review.

4

The discussion of results should be linked to recent studies.

The Discussion section has been revised and supplemented with current studies.

5

Conclusion can be improved.

The section Conclusion was revised and supplemented with an evaluation of the research.

6

The policy recommendations are weak in their present form. They can strengthen it by relating the findings to the recommends.

The policy recommendations were strengthened by additional research in the Introduction and Discussion sections. Recommendations were added in the Discussion and Conclusion section.

7

Limitation and future research opportunity should be identified.

Limits and future research were defined in the Discussion and Conclusion section.

No

Reviewer Comments

Response

1

The first paragraph of the introduction has no reference? Referencing in the introduction should be checked completely.

The first paragraph in the introduction is our thoughts, which we created with the purpose of creating an introduction to the problem being addressed. The references in the Introduction have been checked and any errors corrected. At the same time, the introduction was supplemented with other necessary citations requested by other reviewers.

2

It is better to dedicate the last paragraph of the introduction to the purpose of the study.

A paragraph describing the purpose of the article was added to the introduction.

3

The terms used in figure 1 are unknown, authors should not use dumb or incomprehensible things.

Figure 1 and 2 were accidentally flipped. We have adjusted the order of the images and the relevant text as needed.

The terms referring to the products in Figure 1 are not invented by us. These are the names of products used by the company in which the research was carried out.

4

In figures 8 and 9, it is better to specify the values of different percentiles such as 50 or 95, etc.

The Crystal Ball software tool allows you to set only one pair of percentiles, such as 10/90, 5/95, 30/70, etc. Figures 8 and 9 have defined percentiles of 10 and 90. The system does not allow setting multiple percentiles. It is possible to create one image for each percentile, but in this case we would have to include 9 more images in the article, which would increase the content complexity of the article.

5

In figures 10 and 11, negative values are not interpreted and analyzed.

A paragraph interpreting the representation of negative values was inserted into the article under Figures 10 and 11.

Crystal Ball calculates sensitivity by computing rank correlation coefficients between every assumption and every forecast while the simulation is running. Correlation coefficients provide a meaningful measure of the degree to which assumptions and forecasts change together. If an assumption and a forecast have a high correlation coefficient, it means that the assumption has a significant impact on the forecast (both through its uncertainty and its model sensitivity). Positive coefficients indicate that an increase in the assumption is associated with an increase in the forecast. Negative coefficients imply the opposite situation. The larger the absolute value of the correlation coefficient, the stronger the relationship. It is important to note that the Contribution To Variance method is only an approximation and is not precisely a variance decomposition. Crystal Ball calculates Contribution To Variance by squaring the rank correlation coefficients and normalizing them to 100%. Both the alternate Rank Correlation View and the Contribution To Variance view display the direction of each assumption’s relationship to the target forecast. Assumptions with a positive relationship have bars on the right side of the zero line. Assumptions with a negative relationship have bars on the left size of the zero line. [32]

6

It is better to compare the results of this study with other studies and determine the reasons for the similarities or discrepancies.

A paragraph comparing the results with other studies was added to the Discussion section. Within the paragraph, similarities and differences with similar studies were evaluated.

No

Reviewer Comments

Response

1

The article lacks deep comparison of the methods. There are many risk evaluation methods. The author also compared the traditional method with the one used in this paper. However, different methods have their adaptability conditions when used, so it is not possible to generalized which method is good and which method is bad.

Therefore, it is necessary to make a relatively detailed description of the comparison of

methods.

The references in the Introduction have been checked and any errors corrected. Additional citations of other authors dealing with this issue were added in the Introduction section. Table 1 was supplemented with an overview of the methods used for risk management.

At the same time, the introduction was supplemented with other necessary citations requested by other reviewers.

2

The literature review needs to be supplemented. Although the aim of the article is about risk evaluation approach, the approaches mentioned in the paper are aimed at specific application scenarios, especially for enterprise project investment risk. The article only reviews the methods, but there is not enough literature on the scenario, namely, the application objects. Enterprise project investment risk originates from the enterprise's behavior mechanism, so its financial asset allocation behavior and R&D innovation have an impact on enterprise project investment risks, which can be verified from the following literature:

Liu Y, Failler P, Ding Y (2022) Enterprise financialization and technological innovation: Mechanism and heterogeneity. PLoS ONE 17(12): e0275461. https://doi.org/10.1371/journal.pone.0275461

Li, Z., Zou, F., & Mo, B. (2021). Does mandatory CSR disclosure affect enterprise total factor productivity?. Economic Research-Ekonomska Istraživanja, 1-20. doi:10.1080/1331677X.2021.2019596

At the same time, the enterprise project investment risks also interact with the external macro environment, such as the uncertainty of economic policies. The relevant typical literature is as follows:

Liao, G., Hou, P., Shen, X., & Albitar, K. (2021). The impact of economic policy uncertainty on stock returns: The role of corporate environmental responsibility engagement. International Journal of Finance & Economics. 26(3), 4386-4389. doi: 10.1002/ijfe.2020

In addition, in the context of the transformation of enterprise digital economy, risks may also arise to some extent. Typical studies related to digital economy are as follows:

Kanupriya. Indian textile sector, competitiveness, gender and the digital circular economy: A critical perspective[J]. National Accounting Review, 2022, 4(3): 237-250. doi: 10.3934/NAR.2022014.

The literature review was supplemented. Resources suggested by the reviewer have been added.

3

In the third Section of the risk mapping, it is suggested to add scenario analysis of different locations in the map. The risk map should be the result of different scenarios. Please make a brief analysis of the corresponding scenarios.

In our article, we did not deal in detail with the analysis of risk mapping scenarios. This would require a more detailed analysis of the risk mapping in our case. It would be necessary to deal with several types of risk, e.g. technical, technological, social, etc. However, from our internal analysis, the financial risks, which we focused on and analyzed through Monte Carlo (profit), came out as the most risky.

From the risk matrix, we can state that Red risks - are unacceptable for the company and the company must immediately minimize them. Orange risks - are temporarily acceptable risks, which require clean implementation of measures in the company. Green risks - are acceptable risks and do not require immediate action.

4

Section 4 is suggested to add a comparative analysis with the methods used in other relevant literature. What are the advantages of the approach in this paper? It needs to be elaborated by comparing with other literature.

A paragraph comparing the Results with other studies was added to the Discussion section. Within the paragraph, similarities and differences with similar studies were evaluated.

5

The research prospect should be added to the conclusion section. Although there are some research prospects, there is no further research direction. It is suggested to increase the research prospect by reading relevant literature. For example, the influence of digital finance and relevant financial policies of the central bank on investment decisions of enterprise projects can be referred to as follows:

Li, Z., Yang, C., Huang, Z. (2022). How does the fintech sector react to signals from central bank digital currencies? Finance Research Letters. https://doi.org/10.1016/j.frl.2022.103308

Li Z., Chen H. & Mo B. (2022), Can digital finance promote urban innovation? Evidence from China, Borsa Istanbul Review, https://doi.org/10.1016/j.bir.2022. 10.006.

Of course, the sustainable investment framework should also be noted, such as the literature:

Hiroshige Tanaka, Chiharu Tanaka. Sustainable investment strategies and a theoretical approach of multi-stakeholder communities[J]. Green Finance, 2022, 4(3): 329-346. doi:

10.3934/GF.2022016.

A paragraph comparing the Results with other studies was added to the Discussion section. Within the paragraph, similarities and differences with similar studies were evaluated.

Resources suggested by the reviewer have been added into the Introduction, Discussion, Conclusion and also according to other reviewers.

No

Reviewer Comments

Response

1

The formula for depreciation is presented on Line 183, which is the straight-line method of dividing (acquisition value - salvage value) over the useful life. Theoretically and practically, accelerated depreciation method or declining balance method is applied in most cases, but the authors do not provide sufficient explanation as to why the straight-line method was applied.

For tax purposes (No. 595/2003 Coll. on income tax applies in Slovakia, amendment to the law from 1/1/2015) the company chooses the method of depreciation for each new long-term asset. After that, the chosen method must not be changed for the entire period of use of the long-term asset. So it is quite common for a business to use both methods of depreciation.!

After consulting with the company's management, we chose this method.

Tax depreciation is usually calculated at the end of the accounting period. Their value is the maximum amount of depreciation permitted by law, which can be applied as a tax-deductible item when calculating the income tax base. The calculated annual depreciation is rounded up to whole euros.

Notice:

In accordance with the amendment to the Income Tax Act from January 1/2015, it is permitted to use the accelerated method of depreciation only in depreciation groups 2 and 3. Depreciation of property included in other depreciation groups (1,4,5,6) in which the accelerated method was used depreciation method, must be recalculated using the straight-line depreciation method. !!!

2

In cost analysis, cost elements are divided into DC and IC, and Line 185 separates them into depreciation, labor costs, and other costs. For example, depreciation is IC, and labor cost can be divided into DC and IC. It is questionable why the authors distinguished them separately.

Formula (2) has been modified, we agree with the reviewer that labor costs are direct costs.