Reduction Of Systemic Risk In Serbia Through Intelligent Risk Management In State-Owned Enterprises

These days, the effects of the combined crisis in Serbia have been larger than ever. Serbia was already in a transitional recession when it entered global economic crisis of 2008. The global double dip recession and this domestic recession, caused by structural imbalances before and during the transition, exacerbate each other's negative effects. Consequently, companies find themselves exposed to systemic (or external) risk that is beyond their control, and is continually increasing. The current global economic crisis is a result of human misconceptions about the modeling of economic system and its institutions.The prevailing macroeconomic orthodoxy asserted that there was no incompatibility between keeping inflation low and stable and seeking maximum economic growth (or a minimum output gap). But, inflation does not provide actionable information for sustainable development because it covers up many fractures in the economic system. The U.S. and the EU have shown that this orthodox policy platform is not sustainable, especially in the case of deregulation and securitization. Also, the episode with Serbia's transition, founded on a neoliberal ideology and the so-called "Washington Consensus" economic policy platform, has shown that inflation targeting, when output is below the radar, has not been able to help a transitional economy change from being in a recession to prosperity. Even if the financial system is restored to perfect health, there are problems with the real economy, which will trigger, sooner or later, a negative feedback loop with the financial sector. In principle, when the output gap is small and stable and the economy is overheating, inflation targeting has proved to be effective. But, in the case of transitional recessions (as well as other recessions) any monetary policy, including inflation targeting, has been virtually useless in turning things around. Economic policy makers in Serbia must react to the main transitional contradiction that price stability is not followed by sustainable employment. Employment is not only determined by price stability but also by institutions influencing the internal capacity of companies to react positively to external stimuli, the general societal climate towards enterpreneurship, the prevailing strategy of industrial leaders, endogenous incentives to innovate, etc. Consequently, the key dilemma in the recession is: whether economic policy has to maintain the orthodox anti-inflation line or to cross over to a heterodox one. In the heterodox line, the macroeconomic policies (monetary, fiscal, and financial) are important, but so are industrial policies. Output (not inflation) is the center of economic policy. Reindustrialization through industrial policies creates foundations for recovery and could correct main structural imbalances. In our last two articles, [2] and [3], we sought to identify the seeds of Serbia's economic crisis and to determine a framework for recovery using a microeconomic and macroeconomic perspective, respectively. In this article, we will focus on the expanding role of state-owned enterprises (SOEs) in the energy sector as a first step towards recovery and on intelligent risk management as a key microeconomics policy tool for effective and efficient corporate governance in SOEs. Intelligent risk management is approach that focuses not solely on risk mitigation, but also on risk-taking as a means to achieving higher future returns. This is what this paper will attempt to discuss in five parts. The first part discusses the necessity of a heterodox approach in conducting economic policy in the recession. The second part analyzes macroeconomic policy measures, especially monetary policy during the crisis. The third part consists of a strategic analysis of Serbia's economy. The fourth part reviews arguments for prioritizing energy policy in Serbia's anti-crisis program. The fifth part analyzes an intelligent approach toward risk management in SOEs as a key tool in the strategic implementation of industrial policies.