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VUZF Review, Vol. 7 No. 1 (2022)

VUZF Review, Vol. 7 No. 1 (2022)

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Journal publishes results of research on areas: finance, financial markets, banking, marketing, insurance, accounting and control, business, entrepreneurship, application of mathematics, and ICT in economics.

Publisher: VUZF University.

Journal publishes results of research on areas: finance, financial markets, banking, marketing, insurance, accounting and control, business, entrepreneurship, application of mathematics, and ICT in economics.

Publisher: VUZF University.

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VUZF Review, Vol. 7 No. 1 (2022)

  1. 1. ISSN 2534-9228 (online) Journal of Scientific Papers VUZF REVIEW Volume 7, Issue 1, March 2022 https://papersvuzf.net/index.php/VUZF/ Public organization: VUZF University of Finance, Business and Entrepreneurship
  2. 2. VUZF Review, № 7(1) – 2022 ISSN 2534-9228 Vol. 7, №1 March, 2022 Founded in 2016 by the VUZF University The editorial board Editor of the publication Ivan TKACH Prof, Dr. of Sciences, Ukraine; Deputy Editor-in-Chief Julia Dobreva Prof., PhD, Bulgaria; Igor Britchenko Prof., Dr. of Sciences, Poland; Members of the editorial board Mitko Atanasov Dimitrov Prof., PhD, Chairman of the Academic Council of the Institute for Economic Research of the Bulgarian Academy of Sciences, Bulgaria; Igor Britchenko Prof., Dr. of Sciences, VUZF, Bulgaria; Daniela Bobeva Prof. Dr., Professor at the VUZF, Bulgaria; Mariana M. Petrova Assoc. Prof. PhD, St. Cyril and St. Methodius University of Veliko Turnovo, Bulgaria; Stanislav Dimitrov Assoc. Prof. PhD, VUZF, Bulgaria; Radostin Vazov Assoc. Prof. PhD, VUZF, Bulgaria; Ali Veysel Assoc. Prof. PhD, VUZF, Bulgaria; Desislava Josifova Assoc. Prof. PhD, VUZF, Bulgaria; Manyu Moravenov Assoc. Prof. PhD, VUZF, Bulgaria; Marián Mesároš Prof., DrSc, Rector, University of Security Management in Košice, Slovakia; Peter Lošonczi PhD., Vice-rector for scientific work and educational process, University of Security Management in Košice, Slovakia; Jozefína Drotárová PhD., Vice-rector for Science and Research (Department of Science and Research), University of Security Management in Košice, Slovakia; Marcin Jurgilewicz PhD, DrSc in social sciences in the field of security science, professor at the Rzeszów University of Technology, Poland; Bartosz Mickiewicz Dr. of Sciences, Professor, Dean of Faculty of Economics, West Pomeranian University of Technology, Poland; Petro Gudz Dr. of Science in Economics, Professor, Kujawy and Pomorze University in Bydgoszcz, Poland; Tomasz Wnuk-Pel Dr. of Sciences, Professor, Department of Accounting, Faculty of Management, University of Lodz, Poland; Marcin Kęsy PhD, Senior Lecturer, University of Economy in Bydgoszcz, Poland; Costas Siriopoulos Ph.D., Professor of Finance, College of Business, Zayed University, United Arab Emirates; Prem Lal Joshi Professor, Dr., Senior Fellow, Indian Council of Social Sciences Research (ICSSR), India; Mir Abdul Sofique Dr., Associate Professor Department of Tourism Management University of Burdwan, India; Dio Caisar Darma Assist. Prof., Department of Management, Sekolah Tinggi Ilmu Ekonomi, Indonesia; Omar Durrah Dr., Associate Professor of Management in Dhofar University, Sultanate of Oman; Ahmar Uddin Mohammed Dr., Assistant Professor (Accounting and Finance), Dhofar University, Department of Finance and Economics, Salalah, Oman; Iryna Yepifanova Dr. of Science in Economics, Professor of Department of Finances and Innovative Management, Vinnytsia National Technical University, Ukraine;
  3. 3. VUZF Review, № 7(1) – 2022 ISSN 2534-9228 Nataliya Tanklevska Dr. of Sciences, Prof., State Higher Educational Institution "Kherson State Agrarian University", Ukraine; Vitaliy Shapran Professor, Ph.D. in Economics, Member of the National bank of Ukraine Council, Ukraine; Dr Richard Tomlins Associate Head of School, Faculty of Business and Law, Enterprise and Innovation, School of Marketing and Management, United Kingdom; Visiting Professor at the Early Childhood Department, Muhammadiyah University of Ponorogo, Indonesia; Dr Vladimir Danykiv Ph.D. in Economics, Credit Risk Manager, Fly Now Pay Later, United Kingdom; Maksym Bezpartochnyi Dr. of Sciences, Prof. at the Department of Economics, Marketing and International Economic Relations Faculty of Soft Engineering and Business National Aerospace University named after N. Zhukovsky “Kharkiv Aviation Institute”, Ukraine; Olena Chukurna Dr. of Sciences, Professor of State University «Odessa Polytechnic», Ukraine; Viktor Trynchuk Ph.D., Assoc. Prof. of Department of Banking and Insurance National University of Life and Environmental Sciences of Ukraine, Ukraine; Yaroslava (Iaroslava) Levchenko Doctor of Economics, Professor of Kharkiv National Automobile and Highway University, Ukraine; Jurgita Sekliuckiene Professor of International Business, Kaunas University of Technology, Litva; Sudhanshu Rai Associate Professor, Phd, Copenhagen Business School, Copenhagen, Denmark; Panagiotis Kontakos Assistant Professor in International Business & Entrepreneurship, UCLan Cyprus University, Cyprus; Sahure Gonca Telli Prof. Dr., Dean Faculty of Economics and Administrative Sciences Dogus University, Turkey; Mustafa Erdogdu Professor of Department of Public Finance, Marmara University Faculty of Economics, Turkey; Radmila Pidlypna Doctor of Economic Sciences, Professor, chair of the Department of Finance UTEI Kyiv National University of Trade and Economics, Ukraine; Andrii Nikitin PhD in Economics, Associate Professor, Professor Kyiv National Economic University named after Vadym Hetman, Ukraine; Yasheva Galina Doctor of Economics, Professor, Vitebsk State Technological University, Belarus; Liudmila Bagdonienė Professor at Kaunas University of Technology, Litva; Hans van Meerten Professor, Utrecht University - Utrecht Centre for Shared Regulation and Enforcement in Europe – RENFORCE, The Netherlands; Reinhard Magenreuter Dr., Private investor MG GbR, Germany. e-mail: vuzfreview@gmail.com; tkachivan9@gmail.com https://papersvuzf.net/index.php/VUZF/index, тел. +38(093) 752-81-56 The authors of articles are responsible for the authenticity of facts, quotes, their own names, geographical names, names of enterprises, organizations, institutions and other information. Opinions expressed in these articles may not coincide with the point of view of the editorial board and do not impose any obligations on it.
  4. 4. VUZF Review, № 7(1) – 2022 ISSN 2534-9228 CONTENT 1 Central Banks policy under sanctions: critical assessment of the Central Bank of the Russian Federation experience Vitaliy Shapran, Igor Britchenko …..……………..………………….……………………….. 6 2 Credit economy of banks during SARS-CoV-2 Irena Brukwicka, Iwona Dudzik …………….….……………………..………………….………. 14 3 Formation conditions and theoretical and methodological aspects of assessment of the economy digital transformation level Bartosz Mickiewicz, Yekaterina Volkova.…………..………………….…………………….. 22 4 Limitations of the framework to address value for money risk in the European unit-linked market Stanislav Dimitrov …………….….………………………………………………………………. 32 5 Identification of risks of the bank business model Krasnova Іryna, Lavreniuk Vladislav, Nikitin Andrii …………………………………………………………….. 43 6 Sustainability reporting by companies: reasons and financial benefits Georgi Momchilov..……………………………………………………………………………………………………………. 55 7 The impact of behavioral aspects on the social capital of the tax service of Ukraine Viktoriya Hurochkina, Rіabinina Natalia………………………......................................................... 69 8 Sources of Financing Sustainable Agriculture and Rural Areas in the EU in the Financial Perspective of 2021-2027 Alina Walenia........................................................................................................................... 80 9 The theoretical aspects of mathematical modeling in the banking on the ex ample of compound interest Anna Małgorzata Jatczak …………………………………………………………………………………………………… 88 10 Comparative analysis of innovative and socio-economic development of enterprises and other purposeful systems Horiashchenko Yuliia …………………………………………………………………………………………………………. 97 11 Economic analysis based on indicators in the company Maciej Ślusarczyk ………………………………………………………………………………………………………………. 108 12 Social insurance schemes: foreign experience in the realities of Ukraine Radmila Pidlypna, Oksana Makara, Boris Shevchuk …………………………………………………………… 115 13 Values of the managers within their environments Emanuela Esmerova, Ivana Stojcevska ……………………………………………………………………………….. 129 14 Theoretical and methodological aspects of keeping record of goods exchange operations at transfer prices Igor Kononov ……………………………………………………………………………………………………………………… 142
  5. 5. VUZF Review, № 7(1) – 2022 ISSN 2534-9228 15 The phenomenon of succession in a family business Izabella Kęsy, Marcin Kęsy …………………………………………………………………………………………………. 152 16 Digital economy: essence, approaches, elements, transformation Yekaterina Volkova ……………………………………………………………………………………………………………. 161 17 Potential benefits and risks from Poland’s accession to the euro area Iwona Dudzik, Irena Brukwicka …………………………………………………………………………………………… 169 18 Fourth industrial revolution as a driver of the digitalization of production and urbanization Kateryna Kraus, Nataliia Kraus, Kateryna Buzhdyhan …………………………………………………………. 177 19 Transparency in public life with particular emphasis on local government finance Marek Wolanin ……………………………………………………………………………………………………………… 192
  6. 6. ISSN 2534-9228 (2022) VUZF Review, 7(1) Central Banks policy under sanctions: critical assessment of the Central Bank of the Russian Federation experience Vitaliy Shapran * А ; Igor Britchenko B A National Bank of Ukraine, Instytutska St, 9, Kyiv, 01601, Ukraine B VUZF University, 1, Gusla str., Sofia, 1618, Bulgaria Received: March 25, 2022 | Revised: March 26, 2022 | Accepted: March 28, 2022 JEL Classification: E.31, E.32, E.52, E.58. DOI: 10.38188/2534-9228.22.1.01 Abstract The article provides a critical assessment of The Central Bank of the Russian Federation policy in response to the sanctions of the US, the EU, the UK, Switzerland, Japan, South Korea and a number of other countries. The effect of sanctions on the Russian economy and its financial market is viewed through the prism of credit, interest rate, and currency risk, and the risk of a decline in business activity. Special attention is paid to the inflationary component and inflationary expectations of the Russian Federation, as well as to the forecasts for a decline in business activity in Russia. A critical assessment is given to the actions of the Central Bank of the Russian Federation and the economic bloc of the government of the Russian Federation as a whole in response to the sanctions of the civilized world, which disable the normal existence of the economy and the main purpose of which is not to destroy the economy of the Russian Federation but to ensure the end of hostilities on the European continent. The results of our study will be useful to everyone who studies the problems of the effect of economic sanctions on the resource-based economy and the processes of stimulating political decisions by economic methods. Keywords: credit markets, development markets, inflation, inflation target, monetary policy, monetary regime, monetary transmission, prime rates, sanctions. Introduction The start of the full-scale military aggression of the Russian Federation against Ukraine was a stroke not only for the economy of the European region, but also for the world economy as a whole. The war between the two countries, which remain prominent producers of agricultural raw materials (cereals, oilseeds, and other agricultural crops), was instantly reflected in the dynamics of prices on the world market. It is also important to consider the reaction of the aggressor country to the sanctions of civilized countries. The sanctions were intended not to destroy the Russian Federation economy but only to create additional incentives to start effective peace negotiations. * Corresponding author: A Professor, Ph.D. in Economics, Member of the National bank of Ukraine Council, e-mail: shapranv@gmail.com, ORCID: 0000-0002-1540-6834 B Dr. of Sciences, Professor Higher School of Insurance and Finance, e-mail: ibritchenko@gmail.com, ORCID: 0000-0002-9196-8740 The economic interpretation of the sanctions and the analysis of their consequences for the Russian economy are very important for the correct interpretation of the goals of these sanctions and the restoration of the economic and agricultural balance in the region. The reaction of the Russian economy to sanctions and the effectiveness of countering these sanctions by the Russian authorities have not been studied yet, making this research pioneer. Moreover, in the course of the study, we came to rather non-standard conclusions that economic protection against sanctions does not work as such, and sanctions themselves, like military actions, are force majeure 6
  7. 7. ISSN 2534-9228 (2022) VUZF Review, 7(1) circumstances that cannot be stopped by economic methods. These conclusions were made on the basis of studying the first reaction of the Russian authorities to the economic sanctions of civilized countries, as well as studying further scenarios for the development of the situation and a possible change in the intensity of sanctions pressure. Material and methods In our study, we relied primarily on official statistics and reports from The Central Bank of the Russian Federation (CBRF), as well as on news reports from leading news agencies, the quality of which has been repeatedly tested by time: Reuters, Bloomberg, Interfax. We admit possible data inaccuracies since the primary sources are the state authorities that are currently in a war state, placed under conditions of violation of the basic principles of freedom of speech and democracy. Also, in the study, we used such methods as analysis, synthesis, and historical comparison. Results and discussion The economic sanctions imposed by the US, the UK, the EU, Japan, and other countries had a multidirectional character. These sanctions can be divided into several classes: 1. Freezing of gold and foreign exchange reserves of CBRF and The National Welfare Fund of the Russian Federation. 2. Freezing of assets of a number of banks on correspondent accounts outside the Russian Federation. 3. Prohibition on direct or indirect purchase and import of US dollar and Euro cash banknotes into the territory of the Russian Federation. 4. Sanctions against individual banks that were disconnected from the SWIFT international transfer system. 5. Sanctions against insurance and reinsurance companies, a ban on the presence of European ratings for insurance or reinsurance companies. 6. Personal sanctions against officials of the Russian Federation and the Republic of Belarus who were involved in the aggression. 7. Sanctions against big businessmen (oligarchs) who have earned their fortune due to warm relations with the Russian authorities. 8. A ban on the export to the Russian Federation of high-tech products, as well as products and services that are important for the development of the oil and gas industry and other key sectors of the Russian Federation. 9. Ban on the export of transportation and traffic-related services, such as aircraft certification. 10. Trade sanctions that provide for a complete or partial ban on the export of goods and services to the territory of the Russian Federation, as well as a complete or partial ban on the import of energy resources from the Russian Federation. In total, all 10 groups of sanctions produce the following types of risks: currency risk, risk of the decline of business activity, credit risk, and interest rate risk. Each of the risks will be considered now in its practical aspect. 1. Currency risk. The main reason for the manifestation of currency risk in the Russian Federation was both a bunch of sanctions in general and the freezing of reserves of The Central Bank of the Russian Federation in the US, EU, UK, Japan, and South Korea. These countries have frozen approximately $400 billion of CBRF and The National Welfare Fund (NWF) reserves in total. And although the Ministry of Finance of the Russian Federation underestimates this amount by about $100 billion, comparative statistics from the US and the EU show that the amount of frozen assets of the CBRF and the NWF is closer to $400 billion. Only gold (approximately $135 billion worth) and several tens of billions of Chinese yuan remained in the management of the CBRF from the gold and foreign exchange reserves. In the second decade of March 2022, it became clear that the CBRF did not expect a freeze on reserves and kept a very small part of 7
  8. 8. ISSN 2534-9228 (2022) VUZF Review, 7(1) them in cash dollars and euros. The situation was so critical that on March 9, the CBRF banned the sale of cash to the public. In response, the US and the EU banned the sale and import into the territory of the Russian Federation (directly or indirectly) of cash dollars or euros. With its ban on the sale of cash, the CBRF effectively admitted that it was unable to cope with maintaining the exchange rate, as it had lost its supply of reserve currencies, and the yuan is a very unpopular savings currency among Russians and Russian companies. Therefore, it was decided not only to ban the sale of cash currency but also a number of restrictions on imports, as well as a decision to force exporters to sell 80% of foreign exchange earnings for January and February 2022 (this decision was actually made retroactively). As a result, it should be understood that by segmenting the foreign exchange market, CBRF introduced a plurality of ruble exchange rates: non-cash (for official transactions and critical imports), gray non-cash and black-market cash rates. The active information policy of CBRF and the habit of the main stakeholders to believe that the exchange rate of the ruble reflects the real rate made it possible to slightly calm the market. However, a deeper study of the situation leads to the discovery that from March 15 to March 20, 2022, they gave from 135 to 225 rubles for one US dollar on the black market of the Russian Federation, while the exchange rate on the exchange was 107-120 rubles per dollar. Also, the study of the cash market showed that even with a quote of 135 rubles, the black dealer did not always have cash currency for sale. In addition, surprising cases with additional commissions of banks were recorded. For example, when trying to withdraw cash in euros in one of the banks in the EU, the bank demanded an additional commission of 12.5% of the withdrawal amount. Thus, with the exchange rate, for example, 150 rubles per euro and the rate of the international payment system 155 rubles per euro, the real rate could be 175 rubles per euro. The multiplicity of exchange rates in the Russian Federation became more pronounced when it emerged that citizens were allowed to withdraw no more than 10,000 US dollars from foreign currency deposits but with banks intensifying the situation with burdening these amounts with additional commissions that reached 15%. Later, the CBRF ordered the return of these commissions, but it appeared that the cash desks of banks receive cash at very high costs, which they are not able to cover. By March 23, 2022, CBRF brought down the exchange rate to below 100 rubles per dollar, however, in the Moscow cash market, the maximum quotes for 1 cash dollar were at the level of 170-225 rubles per 1 US dollar. Temporarily, CBRF used the multi-rate technique to enable "elite" currency buyers to conduct more or less normal business activity and not affect inflation in the retail sails. However, this did not slow down the pace of devaluation, and the real selling rate of the cash dollar for the period from February 23 to March 23 increased from 80 to 170 rubles (with some effort, it was possible to buy a small amount from 135 rubles per dollar). As a result, the growth rate of the dollar against the ruble for the month amounted to at least 70%. The effect of currency risk on the economy of the Russian Federation has a classic character of manifestation: • the transfer of a rapid devaluation to inflationary processes in the consumer market; • mass withdrawal of deposits from banks in rubles and conversion of rubles into US dollars or euros, with an outflow of resources from the banking sector; • the maximum impact on inflation in the segment of unofficial supply, the formation of the maximum trade margin on goods that can only be smuggled into the territory of the Russian Federation at the black-market rate, including for sub-sanctioned goods; • formation of a pool of problem loans from among foreign currency loans, the borrowers of which have lost all or the part of their foreign 8
  9. 9. ISSN 2534-9228 (2022) VUZF Review, 7(1) exchange earnings (for example, Russian airlines). In our opinion, in March 2022, the CBRF was unable to block any of the manifestations of the currency risk, perhaps only reducing the impact of devaluation on consumer inflation in the segment of bulk and official supply. In all other cases, the multiplicity of exchange rates only slightly delayed the manifestation of this risk but did not eradicate it. 2. Interest rate risk. In the first days after the invasion, the CBRF reacted with a sharp increase in the key rate: from 9.5% to 20%. With this decision, the Central Bank of Russia tried to stop the outflow of capital from the country, and most importantly, to reduce the outflow of deposits from banks. A few days after the change in the interest rate, Sberbank, which accounts for more than 50% of the deposits of the population of the Russian Federation, set the interest rate on short-term deposits at 18%, and some state-owned banks raised it to 22%. In the third decade of March 2022, many banks lowered deposit rates, believing that the outflow of resources from the banking system in the amount of 1.2 trillion rubles was overcome. However, interest rate risk did only begin to destroy the Russian banking sector. First, there was no victory in the return of 1.2 trillion rubles to the banking system of the Russian Federation. Money only described the circle: part of the population's deposits was withdrawn from banks ahead of time and spent on the consumption of goods and services, after which the money again went to banks, but no longer to current accounts of companies; part of the resources was replaced by CBRF through ruble refinancing. It turns out that in March 2022, the structure of the resource base of Russian banks changed towards an increase in more expensive and less urgent refinancing from CBRF instead of cheaper time deposits from the population. On the whole, the share of time deposits in the resources attracted by banks decreased. Secondly, it turned out that about 40% of the volume of loans of the Russian banking system were issued at a floating rate, which was pegged to the CBRF key rate. Usually, the contracts fixed the coefficient by which the “market rate” was calculated. For banks, on average, this coefficient ranged from 1.2 to 1.5. But with the growth of the key rate to 20%, interest rates on loans soared from 24% to 30% per annum. Commercial companies, which previously paid 12-18% per annum, faced with the need for a sharp increase in interest costs. Some of the agro-industrial complex enterprises applied to the government to be included in preferential support programs. The federal government generously promised support not only to the agro-industrial complex, but also to other industries, the performance of which the population of the Russian Federation is very sensitive to. Such promises of the Russian government will become a budgetary burden already in the second half of the year and will require sequestration of the 2022 federal budget. But an almost twofold increase in the interest burden on borrowers in the Russian Federation will almost inevitably lead to a deterioration in the quality of bank loans and to the bankruptcy of small banks. The process of transformation of interest rate risk into credit risk in the Russian Federation may take 6-9 months, but the wave of the first defaults may begin in 3 months. It turns out that the desire of the CBRF to regulate the impact of currency risk on the financial system through a sharp increase in interest rates launched the flywheel of interest rate risk. And the desire of the government to issue more preferential loans will be a burden on the budget, the revenue plan of which will not be fulfilled. 3. Credit risk. While the currency and interest rate risk has just begun the transformation of Russian borrowers from good to bad quality of risk, a number of industries that have fallen under the sanctions of civilized countries have already become the epicenters of credit risks. For example, almost all Russian airlines whose aircraft are leased from foreign leasing companies are already in a default mode. After the imposition of sanctions, insurance 9
  10. 10. ISSN 2534-9228 (2022) VUZF Review, 7(1) companies providing aviation insurance and lessors demanded that the aircraft leave the territory of the Russian Federation. In response, the Russian Federation blocked the return of the planes by stealing planes worth approximately 13 billion US dollars from the world market. The refusal of Boeing and Airbus to certify aircraft in the Russian Federation did not confuse the authorities, and they started internal certification. But now this means that imported Boeing and Airbus cannot fly abroad even to those countries whose skies are still open for the Russian Federation. For such flights, Russian airlines need to return old IL-76 or TU-134 aircraft or accelerate the production of the new ones. In practice, this led to a drop in airline revenue by several times. Not a single borrower can withstand such pressure. Defaults of Russian airlines towards banks will begin in the next 3 months, and for credit analysts, this is a credit risk that has already taken place. The second point is the stock section of the Moscow Exchange, which has been closed since February 25. For a month now, banks, insurers, and other non-banking financial companies have been accounting for shares and bonds of Russian issuers in their portfolios at the rates that were formed in February at the start of the war between Ukraine and the Russian Federation. The opening of the stock exchange will lead to the fact that credit institutions and insurers will be forced to re-evaluate their securities portfolios upon completion of trading, which may lose up to 50% of their value. In this situation, 10-15 small banks that previously actively worked on the bond and stock market may leave the market. This will also be a direct implementation of credit risk in practice. So far, the CBRF has done nothing to combat the manifestation of credit risks in the banking or insurance sector. The Central Bank of Russia is only postponing the opening of the Moscow Exchange, and it cannot counteract the decline in business activity due to sanctions since it does not have the tools to do so. 4. The risk of a sharp decline in business activity remains the main sanction risk of the Russian Federation, which, although being outside the CBRF perimeter, directly or indirectly affects the structure of the sectoral markets of the Russian economy. Also, this risk is pushing the CBRF into an emergency fight against currency, interest rate and credit risks. In our opinion, the key factors for the decline in business activity in the Russian Federation under the influence of sanctions are: • the oil embargo and the desire of the EU countries and the UK to reduce energy dependence on the Russian Federation; • mass withdrawal of foreign companies from the Russian Federation (the number is already about 200 companies), which announced either a complete curtailment of activities or the cancellation of previously announced projects; • mass withdrawal of banks with foreign capital from the banking system of the Russian Federation. The direct share of the oil and gas sector of the Russian Federation amounted to about 16% of the country's GDP but it was very dynamic due to changes in the external environment and price dynamics. However, there were a lot of related industries related to the oil and gas industry, and many joint projects with foreigners. Together with subcontractors and dependent industries, part of the oil and gas sector accounted for up to a third of the Russian economy. A reduction in oil and gas purchases from the Russian Federation could cause the Russian economy to fall by up to 15-20% in 2022. The Russian Federation has no alternative routes along which the Russian Federation will be able to quickly reorient gas and oil flows. Today, the Russian Federation cannot even quickly organize the sale of oil to China through Kazakhstan due to the small diameters of pipelines. The construction of gas pipelines may take 5-7 years, and their cost may exceed Nord Stream 2. Given the shortage of foreign currency in the Russian Federation, it is impossible to implement such projects in an accelerated mode without the help of China. In addition, it should be taken into 10
  11. 11. ISSN 2534-9228 (2022) VUZF Review, 7(1) account that URALS brand oil will not suit most oil refineries in the world, so its export range is limited to some countries of the former USSR, Africa and some Asian countries. The mass exodus of foreign companies from the Russian Federation is dangerous by itself, as it produces a whole bunch of risks: currency (capital outflow), credit (destruction of industry ties), and the risk of mass unemployment in certain regions or cities. Companies from the EU, the US, Japan, and other countries have stated that they do not want to work with and invest in the Russian Federation. Most of these companies, according to Russian laws, will begin to lay off personnel only a month after such a statement, i.е. the peak of unemployment from the departed companies will be visible only in April-May 2022. The impact on Russia's GDP will be noticeable according to the statistics of the third quarter of 2022. Because of the departure of foreigners, Moscow and St. Petersburg, the main consumers of imported products, may suffer primarily. The total number of unemployed only in Moscow and St. Petersburg by May 1 may reach 1 million people. And this is only direct unemployment associated with the departure of foreigners. 5. Mutual migration of risks and results for the Russian economy. As we saw from the previous 4 points, the risks awakened by sanctions tend to produce each other and strengthen their effect in practice. These processes can be cyclical or continuous. The chain, when the manifestation of currency risk leads to the monetary authorities increasing interest rate risk, which, together with currency risk, supplies bad borrowers to the bank loan market, leading to the flow of bad borrowers amplified by sanctions due to a fall in business activity in the country, always works. The authorities need to make a lot of efforts in order to break the cyclical transfer of risks from one to another, as well as their support of negative trends in the economy. Today, we see attempts to stop the actions of the entire set of risks only from the government through preferential loans and preferential rates. This tool would be effective if it could make a surplus of the Russian Federation's federal budget. However, these programmes seem inefficient in fighting the sanctions, and the Russian budget is expected to undergo sequestration in the summer of 2022. Russian Central Bank did not manage to break the chain of mutual risk support: currency, credit, interest rate. A high inflation rate could weaken the connections between the risks and formally decrease interest rate pressure on the borrowers, yet it would not make a difference in business activity decline. Inflation is a poor tool for tackling the risk correlation, as a high inflation rate does not imply a proportionate income increase between actors in the market. For instance, the boost of incomes in the food industry enterprises could outpace the income growth of importers of household appliances, which could be sold less in case of devaluation. In turn, there are no signs that CBRF would use policy elements to suppress the functioning cyclicality of interest rate, credit and currency risks in the financial sector. There are only attempts to decrease the implications of these risks. This policy would lead to an increase in inflation and the unemployment rate in 2022. Consequently, by the end of 2022, the Russian Federation will have experienced a 10- 15% unemployment rate and increased inflation (according to the most modest ratings, up to 20%). Currently, the expectations on the inflation rate estimate up to 19%, but in some food industry sectors, it reached 45%. Sanctions do have a direct effect both on the inflationary spiral and unemployment rate. Therefore, it is impossible to suppress these negative phenomena with the CBRF's high-interest-rate policy. The Central Bank of Russia directors team is well-aware of it, which is evident from their public statements. Nevertheless, instead of conveying the viewpoint of high-class professionals to the Russian political leadership and clarifying the consequences of imposing more severe sanctions, CBRF took the position of the formal 11
  12. 12. ISSN 2534-9228 (2022) VUZF Review, 7(1) perpetrator when anti-sanctions measures are taken with negative deliberative results for the economy. CBRF's position of "consent" with the functioning of the security structures mark its low independency level from the executive power vertical in Russia. It also indicates the collaboration of CBRF's board of directors (as management body) in financing the war in Ukraine. The degree of such involvement expanded and became tangible when in mid- March, CBRF issued a regulation that allowed insurers and lenders not to share details of their owners. CBRF interpreted this initiative as a desire to oppose sanctions. This way, CBRF in mid-March 2022 acted in a way that allowed civilized states to include the entire CBRF board of directors into the sanctions list, which would make its work with the external risks even more complicated. It is also crucial to note the global economic consequences of war in Ukraine – the food shortage and the rise in the cost of food raw materials in some market segments. According to the government of Cameroon, the bread prices there increased up to 40% because of the disruptions in the grain supply from Ukraine. Nevertheless, there are reverted tendencies as well. In Ecuador, riots broke out among farmers. The sanctions imposed on the Russian seaports caused Ecuadorians not to be able to send 20000 tons of bananas to the consumers, which may cause a drop in banana prices on the global market soon. The banana market is a primary export market for Ecuador, and the longevity of such a situation may lead to a financial crisis there. The countries of Eurasian Economic Communities do experience these problems too, such as Belarus, Kazakhstan and Armenia. For instance, the majority of anti-Russian sanctions were duplicated upon Belarus. The National Bank of Kazakhstan was forced to introduce currency restrictions on the export of foreign currency, as its chronic deficit from Russia spilled over Kazakhstan, formally not engaged in the war with Ukraine. Rising energy prices for Germany and France may accelerate inflation in the euro area, and the same trends may be observed in the UK. Thus, the responsibility for the global economic problems caused by military operations in Ukraine also lies with the authorities of the Russian Federation. Conclusions 1. A set of sanctions from civilized countries evoked a number of the classic risks for the Russian economy: currency, interest rate and credit risks have already launched migration and vice versa. The CBRF and the economic bloc of the Russian government do not have sufficient tools and resources to counter the practical realization of these risks. 2. The catalyst for the work of currency, interest rate and credit risks in the Russian economy is the risk of a decrease in business activity under the influence of sanctions. CBRF does not have adequate tools to counter such a risk, which by itself can reduce the scale of the Russian economy, raise the unemployment rate to 15%, and inflation from 20% already in 2022. 3. All efforts by the CBRF to mitigate the consequences of sanctions delay the practical implementation of risks in time but do not solve the problem in essence. CBRF formed a currency reserve, forcing Russian exporters to sell 80% of foreign exchange earnings for January and February 2022, and did not cancel this norm in March. Such stock may run out already in April- May, and then the classic set of risks will make itself felt again. 4. CBRF's active anti-sanctions policy and CBRF's assistance to sanctioned persons in circumventing sanctions indicate that the CBRF Board of Directors was directly involved in financing the war in Ukraine and, therefore, should also be included in the sanctions list. We should also acknowledge the deficient level of independence of the CBRF from the vertical of the executive power of the Russian Federation and the inability of The Central Bank of Russia to pursue an independent policy, which certainly undermines confidence in the ruble and the 12
  13. 13. ISSN 2534-9228 (2022) VUZF Review, 7(1) Russian banking system, which most foreign banks are abandoning. This trend is a problem for all the central banks of the countries of the Eurasian Economic Community, which are forced to work in current conditions not only with an unreliable partner but also with a source of additional risks. 5. The Russian economy and the war in Ukraine have become a problem not only for the European region. The economic echoes of the conflict are already being heard in Africa, Latin America, and the Eurasian Economic Community countries. If the Russian crisis is not localized, then even the prosperous countries of Europe will feel its consequences in the next month or two. References News database of the agency Interfax. News database of the agency Reuters. News database of the agency Bloomberg. Official Web-Site of the Central Bank of Russian Federation. 13
  14. 14. ISSN 2534-9228 (2022) VUZF Review, 7(1) Credit economy of banks during SARS-CoV-2 Irena Brukwicka * А ; Iwona DudzikB A, B Bronisław Markiewicz State Higher School of Technology and Economics in Jarosław, Czarnieckiego str. 16, Jarosław, 37-500 Poland Received: January 09, 2022 | Revised: January 18, 2022 | Accepted: March 28, 2022 JEL Classification: G14, G17, G21, G32. DOI: 10.38188/2534-9228.22.1.02 Abstract Each pandemic is the greatest potential, negative and global risk, especially when it is connected with high morbidity and mortality. There are also negative social and economic effects associated with a pandemic. The world is fighting nowadays against the COVID-19 pandemic, which is caused by SARS-CoV-2. Thus, there is high concern about the global economy. In the opinion of some analysts, COVID-19 will contribute to the global recession. It is worth emphasizing that the Polish Financial Supervision Authority, the Financial Stability Committee, as well as the National Bank of Poland undertake actions focused on introduction of measures aimed at maintaining the availability of credit for entrepreneurs. At the same time, the Polish Bank Association (ZBP) initiated some facilitations for bank customers with regard to paying off liabilities, as well as extending the period of the loan itself (A. Sieroń, 2021). For those involved in observation of central banks activities, it is obvious that the monetary policy reaction to the situation resulting from the COVID-19 pandemic is dictated by many reasons, and thus, is considered to be exceptional. The purpose of this analysis is to examine in a systematic manner some of the aspects of the above unique situation and to make some comments. The observations described in the paper result only from information relating to the initial reactions of banks to the situation connected with the COVID-19 pandemic. It would be wrong to say that banks can be considered completely safe today. New economic and social events could contribute to the inefficiency of this sector. One of such event is the COVID-19 pandemic. In the long run, there may be more risks of this kind. Keywords: credit economy, market, consumer, interest rates. Introduction As a result of the spread of the COVID-19 pandemic all over the world, significant changes in the economy and financial liquidity of enterprises in Poland are observed. It may also affect the financial capacity of the enterprises themselves to settle their liabilities with regard to financial institutions in a timely manner, thus limiting the availability of debt financing and the ability of banks to finance the economy. (A. Sieroń, 2021). The aim of this article is to show the way the credit market responds to the COVID- * Corresponding author: А PhD, adjunct, The Bronisław Markiewicz State Higher School of Technology and Economics in Jarosław, e-mail: brukwicka.irena@op.pl, ORCID: 0000-0002- 2213-702X B PhD, adjunct, The Bronisław Markiewicz State Higher School of Technology and Economics in Jarosław, e-mail: iwona.dudzik@op.pl, ORCID: 0000-0001- 6434-9699 19 pandemic. The subject of the paper is the credit economy of banks during the SARS-CoV- 2. The coronavirus pandemic is definitely a humanitarian crisis, but it should be emphasized, at the same time, that it also has fundamental social and economic implications. The main consequences include the increased likelihood of a recession in 2021. It is highly probable that the economic growth will return after the end of the COVID-19 pandemic. In the Republic of Poland, it is 14
  15. 15. ISSN 2534-9228 (2022) VUZF Review, 7(1) indicated that the probability of a deep recession is lower than in other European countries, however, a slowdown in economic growth is probable and real. (A. Sieroń, 2021). The Polish Bank Association (ZBP) is working quite intensively on introduction of measures to maintain the availability of credit for entrepreneurs. Moreover, it initiated some facilitations for bank customers with regard to paying off liabilities, as well as extending the period of the loan itself. (A. Sieroń, 2021). All the proposed solutions, however, should be considered in the light of applicable legal regulations, and their application may require prior legislative actions (A. Sieroń, 2021). Material and methods When analyzing the credit economy of banks during the COVID-19 pandemic, it should be noted that cash loans are drawn less frequently in comparison to the previous year. However, the number of processed loan applications has not been reduced to zero, and borrowers are willing to incur much lower loan obligations than before. The number of installment purchases has also increased (https://www. Obserwatorfinansowy.pl, 2021). Thus, it is worth pointing out that many institutions have decided to limit their activities in connection with the coronavirus pandemic. Banks were also among such institutions. Despite the fact that the vast majority of banks indicate that they are still operating, some of them limited themselves only to the remote mode (A. Sieroń, 2021). It is also possible to apply for a cash loan. Banking institutions implement solutions that would enable them to incur this obligation, apart from the necessity to personal contact with the bank (A. Sieroń, 2021). Taking into account the above mentioned, there is a question if the COVID-19 pandemic has adversely affected banks' credit decision- making. At the same time, the main lending conditions are changing, especially those relating to the amount of credit interest itself. (A. Sieroń, 2021). In March 2020, banks changed the way of their employees work in order to guarantee them the greatest possible safety related to the COVID-19 pandemic. Numerous sanitary restrictions, as well as safety rules, have been introduced not only in Poland, but also in other countries, which have contributed, inter alia, to changes in the activities of banking establishments. Restrictions have been implemented, for example, with regard to the number of the customers being present at a banking establishment at the same time. The restrictions related to the need to maintain an appropriate distance between bank employees and its customers have also changed (A. Sieroń, 2021). In addition, during the COVID-19 pandemic, the banks had to prepare the appropriate offers and introduce the appropriate procedures in the context of suspending repayments of mortgage loans, cash loans and other liabilities (A. Sieroń, 2021). It is also worth noting that despite the fact that a small number of people are currently making efforts to incur liabilities in the bank, the COVID-19 coronavirus pandemic contributed to the deterioration of the economic situation in a large part of households, thus reducing automatically creditworthiness (https: //www. Obserwatorfinansowy.pl, 2021). Significant effects also occurred during the second wave of the COVID-19 pandemic. COVID-19 has also contributed to the negative changes in the state economy. In order to stimulate consumer demand and to support various industries in Poland, the Monetary Policy Council decided to lower fundamental interest rates several times. However, the demand for business loans has changed, it can be seen on the basis of the data in the chart below. 15
  16. 16. ISSN 2534-9228 (2022) VUZF Review, 7(1) Chart 1. Criteria for granting loans and demand for business loans Source: Lending criteria and demand for business loans, https://www.obserwatorfinansowy.pl/tematyka/rynki- finansowe/bankowosc/banki- zaostrzaja-wymogi- udzielania-kredytow-w-obliczu-pandemii/#fullimg0 [Access: 23.03.2021] It is predicted that low interest rates will continue to function the following 2-3 years. Thus, favorable loan offers will be recorded during this period. At the same time, however, it should be noted that there is connection between the loan itself and COVID-19 in the form of an increase in commission for granting a loan, but this does not refer to every bank (K. Spurgiasz, 2021). According to the forecasts for 2021, the number of loans during the COVID-19 pandemic will gradually increase, although it undoubtedly depends on the development of the situation and subsequent waves of the pandemic. Banks continue to grant loans. It is still possible to submit on-line loan applications. Nevertheless, borrowers must take into account the necessity to take out loan insurance. Despite the fact that a significant part of Polish citizens should not have difficulties with obtaining a cash loan, it is still necessary to have proper creditworthiness (K. Spurgiasz, 2021). The figures of the Credit Information Bureau for 2020 clearly indicate that Polish citizens were more cautious about taking loans last year. It can be seen in Chart 2. Chart 2. The amount of new credits and loans granted in 2020, in total PLN 141 billion Source: Totalmoney.pl on the basis of BIK The sales of cash loans and loans that Poles willingly took out for the purchase of a vehicle, renovation or furnishing of an apartment, as well as the purchase of RTV equipment and household appliances, dropped sharply. It seems intriguing that 13% of respondents took a loan to repay the previously taken out loan (A. Serafin, 2021). And what is more interesting, Poles took out installment loans more enthusiastically. It should be supposed that they decided to implement the plans that they could not afford and used an alternative form by making purchases in installments. It is the only loan product to record growth and lending value from year to year (+ 0.8% compared to 2019) (A. Serafin, 2021). On the other hand, when it goes about cash loans, the situation is presented in Figure 3. Chart 3. Dynamics of cash loans sales Source: https://media.bik.pl/informacje- prasowe/att/1723738 16
  17. 17. ISSN 2534-9228 (2022) VUZF Review, 7(1) The above chart, prepared by BIK, at the turn of 03/04 2020 shows that the demand for cash loans decreased by almost 70%. The above situation was caused by the beginning of the first wave of the pandemic and the introduced restrictions. The following months brought the situation improvement, which resulted in a renewed demand for cash loans, and the banks were extremely eager to grant them. In the above situation, it is far from the former popularity of this type of liabilities, and the dynamics of loan sales is still more than 20% away from at least a year ago. The situation will therefore depend on the “bloom” of the pandemic, the reaction of the government or specific monetary institutions, and it is not easy at that time to presume anything about the credit policy of banks (Https://media.bik.pl, 2021). In the case of the impact of the pandemic on the conditions for receiving a cash loan (positive decision), it turned out to be more difficult even when the customer previously had low creditworthiness or negative entries in the credit history. In case of health and economic crisis, banks are trying to minimize the risk associated with granting loans. Many of them decided to make verification of customers in order to decide the amount and people for granting a loan. In order to meet customers’ expectations, banks initiated loans granted on- line, especially in case of loans up to several dozen thousand zlotys and for a short period of time (https://media.bik.pl, 2020). The pandemic had also a negative impact on the sale of mortgage loans that are relatively more complex or difficult to obtain, even under normal conditions. This situation is presented in Chart 4. The chart below shows a significant decrease in interest in this type of loans, especially in March and April, 2020. In this case, as with cash loans, the demand for mortgage loans began to grow again. Moreover, the BIK Index Value - Demand for Housing Loans communicates about the annual dynamics of the value of applied housing loans. The index was + 8.1%, which means that in October 2020, according to the number of working days, monetary institutions in the form of banks sent to BIK inquiries about mortgage loans for an amount higher by 8.1% in relation to October 2019 (https://media.bik.pl, 2020). Chart 4. Demand for housing loans Source: https://media.bik.pl/informacje- prasowe/591695/bik-indeks-popytu-na-kredyty- mieszkaniowe-wyniosl-w-pazdzierniku-2020-r-8-1 Taking into account the above trends in the behavior of borrowers, pandemic realities, or getting used to them, the forecast is made for 2021, it is shown in Chart 5. Chart 5. Forecast of loan sales in 2021 (PLN billion) Source: Totalmoney.pl on the basis of BIK Figure 5 illustrates the growing interest in housing and installment loans in 2021 with moderate optimism. BIK predicts that the sale of cash loans will amount to PLN 60 billion in 2021, therefore it will increase by 16.1%. The demand 17
  18. 18. ISSN 2534-9228 (2022) VUZF Review, 7(1) for housing loans will amount to PLN 72 billion, it will increase by 13.9%, and BIK expects an increase ininstallmentloansby4.8%,that is,PLN15.3billion for new loans (D. Sudoł, 2021). It goes without saying that the COVID-19 pandemic has affected various industries, and thus changed the everyday life of the entire world, including Polish citizens. Therefore, it is not surprising that the COVID-19 pandemic also contributed to the method and manner of verifying bankcustomerswhengrantingloans.Currently,the banks are aware that maintaining the workplace at the current level is a highly questionable situation. They are also aware of the possibility of a sharp increase in the unemployment rate and the exclusionofmanyPolesfromthegroupofpotential borrowers (K. Spurgiasz, 2021). Therefore, it shouldn’t be a surprise that banks take cautious actions in making credit decisions, as they are not inclined to incur an additional increased risk. For this reason, they exercise due diligence in assessing the creditworthiness of potential customers (K. Spurgiasz, 2021). In connection with the above, banks undertake activities that would more closely verify the situation of personsapplyingfor a credit obligation. There is no doubt that more advanced creditworthiness in times of the COVID-19 pandemic will be required for mortgage loans (K. Spurgiasz, 2021). Therefore, it seems unjustified to presume that they refrain from granting loans during the coronavirus pandemic. Banks, surely, conduct their activitiesfocusedonearnings. Thus,fortheirown safety, they are required to verify properly potential borrowers. Despite the fact that the assessment of creditworthiness does not guarantee the repayment of the contracted liability, it can undoubtedly contribute to the risk reduction. However, if banksdo not have adequate capacity to properly assess the creditworthiness of a given entity, they resign from granting loans (K. Spurgiasz, 2021). Bankshave always been associated with the risk of granting loans and the creditworthiness of potential borrowers. At the same time, however, it should be emphasized that this riskhas not been as significant for many years as during the COVID-19 pandemic. This pandemic has caused a crisis in manysectors,andstateassistancehasprovedtobe insufficient in many of them. Uncertainty is also growingallthetime,asitisdifficulttoevenforecast the date of the pandemic end. Even if the potential borrower did not lose his job, his remuneration could be significantly reduced during the above period. Despite the fact that borrowers have indefiniteemploymentcontract,itisnotpossibleto have full certainty as to their financial situation (K. Spurgiasz, 2021). Results and discussion When analyzing the credit economy during the COVID-19 pandemic, it is also worth noting that banks received nearly 600,000 applications for a deferral of loan installments at the beginning of the pandemic. The majority of them have been granted by banks. The sum of the deferred installments amounted to nearly several billion zlotys. According to the European Banking Authority, this credit moratorium should only apply to the bank customers who were not in arrears with payment at the time of the pandemic. In this way, the Polish Bank Association also commented the issue, referred by the Human Rights Defender, concerning help for borrowers directly affected by the pandemic. (https://www.parkiet.com/Finanse, 2021). This is the way the banks make decisions. They don’t give loans to borrowers who have experienced delays in repayment of their liabilities in the past. Considering the ethical issues, they remain unresolved, because such banking practices may contribute to the fact that borrowers will be at risk of falling in a debt spiral, incurring further debts in order to pay off the previous charges (Https://www.rpo.gov.pl) , 2021). The Polish Bank Association also makes efforts to collect information on the total number and reasons for complaints that consumers submit to the banks. The Polish Bank Association also emphasizes that the positive assessment of bank’s offer is also evidenced by 18
  19. 19. ISSN 2534-9228 (2022) VUZF review, 7(1) the relatively small number of complaints submitted by consumers (https: //www.rpo.gov.pl, 2021). It is worth noting that, in the opinion of the Polish Bank Association, development and implementation of the bank assistance program depend on compliance with Polish and EU legal regulations referring to creditworthiness. There are the restrictions on the implementation of the banking program introduced, for example, by the European Banking Authority, according to which the assistance should be addressed only to those clients whose financial situation was assessed as satisfactory until the outbreak of the COVID-19 pandemic, and therefore no arrears in the repayment of previous liabilities were observed. It is worth noting that, in the opinion of the Polish Bank Association, it is currently difficult to forecast the economic effects of the pandemic and its impact in the context of the Polish economy, including the finances of Polish consumers and entrepreneurs (https://www.rpo.gov.pl, 2021). When analyzing the credit economy during the COVID-19 pandemic, it is worth noting that in the third quarter of 2020 the lending trend changed and the criteria for borrowers, who showed interest in financing the purchase of real estate, were simplified. Almost 40% of banks decided to take such measures. Despite the fact that many of these banks have increased their margins in this respect, every fifth bank decided to lower the requirements for the minimum own contribution. A situation where the borrower by means of credit covers nearly 90% of the entire property has become a real one (https: //www.rpo.gov.pl, 2021). On the other hand, with regard to contracting consumer loans, a visible wave of banking institutions liberalization was not observed. It should be noted however that the very scale of the unfavorable changes, from the point of view of the borrower himself, was assessed as considerably smaller. Despite the fact that among nearly 40% of the banks, a continuation of the increase in expectations towards the borrowers themselves was observed, in nearly 30% of the banks, despite the fact that it slightly facilitated the access of borrowers to their services. Thus, in some banking establishments an increase in expectations with regard to such issues as, for example, increase in credit guarantee was observed. In most cases, the maximum loan repayment period has also been extended (W. V. Eseoghene, 2020). The author of this article considers the issue of taking out mortgage loans during the coronavirus pandemic to be quite interesting. It is one of the largest obligations incurred by consumers (M. Żukowski, 2020). They are, nowadays, permanently related to the price of real estate on the market, despite the fact that economists and analysts showed different expectations in this regard. Real estate prices did not decline in 2020. According to the above mentioned, the total value of debt due to mortgage loans increased by approx. 7.5% in 2020, compared to the previous year, and amounted to PLN 476.267 billion. There has been also noted a faster increase in the prices of the real estate itself. In 2020, for example, a real estate in Warsaw amounted to about PLN 10,000 per square meter in comparison to the previous year, it represented an increase by nearly 11.75% (M. Żukowski, 2020). Conclusions 1. Summarizing the considerations undertaken in this paper, it should be noted that the market situation in connection with the COVID-19 pandemic is changing very dynamically. As a result, a person interested in taking a loan may have a perception of insecurity. At the same time, however, borrowers should be rational and cautious in their actions, and thus not strive to use their creditworthiness to the maximum extent. At the same time, it is necessary for the borrower to be protected, when the financial situation changes dramatically (M. Żukowski, 2020). 2. There is great hope that the COVID-19 19
  20. 20. ISSN 2534-9228 (2022) VUZF review, 7(1) pandemic will also have positive, long-term effects, and thus increase in awareness of the entire society. Apart from taking into account the fundamental role of public health hygiene, it can contribute to the awareness of state failure. 3. The risks that may lead to a banking crisis are defined as adequately identified in the theory of economics itself. It would be wrong to say that banks can be considered completely safe today. New economic and social events could contribute to the inefficiency of this sector. One of such event is the COVID-19 pandemic. In the long run, there may be more risks of this kind, which will contribute to the perception of this sector with a certain degree of uncertainty (P. Łasak, 2021). 4. The activities of the NBP and lending policy should focus on provision of support to the economy and the population, thus mitigating, at least partially, the effects of the COVID-19 pandemic. The long-term effectiveness of the above activities will depend on the factors that appear in the global economy and domestic economic policy, as well as in the changes and their dynamics, which enable the stabilization of the banking sector (P. Łasak, 2021). 5. Significant negative changes took place in the creditworthiness of a considerable number of Poles. They are associated with job loss, reduction of working hours, evolution of the form of employment. In addition, one can also add gratification decrease and freezing some of its forms (bonuses, awards), as well as forced or unpaid leave (P. Łasak, 2021). 6. The destructive impact of the coronavirus on individual sectors of the economy was initiated by a change in the behavior of the population. The decline in interest rates carried out by FED or other central banks (for example, the National Bank of Poland) is considered by analysts as an unnecessary one, and is not able to help the economy affected by the pandemic. And what is worse, it can intensify some negative effects of unconventional monetary tactics, such as over- indebtedness or “zombie companies” (A. Sieroń, 2021). References Serafin, A. (2021). Poles massively fall into a debt spiral. This is the new fashion: living on credit. Money.pl. https://www.money.pl/gospodarka/polacy- masowo-wpadaja-w-spirale-zadluzenia-to- nowa-moda-zycie-na-kredyt- 6612688120859584a.html [Access: 27.02.2021 12:57]. Sudoł, D. (2021). Are we facing a post-pandemic life on credit? Credit outlook after COVID-19 https://www.money.pl/banki/czy-po- pandemii-czeka-nas-zycie-na-kredyt- prognozy-kredytowe-po-covid-19- 6630493591571232a.html [Access: 2021-01- 28] Eseoghene, W. V. (2020). The political economy of covid-19 and its effects on global econom, International Journal of New Economics and Social Sciences", nr 11. pp. 11-24. https://media.bik.pl/informacje- prasowe/591695/bik-indeks-popytu-na- kredyty-mieszkaniowe-wyniosl-w- pazdzierniku-2020-r-8-1 [Access: 05.11.2020] https://media.bik.pl/informacje- prasowe/att/1723738 [Access: 05.11.2020] Coronavirus. Banks have postponed repayment of over a dozen billion zlotys to borrowers - informs the Polish Bank Association, https://www.rpo.gov.pl/pl/content/korona wirus-info-dla-rpo-banki-odroczyly-splate- kilkunastu-mld-zl-kredytobiorcom [Access: 27.03.2021] Credit in the age of coronavirus and a 91% chance of a positive decision - is it possible?, https://www.parkiet.com/Finanse/2012199 98-Kredyt-w-dobie-koronawirusa-i-91-szans- na-pozytywna-decyzje--czy-to-mozliwe.html [Access: 26.03.2021] Lending criteria and demand for business loans, https://www.obserwatorfinansowy.pl/temat yka/rynkifinansowe/bankowosc/banki- zaostrzaja-wymogi-udzielania-kredytow-w- 20
  21. 21. ISSN 2534-9228 (2022) VUZF review, 7(1) obliczu-pandemii/#fullimg0 [Access: 23.03.2021] Łasak, P. (2020). Challenges for the Polish banking sector as a consequence of the COVID-19 pandemic in Kaleta M., Laska M., Żuchowska D. /red./ Economic policy in an unstable environment: dilemmas and challenges. Publishing House of the Academy of Social and Media Culture, Toruń. pp. 80-93. Sieroń, A. (2021). Will the covid-19 pandemic cause the global economy to collapse? https://uni.wroc.pl/czy-pandemia-covid-19- spowoduje-zapasc-globalnej-gospodarki/ [Access: 26.03.2021] Spurgiasz, K. Cash credit and coronavirus - has the pandemic affected banks' lending decisions. https://www.totalmoney.pl/artykuly/kredyt- gotowkowy-a-koronawirus-czy-pandemia- wplynela-na-decyzje-kredytowe-bankow Żukowski, M. (2020). Turbulence of the banking system in Russia under conditions of the SARS-CoV-2 pandemic. "Legal and Economic Review". nr 4. 21
  22. 22. ISSN 2534-9228 (2022) VUZF Review, 7(1) Formation conditions and theoretical and methodological aspects of assessment of the economy digital transformation level Bartosz Mickiewicz * А ; Yekaterina VolkovaB A West Pomeranian University of Technology, 17, Piastow Ave., Szczecin, 70-310, Poland В Belarusian State University of Food and Chemical Technologies, 4, Nezavisimosti Ave., Minsk, 220030, Belarus Received: February 18, 2022 | Revised: February 22, 2022 | Accepted: March 28, 2022 JEL Classification: Q17, Q18. DOI: 10.38188/2534-9228.22.1.03 Abstract The development of digital technologies in the economy requires the transformation of business processes at the level of organizations focused on a strategic perspective. In the digital economy, obtainingstrategic competitive advantages is associated withthe formation and development of the potential of organizations. The use of digital technologies leads to the introduction of new methods, toolsandservicesthatrequireinfrastructuralchanges inorganizations andcontribute tothecreation of new products (works, services) that increase the competitiveness and financial stability of organizations. The process of digital transformation of the economy is multi-stage, and each stage has goals, objectives and evaluation criteria. The first step towards the economy digital transformation is to assess the digital potential, digital maturity and readiness of organizations. The originality lies in the development of theoretical and methodological foundations for assessing the level of the economy digital transformation and in the development of promising areas. The author's definition of the digital potential of an organization is given as the ability to perform activities tocreate, introduce,developandimplement informationandcommunicationtechnologies in the context of the transformation of business processes, business models in order to ensure strategic competitive advantages in the markets, financial stability and performance. The assessment methodology is proposed and the following groups of estimated private indicators have been identified: digital transformation of the organization, intellectual capital, customer interaction: service quality and customer satisfaction, online sales, business environment. Determined that digital transformation, as the technical and technological core of the digital economy, through the introduction of digital technologies, transforms the structure of the added value of the product by including the digital and intellectual component in the chain of its creation. Keywords: digital economy, conditions, Republic of Belarus, Poland, digital transformation, digital potential, digital maturity, organization, assessment, strategy, development directions. Introduction The goal is to study the formation conditions, deepen the theoretical and methodological foundations for assessing the level of digital transformation of the economy of various countries and develop promising areas for its development. * Corresponding author: А Doctor of Economics, Professor, Faculty of Economics, Department of European and Regional Studies, e-mail: bmickiewicz@zut.edu.pl , ORCID: 0000-0002-4787-2477 B Ph.D. in Economics, Associate Professor, Faculty of Economics, Department of Management of Enterprises, e-mail: kate_ag@mail.ru, ORCID: 0000-0003-0735-5018 The basis of the study is a systematic approach to the formation conditions and assessment of the level of digital transformation, digital potential, digital readiness and digital maturity of economic systems. For studying the readiness for 22
  23. 23. ISSN 2534-9228 (2022) VUZF Review, 7(1) the digital transformation of the economy, general scientific methods of theoretical knowledge were used: statistical and logical analysis, synthesis, comparison, deduction and generalization, expert surveys. Implementation of the economy digital transformation modifies traditional business processes, business models, increasing the prestige of the state, business and organizations. In modern conditions, digital transformation reflects the competitiveness of organizations and is a determining factor in developing a strategy for their sustainable development. The expediency of applying a systematic approach to the analysis of the conditions for the formation, assessment of the level and main directions of development of the digital transformation of the economy is substantiated. Digital transformation of the economy can be studied: as a historical stage in the development of the national economy, providing for access to a qualitatively different, higher level of modern technological development; as a large-scale national project that provides for the implementation of a set of long-term developed measures. Considering the first approach, it should be noted that large-scale transformations (industrialization, electrification, complex mechanization and automation of production) corresponded to each stage of the technical and economic development of Europe and the USA countries. The achieved level of the productive forces development and the existing scientific, technical and human capital in Belarus create conditions for the digital transformation of the economy. Applying the second approach, it should be noted that the development of the information and communication technology sector in economically developed countries demonstrates a certain sequence: first, the appropriate infrastructure, conditions, prerequisites for the digitalization of the service sector are created, then starts the introduction and application of ICT in the real sector of economy. Material and methods Formation of a high-tech sector of the national industry and an increase in its knowledge intensity, as the achievement of key goals, is reflected in the National Strategy for Sustainable Socio-Economic Development of the Republic of Belarus until 2030 (National strategy for sustainable socio-economic development of the Republic of Belarus for the period up to 2030). Digital transformation of an industrial enterprise is the basis for the formation of the sector of intelligent industrial production through the development and implementation of modern information technologies and industrial integrated systems, this is the digital transformation of processes into intelligent management of production, quality and sales of products. Policy paper of the informatization and communications field is the Strategy for the Development of Informatization in the Republic of Belarus for 2016–2022 (Strategy of Development of Informatization in Republic of Belarus for 2016–2022). Digital transformation strategies should be comprehensive in addressing interconnected policies, ensuring its coherency and coordination across all areas and sectors, shaping digital transformation, and engaging relevant stakeholders in its design and implementation. Implementation of the digitalization strategy requires administrative capacity, a clear division of labor and relationships between different levels of government. It is necessary to formulate a strategic vision of the country’s digital transformation in order to develop a coherent policy for the digitalization of the economy. It is important to justify how digital transformation contributes to the achievement of such goals as sustainable development, innovative development, and growth in the welfare of the population? This approach contributes to the formation of strategic priorities and the consistency of the goals of the development of society, the inclusion of the country in global 23
  24. 24. ISSN 2534-9228 (2022) VUZF Review, 7(1) world processes. The Republic of Belarus has developed the State Program “Digital Development of Belarus” for 2021–2025, one of the key tasks of which is the development of digital economy tools in various sectors of the national economy, providing for the use of advanced production technologies in production and processes of foreign economic activity, the formation of the necessary conditions to maintain and improve the competitiveness of Belarusian enterprises in the world market (State Program "Digital Development of Belarus" for 2021-2025). 14. The main task of developing the infrastructure of the Polish economy is its modernization, associated with the development of access to digital technologies, to the dominant information and communication technologies. It is the latter that have a significant impact both on changing consumption patterns and social ties, and on increasing the economic efficiency of production. Achieving this goal is associated with an increase in the number of “innovation platforms” as a means of supporting an effective technological complex. The proposed tools and solutions are contained in the programs “Digital Poland”, “Comprehensive Program of Informatization of Poland”, in the Law “On the Unified State Information and Communication Infrastructure” (Innovative Development of the Food Sector in the Republic of Belarus and Poland, 2021, Ayupov, A.N., 2020). The main reason for the complexity of the transition to digital innovations in industrial enterprises is the lack of professional skills among employees (digital thinking, self- learning, working with data, flexibility and the ability to make decisions in the face of constant market changes). To analyze and activate the digital literacy of employees, it is necessary to test them in the following areas: information security, knowledge of Microsoft Excel and other programs, analytical data processing, modern communication methods and digital trends. The most significant factor is availability and development of a digital strategy (at the same time, the goals of the enterprise are planned: achieving an excellent customer experience, leadership in reducing costs, implementing new digital opportunities, developing digital competencies in a team, etc.), the underdevelopment of the appropriate infrastructure to ensure cybersecurity and development of direct sales channels. Numerous economic literature works are devoted to the study of the problems of economic systems digitalization and processes. However, insufficient attention has been paid to the concept of the digital potential of an organization, assessment methods, quantitative and qualitative measurement. The term “digital potential” in relation to an industrial enterprise appeared in the scientific literature in 2010. The most common approach is to define the concept of “digital potential” as a characteristic of the capabilities of economic systems to use digital technologies. The concept of “digital potential of an enterprise” is a relatively new concept, both for foreign and domestic science. Explore the digital potential as the ability of an enterprise to carry out activities to create, implement and apply information technologies, ensure information security in order to meet the current or future needs of the enterprise (Gorodnova, N.V., Peshkova, A.A., 2018). Digital potential is a set of data itself, software and hardware for their storage and processing, and personnel using this data for management (Popov, E.V., Semyachkov, K.A., Moskalenko Y.A., 2019). In general, when exploring digital potential, the following aspects should be taken into account: “potential” comes from the Latin “potentia” – strength, power, internal capabilities that exist in a hidden form and can manifest themselves under certain conditions; the concept of “digital” is used to denote a sign (quality, property) of an object associated with digital (information) technologies that have a certain life cycle and scope in an enterprise. Digital industrial organization means an integrated set of digital models, methods and tools interconnected on the basis of a data management system. The main objective of the activities of organizations is the integrated 24
  25. 25. ISSN 2534-9228 (2022) VUZF Review, 7(1) planning, evaluation and continuous improvement of the main and auxiliary structures, production processes and resources. The concept of digital transformation of an industrial enterprise is defined as a change in intra-production components, parameters and proportions, connections of the economic system of an industrial enterprise, which determine the gradual transition of an industrial enterprise to a new qualitative digital state (Danilchenko, A.V., Zubritskaya, I.A., Yakushenko, K.V., 2019). The leaders in the formation of competitive advantages with the implementation of the digital transformation of the industry are the following concerns: Siemens, ThyssenKrup, Robert Bosch, BASF, Embedded Systems, Smart Factory, Robuste Netze, Cloud Computing и IT- Security, NV, Materialise NV, Limacorporate SPA, Medical Modeling, Inc. The problem of the digital potential integral assessment, which allows assessing the ability of organizations to implement information technologies and transform business processes, is relevant and in demand. Such an assessment can be carried out in two ways: by forming a balanced scorecard system (BSC), taking into account the level of digitalization, allowing a systematic analysis of the performance of enterprises and based on an integral assessment. An integral indicator – “digital potential of the enterprise” – is proposed, reflecting the actual level and opportunities for the future, taking into account the factors and conditions of the external environment (this is the readiness of the industry for the formation of a digital environment, the readiness of specific key stakeholders of the enterprise to interact, the level of consumer friendliness, the degree of state support for digitalization processes. The proposed approach makes it possible to analyze both the current level of digitalization of individual processes in an organization and the opportunities for increasing digital potential. The readiness of industrial organizations to accept new transformational changes requires, along with the introduction of new information technologies in the processes of organizing their activities, a change in the business model (Kozlov, A.V., Teslya, A.B., 2019). To assess the potential for business digitalization, the Industry Digitisation Index (IDI) proposed by McKinsey&Company is used, which includes 23 indicators grouped into three groups: assets, use and labor. Digital potential is one of the elements of the enterprise economic potential and a distinctive feature of its assessment methodology is a modular structure that allows assessing the potential of enterprises of both full and incomplete cycles in the formation of flexible value chains in the digital economy. The methodology takes into account the basic principles and elements of the Industry 4.0 concept and the Technet roadmap (Frolov, V.G., Sidorenko, Y.A., 2020). The growth rate of the enterprise digital potential is determined by the presence of both hardware and software, and taking into account the financial component (financial resource availability, liquidity indicators and financial stability ratios), which makes it possible to justify the possibility of implementing a digital strategy (Cherkashnev, R.Y., 2016). Results and discussion The results of the studies have shown that estimation of the digital potential of food organizations requires creation of a hierarchy of private indicators,that makesthebasisfor integral indicator formation. The following groups of estimated private indicators have been identified: 1) digital transformation of the organization: the level of business processes automation, scientific and information resources, return on investment in digitalization, income from new digital services; 2) intellectual capital: the presence of digital competencies and personnel capable of using digital technologies, the attitude of the team to digital innovations; 3) customer interaction: service quality and 25
  26. 26. ISSN 2534-9228 (2022) VUZF Review, 7(1) customer satisfaction, online sales; 4) business environment: level of competition, financial stability of the business, innovative products. Since the listed indicators are of a different nature and can be estimated both by its quantity and quality, their formalization is proposed, which take values from 0 (at the lowest value of the indicator) to 1 (in the ideal case). Figure 1 shows a diagram for assessing the digital potential of organizations in the food sector. Figure 1. Estimation of the digital potential of food organizations Source: suggested by the author Data shown in Figure 1 demonstrates a low level of assessment indicators (business environment, customers interaction) for the food sector which requires the development of appropriate measures to activate and grow them. Thus, the organization digital potential is its ability to perform activities to create, introduce, develop and implement information and communication technologies in the context of the transformation of business processes, business models in order to ensure strategic competitive advantages in the markets, financial stability and performance. In the economic literature, most of the methods are based on the analysis of statistical data related to the assessment of the level of informatization, automation and digital maturity of organizations (readiness of organizations to internal and external changes associated with digitalization). Digital maturity is a key indicator of the degree of readiness of the state and organizations to implement digital solutions in their processes. Digital maturity of the business is an assessment of its position relative to the leaders in the field of digitalization in accordance with given criteria, which determines their ability to offer the best value proposition to customers. Digital maturity is the ability of the organization to respond to technological developments, taking into account the realization of competitive advantages. There are two approaches: the first is the assessment of the enterprise level of readiness for digital transformation; the second is the assessment of the introduction of digital technologies and their impact on the formation of the business model of the enterprise and its competitiveness. The general indicators of digital maturity assessment should be the following: strategy and business model, organizational culture and personnel, consumers and their experience, operational processes and digital technologies, value for the client (products and services of the company). At the same time, the digital maturity assessment provides for: 1) determination of the current level of maturity in the functional areas of the organization (structure, key resources, key processes, technologies); 2) identifying development priorities and setting goals in accordance with the digital strategy; 3) identification of priority areas, development of an action plan for the strategy implementation (Medvedeva, L.F., Arkhipova, L.I., 2021). At the moment, large global consulting companies are analyzing the level of digital maturityandassessingthepotentialand dynamics ofchangesin organizationsintheprocessofdigital transformation. To assess the dynamics and effectiveness of implementation, the following digital maturity assessment methods are used: 1. Digital maturity model analyses digital 0,68 0,55 0,44 0,31 0 0,1 0,2 0,3 0,4 0,5 0,6 0,7 0,8 0,9 1 digital transformati on of the organization intellectual capital interaction with clients business environment 26
  27. 27. ISSN 2534-9228 (2022) VUZF Review, 7(1) capabilities across six key dimensions (customers, business strategy, technology, production, structure and culture of the organization), which are divided into 28 subsections, including 179 indicators. 2. Digitization piano evaluates the most important elements of the value chain: business model, organizational structure, people, processes, IT capabilities, offers and interaction modelagainst specificquestionsdesignedforeach category. The model is aimed at identifying differences between the actual and forecast levels of each transformational category of organizations. 3. Acatech Industry Maturity Index 4.0 developed by the German National Academy of Sciences and Technology assesses digital maturity in four areas (resources, information systems, culture and organizational structure) taking into account stages of development and corporate processes. 4. Digital Transformation Index (analytical agency Arthur D. Little) is formed based on seven indicators: (strategy and leadership, products and services, customer management, operations and supply chains, corporate services and control, information technology, workplace and culture) (Barulin, E., 2021). The methodology for calculating the level of digital maturity of the Russian Federation in key sectors of the economy and in the social sphere is based on three indicators: 1) number of specialists intensively using information and communication technologies; 2) expenses of organizations for the implementation and use of modern digital solutions; 3) level of digital maturity depending on the achievement of the target value of 2030 in ten sectors of the economy and the social sphere (in industry, agriculture, construction, urban development, transport and logistics, energy infrastructure, financial services, healthcare, education and science and public management). The Chamber of Commerce and Industry of Russia distinguishes four levels of “digital maturity” of organizations: low (digital transformation carries risks), basic (transformation is possible, but requires clear planning of resources and tasks), advanced (the company has ongoing digitalization initiatives), high (digitalization integrated into the operating and production activities of the company). Organizations can get the status of a digital transformation leader (manage the growth of business value through innovation) or a digital transformation driver (create a digital environment for the integration of partners, suppliers, customers). Assessment is carried out in five areas: “goal setting, strategy, business model”, “organizational structure and processes”, “people”, “product”, “resources”. An alternative modelof “digital maturity” is proposed byDeloitte analysts, which, along with the strategy and organizational structure of the organization, provides for the assessment of the application of technologies, work with clients and operational activities of the organization (Galiyeva, D., 2021). The main technical and organizational conditions that allow organizations to increase their digital maturity are analyzed. These include: interconnected data, automation and technology integration, application of analytical findings in practice, strategic partnerships, specialist skills, flexible teams and a culture of Fail-Fast (trial and error method) (Field, D., Patel, S., Leon, G., 2021). Methodology for assessing the level of digitalization has been developed by questioning top managers on 31 business processes. The pyramid of the digitalization process includes five levels: primary local, partial, complex, “smart” organization and digital ecosystem. Furthermore, in accordance with the digital transformation strategy, the target level of digital maturity of the organization, which is necessary for its implementation, is determined. To overcome the discrepancy between the current and target levels of the organization digital maturity, a digital transformation roadmap is being developed, in accordance with which a portfolio of projects is formed that ensures a balance of innovation and the achievement of the company strategic goals (Merzlov, I.Y., Shilova, E.V., Sannikova, E.A., Sedinin, M.A., 2020). 27
  28. 28. ISSN 2534-9228 (2022) VUZF Review, 7(1) Digital transformation is a way of doing business that involves information and digital technologies, as well as the readiness of companies for internal and external changes, that is, digital maturity. The formation of the digital level in organizations is certainly related to the possibility of its financing (Derizemlya, V.E., Ter- Grigoryants, A.A., 2021). Digital transformation is a large-scale adaptation of a business to the new conditions of the digital economy, which is being studied from different perspectives as: - transformation of society – value systems, culture, relationships, institutions, etc.; - transformation of technologies and their impact on economic processes; - business transformation – markets, industries, competition, business processes, business models, etc. Thanks to modern methods of project management and analytics, innovation centers and digital transformation centers are being formed in organizations, the essence of which isto actively search for and test new areas of business development, products and solutions. The digital maturity model is a tool that can be used to estimate the level of skills and competencies of an organization and develop measures to improve them (Kuzin, D.V., 2019). A comprehensive assessment of the conditions and analysis is the first stage of the digital transformation of an industrial enterprise. Based on SWOT, PEST and strategic analysis, it is necessary to determine the goals that are the basis for the formation of the concept of digital transformation of an industrial enterprise. In addition to the main goal, i.e. to provide conditions for increasing the economic efficiency of production activities, the digital transformation of the industry is aimed at obtaining a synergistic effect from the implementation of ongoing activities (Danilchenko, A.V., Zubritskaya, I.A., Yakushenko, K.V., 2019). To assess the speed of adaptation of enterprises to digital transformation, the BDI (Business Digitalization Index) is used. The calculation of this index is based on data on the organization’s use of: information transmission and storage channels (cloud technologies, corporate mail, instant messengers, automation systems, etc.); digital technologies of artificial intelligence, the Internet of things, 3D printing, electronic document management, etc.; Internet tools for promotion and development of the enterprise; digital information protection programs and the use of specialized anti-virus programs; assessment of the degree of involvement of management in self-development and development of personnel in the field of digital competencies (Veselovsky, M.Y., Khoroshavina N.S., 2021). Figure 2 shows the business digitalization index of various countries in 2018 (Indicators of the digital economy: statistical collection, 2020). Figure 2. Business digitalization index of various countries Source: Indicators of the digital economy: statistical collection, 2020 The data shown in Figure 2 shows that the level of business digitalization is most developed in countries such as Finland, Belgium, Denmark, Sweden, Norway, Austria, Spain, Germany, Slovenia, Italy, Croatia, Czech Republic, Slovakia, Latvia, Russia, etc. It is advisable to evaluate the effectiveness of digital transformation of enterprises in high-tech industries by stages of the digital transformation strategy. When evaluating the effectiveness, it is necessary to take into account the costs of implementing investment projects for the digitalization of economic processes within the considered stages of the product life cycle and the cumulative effect received by the organization as a 50 49 47 46 43 40 40 39 39 37 37 37 36 32 31 31 31 29 0 10 20 30 40 50 60 Finland Belgium Denmark Sweden Norway Austria Spain Germany Slovenia Italy Croatia Czech Republic Slovakia Latvia Russia Greece Poland Bulgaria 28
  29. 29. ISSN 2534-9228 (2022) VUZF Review, 7(1) whole (Kokuytseva,T.V.,Ovchinnikova,O.P.,2021). Digital transformation, as the technical and technological core of the digitaleconomy,through the introduction of digital technologies, transforms the structure of the added value of the product by including the digital and intellectual component in the chain of its creation. Figure 3 shows the share of the ICT sector in gross value added in 2019 for various countries (Indicators of the digital economy: statistical collection, 2020). Figure 3. The share of the ICT sector in the gross value added of various countries Source: Indicators of the digital economy: statistical collection, 2020 The data shown in Figure 3 shows that in 2019 the highest share of the ICT sector in gross value added in the following countries: Hungary (6.1%), Czech Republic (5.9%), Sweden (5.6%), Germany (5.0%), Slovakia (4.8%), France (4.7%), Croatia (4.4%), Denmark (4.1%), Belgium (4.0%), Austria (4.0%), Poland (3.7%), Italy (3.6%), Greece (3.2%), etc. The key areas of digital transformation include changing organizational culture, transforming business models and products, and ensuring the growth of enterprise flexibility (Trushkina, N., Rynkevich, N., 2020). At the same time, the need for highly qualified employees is increasing, especially for specialists in digital technologies, data analytics and graduates in the field of science, technology, engineering and mathematics. Modern methods of personnel search and training programs, formed taking into account the goals and objectives of Industry 4.0, are of decisive importance at the present stage and in the future. Conclusions Modern digital organization is one that actively integrates technology into products and services, uses IT solutions to actively interact with customers, technologies to make decisions and improve business processes. In general, digitalization is a continuous process aimed at improving the efficiency of functioning and sustainable business development. For business development, it is necessary to constantly introduce advanced technologies, improve the quality of service, the level of automation, as well as use modern tools for analyzing and evaluating the effectiveness of both individual investment projects and digital potential. Demanded direction is the development of an algorithm for intellectual analysis of business processes, which ensures a gradual transition from a questionnaire, reports to intelligent systems in order to make a profit and economic growth. The main directions for the development of the economy digital transformation are as follows: 1) increase of expenses on digital transformation and innovations and more than half of the costs of ICT will be directed to these purposes. Organizations must develop a digital transformation strategy to increase competitiveness; 2) integrated application of software training, automation tools for efficient operation. Heads of organizations will invest in the development of sectoral strategies for its implementation; 3) a distributed cloud, that is, the distribution of public cloud services to different locations that operate in an accessible place and around the clock. Approximately 70% of organizations will implement unified technologies, tools and processes for hybrid management, define key 6,1 5,9 5,6 5,0 4,8 4,7 4,4 4,1 4,0 4,0 3,7 3,6 3,2 2,8 0 1 2 3 4 5 6 7 Hungary Czech Republic Sweden Germany Slovakia France Croatia Denmark Belgium Austria Poland Italy Greece Russia 29
  30. 30. ISSN 2534-9228 (2022) VUZF Review, 7(1) business performance indicators and improve IT infrastructure; 4) blockchain, which is able to transform the relationship in the implementation of activities, providing transparency and secure data exchange in business ecosystems; 5) providing users with access to technical knowledge (or business knowledge) through a simplified experience that enables the use of specialized tools and systems in professional activities. References National strategy for sustainable socio- economic development of the Republic of Belarus for the period up to 2030 [Electronic resource]: approved by the Presidium of the Council of Ministers of the Republic of Belarus, May 2, 2017, No. 10 // Ministry of Economy of the Republic of Belarus. – Access mode: http://economy.gov.by. – Access date: 19/01/2022. Strategy of Development of Informatization in Republic of Belarus for 2016–2022 [Electronic resource]. – Access mode: http://economy.gov.by. – Access date: 25/03/2020. State Program "Digital Development of Belarus" for 2021-2025 // Resolution of the Council of Ministers of the Republic of Belarus dated 02.02.2021. - No. 66. Gorodnova, N.V., Peshkova, A.A. (2018). Development of theoretical foundations for assessing the digital potential of an industrial enterprise // Discussion. - No. 5 (90). - pp. 74- 84. Popov, E.V., Semyachkov, K.A., Moskalenko Y.A. (2019). Digital potential of the enterprise // Economic analysis: theory and practice. - T. 18, No. 12. - pp. 2223 - 2236. Cherkashnev, R.Y. (2016). Development and improvement of the mechanism for obtaining competitive advantages by an enterprise when using information technologies // Socio-economic phenomena and processes. - V.11, No. 2. – pp. 65–72. Medvedeva, L.F., Arkhipova, L.I. (2021). Digital maturity as a factor of competitive advantage in business // BIG DATA and Advanced Analytics. BIG DATA and high-level analysis; VII Intern. scientific-practical. Conf., Minsk. – pp. 86–98. Barulin, E. (2021). Diqital is not just diqital: how to analyze the implementation of innovations correctly [Electronic resource]. – Access mode: https://rb.ru/opinion/proanalizirovat- vnedrenie-innovacij. – Date of access: 25.02. 2021. Galiyeva, D. (2021)."Digits" are looking for the threshold of maturity [Electronic resource]. - Access mode: https://www.kommersant.ru/doc/4602997. – Date of access: 25.02. 2021. Field, D., Patel, S., Leon, G. (2021). How to achieve digital maturity [Electronic resource]. Accessmode:ru_AdWords_Marketing_Sales_ 891609_Mastering_Digital_Marketing_Matu rity%20(2).pdf. – Date of access: 26.02. 2021. Kozlov, A.V., Teslya, A.B. (2019). Digital potential of industrial enterprises: essence, definition and methods of calculation // Bulletin of ZabGU. - V.25, No. 6. - pp. 101-110. Frolov, V.G., Sidorenko, Y.A. (2020). Assessment of the economic potential of industrial structures in a digital economy // Economics, Entrepreneurship and Law. - 2020. - Volume 10. - No. 10. - pp. 2505-2516. Merzlov, I.Y., Shilova, E.V., Sannikova, E.A., Sedinin, M.A. (2020). Comprehensive methodology for assessing the level of digitalization of organizations // Economics, entrepreneurship and law. - 2020. - T. 10. - No. 9. - pp. 2379-2396. Kokuytseva, T.V., Ovchinnikova, O.P. (2021). Methodological approaches to performance evaluation of enterprises digital transformation in high-tech industries. Kreativnaya ekonomika, 15(6), pp. 2413- 2430. Veselovsky, M.Y., Khoroshavina N.S. (2021). Digital transformation of industrial 30

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