Risk Management

Author: Jugnum Parimal

 

Data Analysis for Risk Management—Economics, Finance and Business: New Developments and Challenges

 

Jajuga (2023) states the evolution of risk management in economics, finance, and business, highlighting the driving forces behind its development. It discusses the theoretical tools and instruments used for risk analysis and management, as well as the role of regulations in the financial sector. The paper emphasizes the role of data analysis in modern risk management, particularly the use of artificial intelligence and machine learning techniques, while acknowledging the challenges associated with data variety and quality, model transparency, and customizability. The paper also presents a review of the contributions in the special issue, which cover a range of topics, including credit risk, systemic risk, risk analysis in financial investments, and risk management at both macro and micro levels. It concludes by emphasizing the critical importance of risk management in today’s world, particularly in addressing risks related to climate, cyber, media, and technology, and the role of education and advanced data analysis methodologies in mitigating these risks.

 Risk management in the NHS: governance, finance and clinical risk

 

Fenn, P., & Egan, T. (2012) states that this paper discusses the interrelationship between good governance, financial incentives, and clinical risk management in healthcare services, with a focus on NHS (National Health Service) hospitals in the UK. The authors emphasize that healthcare services inherently involve high levels of risk, and effective risk management is crucial for patient safety and quality of care. The paper explores how the NHS has implemented risk management, including financial incentives to improve risk management levels. It also highlights the role of external regulators like Monitor and the NHSLA (NHS Litigation Authority) in assessing and rating hospitals based on their risk management, finance, and governance.

 The paper reveals that there is little correlation between the NHSLA’s clinical risk management ratings and Monitor’s finance and governance risk ratings for NHS hospitals. This suggests that while hospitals with good governance and low financial risk may invest in higher-risk management standards, those facing financial challenges might also do so to ease their problems. The paper underscores the complex nature of risk management in healthcare and its interplay with governance and finance. It discusses the need for a more nuanced approach to measuring risk management and acknowledges that the relationships between these factors may be more intricate than initially assumed.

The paper sheds light on the complexities of risk management in healthcare and the intricate relationships between good governance, financial incentives, and clinical risk management, based on empirical evidence from NHS hospitals in the UK. It suggests that a single rating or measurement may not fully capture the multifaceted nature of risk management in healthcare organizations.

 

 

 

 

Risk Management and Risk Transfer: Distributive Justice in Finance

 

Kolb (2011) says that The intersection of finance, risk management, and distributive justice. It explores different theories of justice, such as egalitarian, utilitarian, desert, and libertarian, and how they relate to the distribution of goods, ills, costs, and benefits in society. The author argues that the normative dimensions of risk management are often overlooked, and risk management goes beyond technical and efficiency considerations, as it can raise issues of distributive justice.

 

The article highlights various methods of risk management, including risk mitigation, diversification, voluntary and involuntary risk transfers, and how they can impact distributive justice. It emphasizes that risk transfer can lead to issues of deception, asymmetric information, and the exercise of power, and examines these scenarios in the context of financial markets.

 

In perfect markets with equal access to information, questions of distributive justice have little relevance. However, when information asymmetry exists, as in insider trading or derivatives trading, distributive justice becomes a more significant concern. The article also explores cases where firms can manipulate their risk posture, impacting the distribution of risk and returns, and how such actions can raise ethical and justice-related questions. Ultimately, it suggests that risk management in financial markets and beyond should consider the implications for distributive justice, especially when power imbalances or externalities come into play.

 

 

Risk management in project finance and implementation

 

Lev (1999) covers risk management in project finance and implementation. It’s designed for a broad audience and aims to provide a practical, interdisciplinary approach to risk management. The book covers various topics, including government policies, quantitative risk analysis, hedging, options, and more. It’s suitable for readers with basic math knowledge and seeks to bridge the gap between theory and practical application in managing real-world risks. The book does not include exercises but can be used as a reference alongside other texts for those seeking a deeper mathematical understanding.

This is designed for students and practitioners looking for practical insights into risk management. It’s self-contained and modular, allowing chapters to be read independently. It assumes only basic knowledge of secondary school mathematics and aims to bridge the gap between theory and real-world application. The book does not include exercises or problems but can be complemented with other texts for additional mathematical rigor.

 

 

 

The Risk Landscape in the Digital Transformation of Finance and Insurance

 

 

Rupeika-Apoga & Marano (2023).The “Risk Landscape in the Digital Transformation of Finance and Insurance” is a special issue that explores the impact of emerging technologies on the finance and insurance sectors. It highlights how digital transformation, driven by technologies like AI, blockchain, cloud computing, big data, and IoT, is reshaping these industries. The issue includes several papers that offer insights into different aspects of risk within the digital transformation process.

Supervision and Risk Management: One paper discusses the development of stress tests tailored for fast-growing firms and fintech companies in the UK to enhance supervision and risk management practices.

Regulations for Robo-Advisors: Another paper evaluates the effectiveness of regulations governing robo-advisors in insurance distribution to ensure their ethical and responsible use.

Risk-Return Relationship in Fintech: There’s an analysis of the dynamic relationship between risk and return in India’s fintech market, with a focus on price volatility and its implications for stock investors.

Systematic Review: A systematic review of the literature provides an overview of the risk landscape in fintech, highlighting publication trends, journal productivity, and the emergence of risk categories, emphasizing the need for a comprehensive legislative framework.

Overall, this special issue provides valuable insights into the risks and risk management strategies associated with the digital transformation of finance and insurance. It’s intended to benefit researchers, practitioners, and policymakers in understanding and addressing the challenges and opportunities brought about by technological advancements in these sectors. The authors express their gratitude to the contributors and the academic and professional community for their support in creating this resource.

 

 

 

 

 Methods of State’s Reaction to Risks of State Finances Management

 

Irizepova (2015) discusses the importance of managing state finances and the need for risk management in this process, especially in the context of global economic uncertainty. It highlights the role of financial reserves in managing these risks and the different strategies for handling them. The concept of risk and uncertainty is discussed, and it is emphasized that state financial reserves aim to minimize risks to a manageable level. The text concludes by noting that the creation and use of state financial reserves should result in a positive financial outcome and sustained economic growth. Overall, it underscores the significance of state financial reserves in ensuring economic stability and managing financial risks.

 

 

Basic Statistics for Risk Management in Banks and Financial Institutions

 

Chherawala (2023) states the “Basic Statistics for Risk Management in Banks and Financial Institutions” by Arindam Bandyopadhyay focuses on demystifying fundamental quantitative concepts in the context of risk measurement. It provides practical applications of statistical and econometric methods in the field of risk management in banks and financial institutions. The book begins with an overview of risk management in the banking sector and then delves into various statistical and econometric topics, including descriptive statistics, probability theory, probability distributions, inferential statistics, multivariate analysis, validation tools, time series forecasting, and simulation techniques. The book emphasizes the importance of using statistical and econometric models to quantify and manage financial risks in the banking industry, which is essential for regulatory compliance and strategic decision-making. It covers a range of topics, from credit scoring models to time series regression and model validation. While the book primarily focuses on credit risk, it provides a solid foundation for understanding quantitative risk management concepts. The author uses real-world examples and econometric tools to illustrate the concepts, making it a valuable resource for risk managers, banking regulators, and students of quantitative finance.

 

 

 

Supply Chain Risk Management in a Digital Era: Evidence from SMEs of Clothing Retailers in Australia

Mamun (2023) explains that this text appears to be an excerpt from a research paper or article that discusses the role of small and medium-sized enterprises (SMEs) in global economies, with a specific focus on the clothing retailing SMEs in Australia. The author highlights the significance of SMEs in terms of employment and their contribution to the GDP, while also acknowledging the challenges they face, especially in managing supply chain risks in the digital era.

The text outlines the research questions addressed in the study, which primarily revolve around identifying major supply chain risks experienced by Australian clothing retailing SMEs and how these SMEs manage these risks. It briefly discusses the methodology used for the research, involving semi-structured interviews with participants from these SMEs.The literature review section of the text delves into concepts related to supply chain risk and supply chain risk management, including the identification, assessment, mitigation, and monitoring of risks in supply chains. It emphasizes the importance of proactive and reactive strategies for managing risks.Additionally, the text acknowledges the challenges SMEs face in implementing effective supply chain risk management practices, citing the lack of research in this area. It also highlights the scarcity of empirical studies on clothing retailing SMEs in Australia. This text provides an overview of the research focus and methodology of a study that explores supply chain risks and their management in Australian clothing retailing SMEs. It emphasizes the importance of understanding how SMEs handle supply chain risks and highlights gaps in the existing literature that this study aims to fill.

 

 

 

Exploring Risks and Issues Related to Policy Making and Regulation in FinTech

Benlala, M. A. (2023) this paper explores the application of FinTech (Financial Technology) in various areas, such as payment services, investment, insurance, asset management, and credit assessment. It highlights the potential benefits, including cost reduction, enhanced efficiency, and financial inclusion, enabled by technologies like artificial intelligence (AI) and machine learning. However, it also identifies several risks and challenges associated with FinTech, including data privacy, fairness, regulatory compliance, explainability of AI models, and systemic risks.

The paper recommends proactive policies and regulations to address these issues, such as disclosure requirements, model governance frameworks, accountability measures, and human oversight of AI systems. It mentions international and national efforts to regulate AI and FinTech, emphasizing the need for regulations that balance innovation and consumer protection while maintaining trust in these technologies.

 

 

Financial Literacy and Risk Management: A Study on Small Independent Women Entrepreneurs

Maharana, & N., Ganesh et al (2023)This study focuses on the critical role of financial literacy for small, independent women entrepreneurs in India and how it relates to their ability to manage business risks effectively. It emphasizes that while women entrepreneurs contribute significantly to the economy, they often lack financial literacy, which hinders their risk management practices. The study aims to measure financial literacy levels, identify risk management practices, explore the relationship between financial literacy and risk management, and suggest strategies for improvement. The hypotheses suggest that higher financial literacy leads to better risk management, different sectors may have varying risk management practices, and financial resources influence risk management effectiveness. The study surveyed 139 women entrepreneurs in India using structured questionnaires and employed statistical analysis for insights.

Conclusion

The conclusion of these various texts on risk management underscores the critical importance of risk management in different fields and contexts. Effective risk management is vital for ensuring the stability and success of businesses, healthcare services, financial systems, and other industries. It involves a nuanced understanding of the interplay between factors such as governance, financial incentives, and clinical risk in healthcare, as well as distributive justice in finance. Managing risks requires comprehensive strategies, data analysis, and the adoption of modern technologies like artificial intelligence and machine learning. The evolving landscape of digital transformation, especially in finance and insurance, brings new risks that must be addressed through robust risk management practices and regulations. In addition, it’s crucial to consider the role of state financial reserves in managing risks, and the need for financial literacy in risk management, especially for small independent entrepreneurs. These texts collectively highlight that risk management is a multifaceted discipline that is indispensable in safeguarding individuals, organizations, and economies against various uncertainties and challenges.

References

 

1. Benlala, M. A. (2023). Exploring risks and issues related to policy making and regulation in FinTech. Perspectives of Law and Public Administration, 12(2), 249-255. Retrieved from https://www.proquest.com/scholarly-journals/exploring-risks-issues-related-policy-making/docview/2834503583/se-2
2. Chherawala, T. (2023). Basic statistics for risk management in banks and financial institutions. Prajnan, 51(4), 413-416. Retrieved from https://www.proquest.com/scholarly-journals/basic-statistics-risk-management-banks-financial/docview/2843448489/se-2
3. Fenn, P., & Egan, T. (2012). Risk management in the NHS: Governance, finance, and clinical risk. Clinical Medicine, 12(1), 25-28. Retrieved from https://www.proquest.com/scholarly-journals/risk-management-nhs-governance-finance-clinical/docview/1025127723/se-2
4. Irizepova, M. (2015). Methods of state’s reaction to risks of state finances management. European Research Studies, Suppl. Special Issue on “the Role of Clustering in Provision of…, 18(3), 129-136. Retrieved from https://www.proquest.com/scholarly-journals/methods-states-reaction-risks-state-finances/docview/1779198447/se-2
5. Jajuga, K. (2023). Data analysis for risk Management—Economics, finance and business: New developments and challenges. Risks, 11(4), 70. doi: https://doi.org/10.3390/risks11040070
6. Kolb, R. W. (2011). Risk management and risk transfer: Distributive justice in finance. The Journal of Alternative Investments, 13(4), 90-98, 8. Retrieved from https://www.proquest.com/scholarly-journals/risk-management-transfer-distributive-justice/docview/863261367/se-2
7. Lev, B. (1999). Risk management in project finance and implementation. Interfaces, 29(2), 133-135. Retrieved from https://www.proquest.com/scholarly-journals/risk-management-project-finance-implementation/docview/217137048/se-2
8. Maharana & Ganesh ET AL (2023). Financial literacy and risk management: A study on small independent women entrepreneurs. IUP Journal of Financial Risk Management, 20(1), 5-24. Retrieved from https://www.proquest.com/scholarly-journals/financial-literacy-risk-management-study-on-small/docview/2865584484/se-2
9. Mamun (2023). Supply chain risk management in a digital era: Evidence from SMEs of clothing retailers in Australia. Journal of Risk and Financial Management, 16(4), 242. doi: https://doi.org/10.3390/jrfm16040242
10. Rupeika-Apoga & Marano (2023). The risk landscape in the digital transformation of finance and insurance. Risks, 11(7), 129. doi: https://doi.org/10.3390/risks11070129