Catastrophe risk, reinsurance and securitized risk-transfer solutions: a review

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Yang Zhao ◽  
Jin-Ping Lee ◽  
Min-Teh Yu
Keyword(s):  
Risk Management ◽  
Insurance Industry ◽  
Long Term Effects ◽  
Insurance Demand ◽  
Content Type ◽  
Risk Transfer ◽  
Natural Catastrophes ◽  
Structural Framework ◽  
Hybrid Solutions ◽  
The Impact

PurposeCatastrophe (CAT) events associated with natural catastrophes and man-made disasters cause profound impacts on the insurance industry. This research thus reviews the impact of CAT risk on the insurance industry and how traditional reinsurance and securitized risk-transfer instruments are used for managing CAT risk.Design/methodology/approachThis research reviews the impact of CAT risk on the insurance industry and how traditional reinsurance and securitized risk-transfer instruments are used for managing CAT risk. Apart from many negative influences, CAT events can increase the net revenue of the insurance industry around CAT events and improve insurance demand over the post-CAT periods. The underwriting cycle of reinsurance causes inefficiencies in transferring CAT risks. Securitized risk-transfer instruments resolve some inefficiencies of the reinsurance market, but are subject to moral hazard, basis risk, credit risk, regulatory uncertainty, etc. The authors introduce some popular securitized solutions and use Merton's structural framework to demonstrate how to value these CAT-linked securities. The hybrid solutions by combining reinsurance with securitized CAT instruments are expected to offer promising applications for CAT risk management.FindingsThe authors introduce some popular securitized solutions and use Merton's structural framework to demonstrate how to value these CAT-linked securities. The hybrid solutions by combining reinsurance with securitized CAT instruments are expected to offer promising applications for CAT risk management.Originality/valueThis research reviews a broad array of impacts of CAT risks on the (re)insurance industry. CAT events challenge (re)insurance capacity and influence insurers' supply decisions and reconstruction costs in the aftermath of catastrophes. While losses from natural catastrophes are the primary threat to property–casualty insurers, the mortality risk posed by influenza pandemics is a leading CAT risk for life insurers. At the same time, natural catastrophes and man-made disasters cause distinct impacts on (re)insures. Man-made disasters can increase the correlation between insurance stocks and the overall market, and natural catastrophes reduce the above correlation. It should be noted that huge CAT losses can also improve (re)insurance demand during the postevent period and thus bring long-term effects to the (re)insurance industry.

Do disclosure and transparency affect bank’s financial performance?

2019 ◽  
Vol 19 (6) ◽  
pp. 1344-1361
Author(s):  
Isaiah Oino
Keyword(s):  
Risk Management ◽  
Corporate Governance ◽  
Financial Performance ◽  
Financial Institutions ◽  
Content Type ◽  
Loan Portfolios ◽  
Cent Level ◽  
Transparency And Disclosure ◽  
The Impact

Purpose The purpose of this paper is to examine the impact of transparency and disclosure on the financial performance of financial institutions. The emphasis is on assessing transparency and disclosure; auditing and compliance; risk management as indicators of corporate governance; and understanding how these parameters affect bank profitability, liquidity and the quality of loan portfolios. Design/methodology/approach A sample of 20 financial institutions was selected, with ten respondents from each, yielding a total sample size of 200. Principal component analysis (PCA), with inbuilt ability to check for composite reliability, was used to obtain composite indices for the corporate governance indicators as well as the indicators of financial performance, based on a set of questions framed for each institution. Findings The analysis demonstrates that greater disclosure and transparency, improved auditing and compliance and better risk management positively affect the financial performance of financial institutions. In terms of significance, the results show that as the level of disclosure and transparency in managerial affairs increases, the performance of financial institutions – as measured in terms of the quality of loan portfolios, liquidity and profitability – increases by 0.3046, with the effect being statistically significant at the 1 per cent level. Furthermore, as the level of auditing and the degree of compliance with banking regulations increases, the financial performance of banks improves by 0.3309. Research limitations/implications This paper did not consider time series because corporate governance does not change periodically. Practical implications This paper demonstrates the importance of disclosure and transparency in managerial affairs because the performance of financial institutions, as measured in terms of loan portfolios, liquidity and profitability, increases by 0.4 when transparency and disclosure improve, with this effect being statistically significant at the 1 per cent level. Originality/value The use of primary data in assessing the impact of corporate governance on financial performance, instead of secondary data, is the primary novelty of this study. Moreover, PCA is used to assess the weight of the various parameters.

The impact of counterfeit risk management on healthcare supply chain performance: an empirical analysis

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Mauro Falasca ◽  
Scott Dellana ◽  
William J. Rowe ◽  
John F. Kros
Keyword(s):  
Risk Management ◽  
Supply Chain ◽  
The United States ◽  
Equation Modeling ◽  
Significant Positive Effect ◽  
Healthcare Organizations ◽  
Content Type ◽  
Overall Performance ◽  
The Impact ◽  
Positive Effect

PurposeThis study develops and tests a model exploring the relationship between supply chain (SC) counterfeit risk management and performance in the healthcare supply chain (HCSC).Design/methodology/approachIn the proposed theoretical model, HCSC counterfeit risk management is characterized by HCSC counterfeit risk orientation (HCRO), HCSC counterfeit risk mitigation (HCRM) and HCSC risk management integration (HRMI), while performance is represented by healthcare logistics performance (HLP) and healthcare organization overall performance (HOP). Partial least squares structural equation modeling (PLS-SEM) and survey data from 55 HCSC managers are used to test the research hypotheses.FindingsHCRO has a significant positive effect on HCRM, while HCRM has a positive impact on HRMI. With respect to HLP, HCRM has a nonsignificant effect, while HRMI has a significant impact, thus confirming the important mediating role of HRMI. Finally, HLP has a significant positive effect on the overall performance of healthcare organizations.Research limitations/implicationsAll study participants were from the United States, limiting the generalizability of the study findings to different countries or regions. The sample size employed in the study did not allow the authors to distinguish among the different types of healthcare organizations.Originality/valueThis study delineates between a healthcare organization's philosophy toward counterfeiting risks vs actions taken to eliminate or reduce the impact of counterfeiting on the HCSC. By offering firm-level guidance for managers, this study informs healthcare organizations about addressing the challenge of counterfeiting in the HCSC.

Enterprise risk management and sustainability of banks performance

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Babajide Oyewo
Keyword(s):  
Risk Management ◽  
Banking Sector ◽  
Management Practice ◽  
Enterprise Risk Management ◽  
Annual Reports ◽  
Banking Reform ◽  
Content Type ◽  
Enterprise Risk ◽  
The Impact

PurposeThis study investigates firm attributes (namely level of capitalisation, scope of operation, organisational structure, organisational lifecycle, systemic importance and size) affecting the robustness of enterprise risk management (ERM) practice, the extent to which ERM affects the performance of banks and the impact of ERM on the long-term sustainability of banks in Nigeria. This was against the backdrop that the 2012 banking reform was a major regulatory intervention that mainstreamed ERM in the Nigerian banking sector.Design/methodology/approachThe study employed a mixed methodology of content, trend and quantitative analyses. Ex post facto research design was deployed to analyse performance differential of banks, with respect to the implementation of ERM, over a 10-year period (2008–2017). A disclosure checklist developed from the COSO ERM integrated framework was used to assess the robustness of ERM by content-analysing divulgence on risk management in published annual reports. The banking reform periods were dichotomised into pre- (2008–2012) and post- (2013–2017) reform periods. Jonckheere–Terpstra test, independent sample t-test and Mann–Whitney test were applied to analyse a total of 1,036 firm-year observations over the period 2008–2017.FindingsResult shows that bank attributes significantly affecting the robustness of risk management practice are level of capitalisation, scope of operation, systemic importance and size. Performance of banks improved slightly during the post-2012 banking reform period. This suggests that as banks consolidate on the gains of ERM, benefits of the regulatory policy on risk management may be realised in the long run. Result also shows that ERM enhances long-term performance, connoting that effective risk management could serve as a competitive strategy for surviving turbulence that typically characterises the banking sector.Practical implicationsThe emergence of level of capitalisation, scope of operation, systemic importance and size as determinants of ERM provides empirical evidence to support the practice of reviewing the capital requirements for banking business from time to time by regulatory authorities (i.e. recapitalisation policy) as a strategy for managing systemic risk. Top management of banks may consider instituting mechanisms that will ensure risk management is given prominence. A proactive approach must be taken to convert risks to opportunities by banks and other financial institutions, going forward, to cope with the vicissitudes of financial intermediation.Originality/valueThe originality of the study stems from the consideration that it provides some new insights into the impact of ERM on banks long-term sustainability in a developing country. The study also contributes to knowledge by exposing the factors determining the robustness of risk management practice. The study developed a checklist for assessing ERM practice from annual reports and other risk management disclosure documents. The paper also adds to the scarce literature on risk governance and risk management.

Enterprise risk management and Solvency II: the system of governance and the Own Risk and Solvency Assessment

2020 ◽  
Vol 21 (4) ◽  
pp. 317-332 ◽  
Author(s):  
Pablo Durán Santomil ◽  
Luis Otero González
Keyword(s):  
Risk Management ◽  
Insurance Industry ◽  
Solvency Ii ◽  
Enterprise Risk Management ◽  
Insurance Companies ◽  
Legal Form ◽  
Content Type ◽  
Enterprise Risk ◽  
Solvency Assessment

Purpose The purpose of this paper is to analyze how enterprise risk management (ERM), the system of governance and the Own Risk and Solvency Assessment (ORSA) have been boosted with the entry of Solvency II. Design/methodology/approach For this analysis, the authors have undertaken a survey of chief risk officers (CROs) working in Spanish insurance companies. Findings The results show that Solvency II has definitely promoted ERM in the European insurance industry and improved the system of governance of the insurance companies, and that the perceived value of the ORSA for the companies is higher than the cost. It is clear that the quality of ERM implemented by companies is higher in those that face more complex risks and with greater interdependencies – that is, larger companies, foreign insurers and insurers with several lines of business – but is unaffected by the legal form of the entity (mutual/corporation). Originality/value This study conducts primary research with surveys of CROs and develops a measure of the quality of ERM implemented by insurance companies.

The Impact of Reinsurance

2021 ◽  
Author(s):  
Niels Viggo Haueter
Keyword(s):  
Economic Growth ◽  
Developing Countries ◽  
Insurance Industry ◽  
Natural Catastrophes ◽  
Security Interest ◽  
Environmental Deterioration ◽  
Stabilizing Effect ◽  
The 1960S ◽  
The Impact

Reinsurance is perceived to have a stabilizing effect on the direct insurance industry and thereby on the economy overall. Yet, research into how exactly reinsurance impacts various areas is scarce. Traditionally, studying the impact of reinsurance used to be in the domain of actuaries; since the 1960s, they have tried to assess how different contract elements can provide what came to be called “optimal reinsurance.” In the 2010s, such research was intensified in developing countries with the aim to deploy reinsurance to support economic growth and security. Interest in reinsurance increased when the industry became more visible in the 1990s as the impact of natural catastrophes started being linked to a changing climate. Reinsurers emerged as spokespeople for climate-related issues, and the industry took a lead role in arguing in favor of implementing measures to reduce environmental deterioration. Reinsurers, it was argued, have a vested interest in managing the impact of natural catastrophes. This triggered discussions about the role of reinsurance overall and about how to assess its impact. In the wake of the financial crisis of 2007 and 2008, interest in reinsurance again surged, this time due to perceived systemic impacts.

Comparing co-production approaches to dynamic risk assessments in a forensic intellectual disability population: outcomes of a clinical pilot

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Deborah J. Morris ◽  
Elanor L. Webb ◽  
Inga Stewart ◽  
Jordan Galsworthy ◽  
Paul Wallang
Keyword(s):  
Risk Management ◽  
Intellectual Disability ◽  
Management Plan ◽  
Risk Assessments ◽  
Risk Management Plan ◽  
Convenience Sample ◽  
Content Type ◽  
Dynamic Risk ◽  
Management Plans ◽  
The Impact

Purpose A co-produced clinical practice that aims to improve outcomes through a partnership with service users is becoming increasingly important in intellectual disability (ICD) services, yet these approaches are under-evaluated in forensic settings. This study aims to explore and compare the feasibility of two approaches to co-production in the completion of dynamic risk assessments and management plans in a secure setting. Design/methodology/approach A convenience sample of adults admitted to a secure specialist forensic ICD service (N = 54) completed the short dynamic risk scale (SDRS) and drafted risk management plans under one of two conditions. In the first condition, participants rated the SDRS and risk management plan first, separately from the multidisciplinary team (MDT). In the second condition, participants and MDTs rated the SDRS and risk management plan together. Findings In total, 35 (65%) participants rated their risk assessments and 25 (47%) completed their risk management plans. Participants who rated their risk assessments separately from the MDT were significantly more likely to complete the SDRS (p = 0.025) and draft their risk management plans (p = 0.003). When rated separately, MDT scorers recorded significantly higher total SDRS scores compared to participants (p = 0.009). A series of Mann-Whitney U tests revealed significant differences between MDT and participant ratings on questions that required greater skills in abstraction and social reasoning, as well as sexual behaviour and self-harm. Originality/value Detained participants with an intellectual disabilities will engage in their dynamic risk assessment and management plan processes. The study demonstrates the impact of different co-production methodologies on engagement and highlights areas for future research pertaining to co-production.

Beyond COVID-19 supply chain heroism, no dust settling yet – lessons learned at Rolls Royce about advancing risk management thinking

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Remko van Hoek ◽  
David Loseby
Keyword(s):  
Risk Management ◽  
Supply Chain ◽  
Lessons Learned ◽  
First Year ◽  
Multiple Time ◽  
Content Type ◽  
Manufacturing Operations ◽  
Time Horizons ◽  
Management Literature ◽  
The Impact

PurposeWhile there is a rich body of risk management literature and while there have been valuable theoretical advancements on the specific impact of the COVID-19 pandemic on risks, this paper aims to posit that at least four more advancements are needed.Design/methodology/approachThe co-author from Rolls Royce (RR) illustrates the risks experienced and risk management approaches taken in its manufacturing and supply chain operations both in the earlier stages of the pandemic as well as after the first year of the pandemic.FindingsThe COVID-19 pandemic offers a unique risk scenario that is beyond the scope of most existing risk management literature. The impact of the pandemic is very multi-faceted, not location specific but very global and experienced throughout the entire supply chain, across industries and over a much extended timeline with multiple time horizons. In manufacturing operations, there have been major instances of supply chain heroism in the first year of the pandemic and there is a lot more work ahead.Originality/valueThe authors' co-created paper enriches the perspective on COVID-19 research in manufacturing and supply chain operations by pointing at empirical opportunities, the need for more inter disciplinary research and the need to consider multiple time horizons.

Understanding the influence of lean and agile strategies on creating firms’ supply chain risk management capabilities

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Waqar Ahmed ◽  
Muhammad Zaki Rashdi
Keyword(s):  
Risk Management ◽  
Supply Chain ◽  
Empirical Evidence ◽  
Internal Control ◽  
Market Condition ◽  
Equation Modeling ◽  
Supply Chain Risk ◽  
Content Type ◽  
Management Capabilities ◽  
The Impact

Purpose Lean and agile strategies are two basic supply chain paradigms that strategist decouples based on their internal and external environment. This study aims to identify the influence of market orientation (MO) and quality management (QM) deployment on the supply chain strategies. Furthermore, this study also seeks empirical evidence of the impact of these core strategies on creating risk management capabilities. Design/methodology/approach Quantitative research technique is deployed to explain the phenomenon. The data was gathered through a structured scale questionnaire from supply chain professionals working at different manufacturing firms. Valid data of 134 respondents is then analyzed through partial least squares structural equation modeling for further empirical understanding. Findings The outcome of the research indicates that MO capability; as an external drive is a key to make an operational strategy. QM as an internal control is more prone to formulating a lean strategy (LS). Another important finding is that LS does not complement risk management capabilities especially in an uncertain market condition. Practical implications The study suggested concrete implications for risk management through the right mix of lean and agile supply chain strategies. There are some good insights for the supply chain policy-makers working in a developing country. Originality/value This study will provide empirical evidence for managing supply chain risk through an effective strategy making.

Risk disclosure and risk governance characteristics: evidence from a developing economy

2020 ◽  
Vol 28 (4) ◽  
pp. 577-605 ◽  
Author(s):  
Shamsun Nahar ◽  
Mohammad Istiaq Azim ◽  
Md Moazzem Hossain
Keyword(s):  
Risk Management ◽  
Developed Countries ◽  
Business Environment ◽  
International Standards ◽  
Risk Governance ◽  
Developing Economy ◽  
Risk Disclosure ◽  
Content Type ◽  
Governance Practices ◽  
The Impact

Purpose The purpose of this paper is to explore to what extent risk disclosure is associated with banks’ governance characteristics. The research also focuses on how the business environment and culture may create a bank’s awareness of risk management and its disclosure. This study is conducted in a setting where banks are not mandated to follow international standards for their risk disclosures. Design/methodology/approach Using 300 bank-year observations comprising hand-collected private commercial bank data, the study uses regression analysis to investigate the influence of risk governance characteristics on risk disclosure. Findings This paper reports a positive relationship between risk disclosure and banks’ governance characteristics, such as the presence of various risk committees and a risk management unit. Practical implications Because studies are lacking on risk disclosure and risk governance conducted in developing countries, it is expected that this research will make a significant contribution to the literature and provide a foundation for further research in this field. Social implications This study complements the corporate governance literature, more specifically the risk governance literature, by incorporating agency theory, institutional theory and proprietary cost theory to provide robust evidence of the impact of risk governance practices in the context of a developing economy. Originality/value Previous studies on risk disclosure and governance determinants primarily involve developed countries. This paper’s contribution is to examine risk disclosure and risk governance characteristics in a developing country in which reporting according to international standards is effectively voluntary.

Bridging the gap between supply chain risk management and strategic technology partnering capabilities: insights from social capital theory

2018 ◽  
Vol 23 (4) ◽  
pp. 278-292 ◽  
Author(s):  
Irène Kilubi ◽  
Helen Rogers
Keyword(s):  
Social Capital ◽  
Risk Management ◽  
Supply Chain ◽  
Organizational Performance ◽  
Social Capital Theory ◽  
Supply Chain Risk Management ◽  
Supply Chain Risk ◽  
Capital Theory ◽  
Content Type ◽  
The Impact

Purpose As companies seek to continually innovate to remain globally competitive, they also need to be mindful of the impact of the potential associated supply chain risks. Hence, the purpose of this study is to explore the causal nexus of relationships linking supply chain risk management (SCRM) and strategic technology partnering (STP) capabilities (i.e. organizational capabilities, technological and innovative capabilities, learning and exploitation capabilities, complementary capabilities and network and partnership capabilities) as identified by Kilubi (2016). Design/methodology/approach The authors investigate STP capabilities that may positively influence SCRM and in turn foster organizational performance. By using conceptual theory building, the authors create a conceptual framework and use it to guide future investigation through research propositions. Social capital theory serves as the theoretical background. Findings Five STP capabilities have been identified as positive mediators for the relationship between SCRM and organizational performance, in particular flexibility and responsiveness. Originality/value This paper focuses on bridging the gap and identifying commonalities between two principal research disciplines, STP and SCRM, examining how these can be used to assist in the controlling and management of future risks. This study contributes to the ongoing development of SCRM and STP by integrating insights from social capital theory, supply chain management and strategic management.

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