Social Media Analytics for Maintaining Financial Stability

Risk and uncertainty are disliked but inevitable. The nature of these has changed and new sources of risk have risen. To mitigate risk and maintain financial stability, the firms need to adapt. The world wide web and, within it, social media have had tremendous growth and wide coverage lately, making them determining forces in any economic activity. This has led to generation of large amount of data on myriad concerns. Recent developments in computing technology has thrown open the possibility of mining useful information from the enormous and dynamic data. The chapter outlines the growth of social media and social media analytics and its financial implications to businesses, consumers, and governments. It details how risk management and social media, two domains earlier considered more diverged than chalk and cheese are now inextricably linked and explains using various cases how social media analytics is used to manage risk and uncertainty. The authors also look at the emerging challenges with these developments.

The Effects of Macroprudential Policies on Financial Stability in Developing Countries

In this chapter, the concept of financial instability is examined in terms of the policy instruments used by central banks. Although the policy instruments used in each country differ according to the country conditions, it is thought that the common factor among developing countries with a current account deficit problem is exchange rate volatility resulting from excessive credit growth and short-term capital movements. In this context, Argentina, Brazil, Chile, Colombia, Hungary, Indonesia, India, Mexico, Poland, South Africa, and Turkey are examined with regard to the effects of macroprudential policies on financial stability for the period between Q2 of 2006 and Q2 of 2017 by using the time-varying panel causality test developed by Dumitrescu and Hurlin. The results of the analysis indicate that excessive credit growth is a cause of the current account deficit. The same findings are also valid for interest rate. There is no obvious link between the exchange rate and the current account deficit.

Fragility of the Spanish Banking System and Financial Exclusion

Since the outbreak of the financial crisis in 2007, Spain entered a period of wide-ranging economic and social changes. Spanish financial institutions have been implicated in the real-estate bubble, and they were highly exposed to uncertainty and the steady decline of real estate businesses. As a result, the Spanish banking system has undergone a major transformation process. It has been necessary to restructure many institutions, so today the sector is smaller, and it has been forced to rethink its business strategy to survive. The social cost of all these changes has been particularly high, and financial exclusion has increased in Spain from the beginning of the crisis. This chapter shows the changes that have taken place in the Spanish banking system from the beginning of the crisis, the social implications ensued, and the challenges currently faced by the new banking industry that has emerged since the crisis.

Maintaining Financial Stability in the Banking Sector

Maintaining financial stability in the banking sector through a well-functioning risk management system is a strategic approach in today's global world where the risks have become much more diversified than ever. This chapter was undertaken in order to investigate the risk management topic by focusing on the experiences learned from the banking crises up-to-date and implications of the Basel Accords which outlined capital adequacy standards to prevent such crises. With paying special attention to the case of Turkish banking system, main challenges and possible solutions are also discussed.

Financial Risk Analysis for Crude Oil Buried Pipeline System

Buried pipelines are the most lucrative deal in today's transportation for transmission of vital fluids and liquids. However, with the advent of disasters, the continuous flow through these indispensable systems gets hampered. The purpose of this chapter is twofold: one is to develop a simulation approach to capturing the effect of risk/disaster due to unforeseen events on buried pipeline, and the second is to gauge financial losses due to such uncertain events. A simulation model considering hoop, longitudinal, and radial stresses on continuous flow carrying buried pipeline subjected to uncertain and risky events is developed in CAESAR II engineering software. The authors performed statistical analysis to carry node-based analysis to describe the repair cost associated with the individual node or throughout the whole pipeline system under study. Although with a limitation in terms of model accuracy and reliability as the actual scenario could differ from the simulated model, the study outlines financial gain over total repair cost using simulation modeling approach in face of disruptions.

Behavioral Strategies to Achieve Financial Stability in Uncertain Times

The automatic use of heuristics, the effects of framing, and the tendency to procrastinate when combined with the risk and uncertainty inherent in the financial environment can lead to financial instability for ordinary investors. This chapter explores established behavioral tendencies with respect to financial decision making within the framework of behavioral economics: how and why heuristics are used to make decisions, how different choice frames influence decisions, the crucial impact of biases like loss aversion on decision outcomes. The chapter also explores critical factors that induce the tendency to procrastinate saving and investing. The chapter suggests strategies that investors can use to achieve long-term financial stability by achieving predetermined financial goals as well as protect their investments from depreciating in value in the context of financial market instability.

Farm Debt Waiver in India

Farm debt waivers have been introduced in India, from time to time, to provide relief to the indebted farmers. The chapter focuses on the viability of farm debt waiver in India—whether it serves as an ephemeral palliative (a temporary reassuring measure) or an enduring risk management tool (a permanent remedy to build resilience against a longstanding debt crisis)—for farmers by employing situation, actor, process, learning, action, performance (SAP-LAP) framework. Loan waivers occasionally appear as a quick fix to alleviate farmers' misery. They trigger moral hazard as the farmers make no attempts to repay the loans themselves with the expectation that an imminent waiver from the government would clear their debts, thus ruining the credit culture of the country. From a policy viewpoint, it is imperative to make agriculture sustainable by lessening inefficiencies, augmenting income, moderating costs, and affording protection through premeditated and well-defined insurance schemes.

Addressing Financial Risks and Uncertainties Through Financial Literacy Education

The world is full of financial risks and uncertainties even for those who have financial literacy. There are many factors to consider when planning financially: the stock market, hyperinflation, and climate change all play roles and are unpredictable. This chapter will focus on the actions that are being taken to establish financial literacy across the world and the impact these actions have on individual financial stability. Although financial literacy certainly cannot eliminate the risks and uncertainties that accompany unforeseen events, it is one way to prepare for these events. Even in times of normalcy, lack of financial literacy can put individuals at an increased risk of financial instability. This chapter presents a variety of recommendations and resources for financial literacy education as well as the risks and uncertainties that accompany their use.

The Threat of Ponzi Schemes

A flood of corporate fraud has hit the market in the most recent decade, resuscitating attention to the impact of these incidences on corporate administration and stock market responses. Of particular relevance are Ponzi schemes that are considered practically the same as frauds. As more and more investors fall into the deep trap of Ponzi schemes, the situation is getting even more irrepressible. The reasons for a rise in the number of such swindles are mainly attributed to the breakdown in governance in different countries across the globe. This chapter dwells over the root causes of Ponzi schemes with specific focus on Asia and its developing regions. Through an in-depth study of the causes, the chapter looks to recommend possible solutions in mitigating the crisis, steps to ensure financial stability, and prevention of fraud risks.

Agricultural Risk Management Through Contract Farming Ventures

To build an agrarian economy that guarantees sustenance and food security to a vast populace, raw material for its growing industrial base, surpluses for exports, and a just, even-handed, and reasonable rewarding system for the farming community, “commitment-driven” contract farming is undoubtedly a feasible unconventional farming model that offers a reliable and consistent input service to farmers and delivers preferred farm produce to the contracting firms. Contract farming is used as a risk management tool. Facilitation of contract farming requires support in terms of flexibility in legislation, offering effective mechanism to resolve conflicts between contracting parties, having an arbitration body for resolving conflicts and providing quality checking facilities. Proper design of the contract is critical in making contract farming more successful. Education and training in connection with contract farming should be provided extensively to companies and other government agencies. Governments should endeavor to encourage contract farming by means of appropriate legislation and facilitation, through a demand-driven approach. The chapter aims to examine contract farming as a risk mitigation tool for farmers in general and small farmers in particular by considering diverse cases of successes/failures in developed and developing countries. While doing so, the authors have also delved into the historical evolution of contract farming, types of contracts, benefits, and apprehensions of the contracting parties, and they offer solutions to make contract farming successful.