Risk management and operations research: a review and introduction to the special volume

Abstract

Risks exist in all aspects of our business world. Many risks exhibit properties of interconnection and complexity besides uncertainty and dynamics, and therefore may be difficult to quantify (Arena et al. 2010, 2011; Wu and Olson 2010; Wu et al. 2014). Operations research provides many tools, such as game theory and optimization, for dealing with risks in today’s uncertain world (Wu et al. 2010, 2014). Over the past several decades, risk management and operations research have attracted a great deal of attention from both researchers and practitioners, especially in the emerging area of enterprise risk management (Wu and Olson 2009, 2010, 2013). Figure 1 presents the numbers of journal publications on “risk management and operations research” since 1994. The trend figure was created by using the key words “risk management and operations research” in ISIWeb of Science (SCI-EXPANDED). Data we used from ISI Web of Science include the data source Science Citation Index Expanded (SCI-EXPANDED). Figure 1 suggests that risk management and operations research have been popularized by the financial crisis during the last two decades and continue to be hot research areas. We are very pleased to offer this special volume on state-of-the-art research and development of quantitative analysis in the areas of risk management and operations research. Deutsch and Golany analyze an inspection game between a single inspector and several independent (potential) violators over a finite-timehorizon. In each period, the inspector gets a renewable inspection resource, which cannot be saved and used in future periods. The authors introduce an efficient way to determine a Nash equilibrium for this game, parametrically in the inspector’s global budget. The results indicate that there are situations where the players choose the same strategy even when the values of beta are changed. The authors also conduct an interesting review of business intelligence and risk management, and present relations between them and game theory. Hausken and Zhuang analyze the tradeoff between safety and production. The government chooses safety effort and tax rate in the first stage, and then the company strikes a balance between safety effort and production in the second stage. Both players’ safety efforts mitigate