Exposure Of Assets Research Articles

Assessing the impacts of and resilience to Tropical Cyclone Bejisa, Reunion Island (Indian Ocean)

This paper highlights the high variability of the nature and severity of the impacts of Tropical Cyclone Bejisa (January 2014, category 3) along the 20-km-long beach–dune systems of the western coast of Reunion Island. Erosional impacts were reported on 17 out of 26 topographic transects, while nine transects exhibited accretion. Sediment loss and gain reached maximum average values of 1.23 and 0.36 m3/m of transect, respectively. Sediment deposition occurred on upper beaches and foredunes, which gained up to 1 m in thickness. After 1 year, beach resilience proved to be medium (from 0.4 to 0.8 m3/m) to high (>0.8 m3/m) on 40 % of transects, but some transects exhibited permanent dune loss. Marine inundation reached a maximum distance of 70.8 m from the vegetation line and a maximum elevation of 6.9 m above sea level. The indigenous vegetation showed high resistance to the impacts of the cyclone and rapid regeneration, whereas introduced species were lastingly damaged. The cyclonic waves damaged 18 seawalls protecting either public infrastructures or private properties, half of which had been reconstructed 3 months later. Severe damage was also caused to a marina built in the downstream section of a river. Importantly, this study emphasises the vicious-cycle effects caused by “coastal compression” that exacerbates the devastating impacts of cyclonic waves on beaches, vegetation and protection structures, encouraging coastal residents to strengthen engineered structures. In accretional areas, the reworking of sediment deposits by residents reduced the long-term benefits of sediment deposition. Such human-induced processes increase asset exposure and vulnerability.

Banking and Insurance Recapitalization During the 2007-2009 Credit Crisis

This paper explores the feedback loop between the intensity of financial intermediary recapitalization and a number of measures of credit and liquidity risk. We cover the entire 2007–2009 subprime crisis with a sample that includes the 97 largest banks and insurance companies on both sides of the Atlantic. We model the intensity of recapitalization by implementing a scale measure inspired by the Corrective Action system used by U.S. banking regulators. The proposed ordering starts with inaction, followed by dividend cuts, to issues of new equity, to bailouts. Our risk measures include toxic asset exposures, credit default swap spreads, and Merton-style probabilities of default. We show that there is a monotone relationship between the intensity of risk and the intensity of recapitalization across all firms and jurisdictions in the sample. We are able to simplify the large heterogeneity of regulations and business models across sectors and countries within a fairly simple and general classification scheme. This scheme distinguishes between individual bailouts, targeted at bankruptcy prevention, and more nuanced collective bailouts, which were more related to the prevention of systemic risk arising from potentially solvent institutions.

New prospects for the spatialisation of technological risks by combining hazard and the vulnerability of assets

Risk is currently considered as a function of hazard and the exposure of assets, depending on their vulnerability, on an area within which a disaster could occur. However, in France, technological risk management is shared between a technician management focused on hazard, where assets are identified only from direct exposure, and vulnerability assessment of the assets, which are rarely incorporated in their entirety. Early studies, which tried to take into account these two parts of management, are limited, as a result of incomplete identification of assets and their vulnerabilities. An absence or an inadequate combination between hazard and the vulnerability of assets is also frequently observed. Indeed, they are mainly based on the combination of territorial vulnerability through quantification of the hazard, which is not unproblematic: the characterisation of the hazard, translated into quality criteria in terms of technological hazards, is not a linear relation. To solve these problems, a geographical information system-based methodology is therefore suggested in this study, where hazard perimeters are combined with the vulnerabilities of the exposed assets in a qualitative way. It is based on a process that uses geospatial operations and a specific semiology to provide an efficient mapping of the global risk. This methodology could be applied to any kind of territory, hazard and assets, to produce operational and useful knowledge of technological risk cartography. It can also be considered as a first step to a more global Natech risk assessment, since floods may cause severe damages to the local industrial facilities and trigger major accidents involving human, material and environmental assets.

Climate change track in river floods in Europe

Abstract. A holistic perspective on changing river flood risk in Europe is provided. Economic losses from floods have increased, principally driven by the expanding exposure of assets at risk. Climate change (i.e. observed increase in precipitation intensity, decrease of snowpack and other observed climate changes) might already have had an impact on floods. However, no gauge-based evidence had been found for a climate-driven, widespread change in the magnitude/frequency of floods during the last decades. There are strong regional and sub-regional variations in the trends. Moreover, it has not been generally possible to attribute rain-generated peak streamflow trends to anthropogenic climate change. Physical reasoning suggests that projected increases in the frequency and intensity of heavy rainfall would contribute to increases in rain-generated local floods, while less snowmelt flooding and earlier spring peak flows in snowmelt-fed rivers are expected. However, there is low confidence in future changes in flood magnitude and frequency resulting from climate change. The impacts of climate change on flood characteristics are highly sensitive to the detailed nature of those changes. Discussion of projections of flood hazard in Europe is offered. Attention is drawn to a considerable uncertainty - over the last decade or so, projections of flood hazard in Europe have largely changed.

Which Financial Stocks Did Short Sellers Target in the Subprime Crisis?

​Tracing the SEC ban on the short selling of financial stocks in September 2008, this paper investigates whether such selling activity before the 2008 short ban reflected financial companies’ risk exposures in the subprime crisis. The evidence suggests that short sellers sold short stocks that had the greatest asset and insolvency risk exposures, and that the short selling of financial firms’ stocks was not significantly greater than that of non-financial firms. When the short ban was in effect, the market quality of financial stocks without subprime asset exposure had deteriorated to a larger degree than that of financial companies with subprime asset exposure. The findings imply that such a regulation may mute the market disciplining effects of investors and may also serve as a counterweight to any perceived macro or systemic risk reduction benefits resulting from such a ban.

Influence of fuels, weather and the built environment on the exposure of property to wildfire.

Wildfires can pose a significant risk to people and property. Billions of dollars are spent investing in fire management actions in an attempt to reduce the risk of loss. One of the key areas where money is spent is through fuel treatment – either fuel reduction (prescribed fire) or fuel removal (fuel breaks). Individual treatments can influence fire size and the maximum distance travelled from the ignition and presumably risk, but few studies have examined the landscape level effectiveness of these treatments. Here we use a Bayesian Network model to examine the relative influence of the built and natural environment, weather, fuel and fuel treatments in determining the risk posed from wildfire to the wildland-urban interface. Fire size and distance travelled was influenced most strongly by weather, with exposure to fires most sensitive to changes in the built environment and fire parameters. Natural environment variables and fuel load all had minor influences on fire size, distance travelled and exposure of assets. These results suggest that management of fuels provided minimal reductions in risk to assets and adequate planning of the changes in the built environment to cope with the expansion of human populations is going to be vital for managing risk from fire under future climates.

Seismically induced landslide hazard and exposure modelling in Southern California based on the 1994 Northridge, California earthquake event

Quantitative modelling of landslide hazard, as opposed to landslide susceptibility, as a function of the earthquake trigger is vital in understanding and assessing future potential exposure to landsliding. Logistic regression analysis is a method commonly used to assess susceptibility to landsliding; however, estimating probability of landslide hazard as a result of an earthquake trigger is rarely undertaken. This paper utilises a very detailed landslide inventory map and a comprehensive dataset on peak ground acceleration for the 1994 Mw6.7 Northridge earthquake event to fit a landslide hazard logistic regression model. The model demonstrates a high success rate for estimating probability of landslides as a result of earthquake shaking. Seven earthquake magnitude scenarios were simulated using the Open Source Seismic Hazard Analysis (OpenSHA) application to simulate peak ground acceleration, a covariate of landsliding, for each event. The exposure of assets such as population, housing and roads to high levels of shaking and high probabilities of landsliding was estimated for each scenario. There has been urban development in the Northridge region since 1994, leading to an increase in prospective exposure of assets to the earthquake and landslide hazards in the event of a potential future earthquake. As the earthquake scenario magnitude increases, the impact from earthquake shaking initially increases then quickly levels out, but potential losses from landslides increase at a rapid rate. The modelling approach, as well as the specific model, developed in this paper can be used to estimate landslide probabilities as a result of an earthquake event for any scenario where the peak ground acceleration variable is available.

On the relation between weather-related disaster impacts, vulnerability and climate change

Disasters such as floods, storms, heatwaves and droughts can have enormous implications for health, the environment and economic development. In this article, we address the question of how climate change might have influenced the impact of weather-related disasters. This relation is not straightforward, since disaster burden is not influenced by weather and climate events alone—other drivers are growth in population and wealth, and changes in vulnerability. We normalized disaster impacts, analyzed trends in the data and compared them with trends in extreme weather and climate events and vulnerability, following a 3 by 4 by 3 set-up, with three disaster burden categories, four regions and three extreme weather event categories. The trends in normalized disaster impacts show large differences between regions and weather event categories. Despite these variations, our overall conclusion is that the increasing exposure of people and economic assets is the major cause of increasing trends in disaster impacts. This holds for long-term trends in economic losses as well as the number of people affected. We also found similar, though more qualitative, results for the number of people killed; in all three cases, the role played by climate change cannot be excluded. Furthermore, we found that trends in historic vulnerability tend to be stable over time, despite adaptation measures taken by countries. Based on these findings, we derived disaster impact projections for the coming decades. We argue that projections beyond 2030 are too uncertain, not only due to unknown changes in vulnerability, but also due to increasing non-stationarities in normalization relations.

A Huiristic Method for Information Scaling in Manufacturing Organizations

Protecting information assets is very vital to the core survival of an organization. By increasing in cyber-attacks and viruses worldwide, it has become essential for organizations to adopt innovative and rigorous procedures to keep these vital assets out of the reach of exploiters. Although worldwide complying with an international information security standard such as ISO 27001 has been raised, with over 7000 registered certificates, few Iranian companies are under ISO 27001 certified. Also organization needs to perform a risk assessment in order to determine the organization's asset exposure to risk and determine the best way to manage this. The determination of risk within the methodology is based upon the standard formula, which the risk is calculated from the multiplication of the asset value, threats and vulnerability. The ISO 27001 requires is that 'An appropriate risk assessment shall be undertaken'. One of the main factors for risk assessment is identifying and scoring of Information asset in this process. Due to different values of asset in organizations, the main purpose of this study is to identify and investigate a weighted method to assign different values of assets in order to minimize vulnerability in manufacturing systems. This study also aims at improving asset value scoring by using heuristic methods. A real world case study was selected for implementation of this approach based on ISO27001` in Iran.

Comparisons of the Incentive for Insolvency under Different Legal Regimes

This paper compares, in the context of hazardous waste generation, the effects of joint and several liability on capital and production decisions to the effects of several only liability. Our main result shows that increased potential liability causes firms to decrease asset exposure, but may also lead firms to create less waste. First, we find that both several only and joint and several liability induce firms to go bankrupt more often and create more waste than is socially optimal. Then we find that, for a given level of funds, joint and several liability induces firms to go bankrupt more often and create more waste than several only liability. This implies that society will be responsible for a larger share of cleanup under joint and several liability than under several only liability. Finally, we show that firms with potentially higher liabilities for cleanup will raise less funds, creating smaller firms, and thus, the possibility of less waste generated overall.

Does Regulation Matter? Riskiness and Procyclicality in Pension Asset Allocation

We investigate the extent to which regulations governing investment, valuation and funding affect the riskiness of defined benefit pension funds' asset allocations. We compare the regulatory frameworks of public, corporate and industry pension funds in the United States, Canada and the Netherlands over 1992-2011. Derived from panel data analysis of a unique set of asset allocation details for close to 600 funds, our results highlight that regulatory factors are more economically significant than funds' characteristics in shaping their asset allocation. In particular, risk-based capital requirements and mark-to-market valuation are associated with a 7% lower risky asset exposure, regardless of market conditions. Most of the decline in investment risk-taking concerns equities. The exposure of a fund subject to a 100% funding requirement does not differ significantly from that of an unconstrained fund during normal times, but the constrained fund invests 2% less in risky assets during a financial crisis. In line with theoretical predictions, we find that risk-based capital requirements and minimum funding limits have different consequences for pension funds’ risk-taking during periods of financial market stress.

Flood risk and climate change: global and regional perspectives

A holistic perspective on changing rainfall-driven flood risk is provided for the late 20th and early 21st centuries. Economic losses from floods have greatly increased, principally driven by the expanding exposure of assets at risk. It has not been possible to attribute rain-generated peak streamflow trends to anthropogenic climate change over the past several decades. Projected increases in the frequency and intensity of heavy rainfall, based on climate models, should contribute to increases in precipitation-generated local flooding (e.g. flash flooding and urban flooding). This article assesses the literature included in the IPCC SREX report and new literature published since, and includes an assessment of changes in flood risk in seven of the regions considered in the recent IPCC SREX report—Africa, Asia, Central and South America, Europe, North America, Oceania and Polar regions. Also considering newer publications, this article is consistent with the recent IPCC SREX assessment finding that the impacts of climate change on flood characteristics are highly sensitive to the detailed nature of those changes and that presently we have only low confidence1 in numerical projections of changes in flood magnitude or frequency resulting from climate change.Editor D. KoutsoyiannisCitation Kundzewicz, Z.W., et al., 2013. Flood risk and climate change: global and regional perspectives. Hydrological Sciences Journal, 59 (1), 1–28.

Climate change and river floods in the European Union: Socio-economic consequences and the costs and benefits of adaptation

This study presents the first appraisal of the socio-economic impacts of river floods in the European Union in view of climate and socio-economic changes. The assessment is based on two trajectories: (a) no adaptation, where the current levels of protection are kept constant, and (b) adaptation, where the level of protection is increased to defend against future flooding events. As a basis for our analysis we use an ensemble-based pan-European flood hazard assessment for present and future conditions. Socio-economic impacts are estimated by combining flood inundation maps with information on assets exposure and vulnerability. Ensemble-based results indicate that current expected annual population affected of ca. 200,000 is projected to increase up to 360,000 due to the effects of socio-economic development and climate change. Under the no adaptation trajectory current expected annual damages of €5.5billion/year are projected to reach €98billion/year by the 2080s due to the combined effects of socio-economic and climate change. Under the adaptation trajectory the avoided damages (benefits) amount to €53billion/year by the 2080s. An analysis of the potential costs of adaptation associated with the increase in protection suggests that adaptation could be highly cost-effective. There is, however, a wide range around these central numbers reflecting the variability in projected climate. Analysis at the country level shows high damages, and by association high costs of adaptation, in the United Kingdom, France, Italy, Romania, Hungary and Czech Republic. At the country level, there is an even wider range around these central values, thus, pointing to a need to consider climate uncertainty in formulating practical adaptation strategies.

Small island developing states: coastal systems, global change and sustainability

The intent of this paper is to place the concepts of exposure, vulnerability, resilience and risk in the context of the consequences of global change for the sustainable development of small island developing states (SIDS). Many such states face a number of global climate change risks, such as an increase in the proportion of more intense storms, along with other global change threats that include energy security and costs. All these threats come on top of local development threats, such as increased run-off, often with increasing levels of contaminants due to unsustainable agricultural and industrial practices. When taken together, the resulting pressures on islands and their communities lead to significant increases in vulnerability to change due to reduced resilience to these changes. Vulnerability is also increasing as a result of contemporary processes that heighten the exposure of material and other assets. The capacity to address hazard risk also influences vulnerability. This includes the level of awareness of coastal hazards and exposure, and access to critical life support infrastructure, especially for people living in hazard-prone areas. Vulnerability and resilience are considered to be important integrating concepts when managing the local consequences of global changes. There are many initiatives that will help reduce the vulnerability and enhance the resilience of SIDS to such changes. These include improving risk knowledge and coastal resource and land use management, while also strengthening socio-economic systems and livelihoods. In this way, managing global change can be closely aligned with local development and humanitarian processes, thereby enhancing the overall sustainability of development processes and outcomes.

Multiple bank regulators and risk taking

The potential for banks to arbitrage between regulators exists both in the US, with its multiple federal banking regulators, and in Europe, due to multinational banking. This paper models multiple regulators that have an agency bias, which can give rise to a “race to the bottom”. The model is used to analyze the interaction between the regulatory equilibrium and several salient pre-crisis features: rising bank leverage; wholesale funding with asymmetric information; and increasing supervisional costs to disentangling bank asset exposures. Each of these raises bank risk taking on its own, but regulatory competition is shown to be an amplification mechanism.

A polygon-based modeling approach to assess exposure of resources and assets to wildfire

Spatially explicit burn probability modeling is increasingly applied to assess wildfire risk and inform mitigation strategy development. Burn probabilities are typically expressed on a per-pixel basis, calculated as the number of times a pixel burns divided by the number of simulation iterations. Spatial intersection of highly valued resources and assets (HVRAs) with pixel-based burn probability estimates enables quantification of HVRA exposure to wildfire in terms of expected area burned. However, statistical expectations can mask variability in HVRA area burned across all simulated fires. We present an alternative, polygon-based formulation for deriving estimates of HVRA area burned. This effort enhances investigations into spatial patterns of fire occurrence and behavior by overlaying simulated fire perimeters with mapped HVRA polygons to estimate conditional distributions of HVRA area burned. This information can be especially useful for assessing risks where cumulative effects and the spatial pattern and extent of area burned influence HVRA response to fire. We illustrate our modeling approach and demonstrate application across real-world landscapes for two case studies: first, a comparative analysis of exposure and area burned across ten municipal watersheds on the Beaverhead-Deerlodge National Forest in Montana, USA, and second, fireshed delineation and exposure analysis of a geographically isolated and limited area of critical wildlife habitat on the Pike and San Isabel National Forests in Colorado, USA. We highlight how this information can be used to inform prioritization and mitigation decisions and can be used complementarily with more traditional pixel-based burn probability and fire intensity metrics in an expanded exposure analysis framework.

A GIS Methodology to Assess Exposure of Coastal Infrastructure to Storm Surge & Sea-Level Rise: A Case Study of Sarasota County, Florida

Storm surge is the leading cause of loss of life and property from hurricanes. Recent research using geographical information system (GIS) technology has demonstrated sea level rise (SLR) will increase storm surge inundation zones. While effective and accepted GIS models exist for framing surge inundation there is a lack of depth information and consideration of SLR that may be critical for examining the exposure of coastal assets to current and future storm surge hazards. There is a need for a methodology that relates depth to inundation and asset exposure, and is supported by recent hazard vulnerability and resilience literature. Furthermore, new data has been collected that facilitates more detailed SLR modelling than available in previous research. Researchers provide a framework for GIS depth modelling of contemporary and SLR enhanced storm surge that is superior to two-dimensional inundation modelling for examining exposure of societal assets to storm surge and SLR in Sarasota County, Florida. The effectiveness of this framework is demonstrated in a GIS by comparing inundation modelling, depth modelling, and SLR modelling as applied to the exposure of flood-depth sensitive infrastructure in Sarasota County, Florida.

Projections of Future Extreme Weather Losses Under Changes in Climate and Exposure

Many attempts are made to assess future changes in extreme weather events due to anthropogenic climate change, but few studies have estimated the potential change in economic losses from such events. Projecting losses is more complex as it requires insight into the change in the weather hazard but also into exposure and vulnerability of assets. This article discusses the issues involved as well as a framework for projecting future losses, and provides an overview of some state-of-the-art projections. Estimates of changes in losses from cyclones and floods are given, and particular attention is paid to the different approaches and assumptions. All projections show increases in extreme weather losses due to climate change. Flood losses are generally projected to increase more rapidly than losses from tropical and extra-tropical cyclones. However, for the period until the year 2040, the contribution from increasing exposure and value of capital at risk to future losses is likely to be equal or larger than the contribution from anthropogenic climate change. Given the fact that the occurrence of loss events also varies over time due to natural climate variability, the signal from anthropogenic climate change is likely to be lost among the other causes for changes in risk, at least during the period until 2040. More efforts are needed to arrive at a comprehensive approach that includes quantification of changes in hazard, exposure, and vulnerability, as well as adaptation effects.

A New Method to Estimate Risk and Return of Nontraded Assets from Cash Flows: The Case of Private Equity Funds

AbstractWe develop a new methodology to estimate abnormal performance and risk exposure of nontraded assets from cash flows. Our methodology extends the standard internal rate of return approach to a dynamic setting. The small-sample properties are validated using a simulation study. We apply the method to a sample of 958 private equity funds. For venture capital funds, we find a high market beta and underperformance before and after fees. For buyout funds, we find a relatively low market beta and no evidence for outperformance. We find that self-reported net asset values significantly overstate fund values for mature and inactive funds.

Insurance Law and Economics Research for Natural Hazard Management in a Changing Climate

“The impacts of climate extremes and the potential for disasters result fromthe climate extremes themselves and from the exposure and vulnerability of humanand natural systems. Observed changes in climate extremes reflect the influence ofanthropogenic climate change in addition to natural climate variability, with changesin exposure and vulnerability influenced by both climatic and non climatic factors”.The IPCC emphasises that “Increasing exposure of people and economic assets hasbeen the major cause of long-term increases in economic losses from weather- andclimate-related disasters. Settlement patterns, urbanisation and changes in socio-economic conditions have all influenced observed trends in exposure and vulnerabilityto climate extremes”.