Integrated Risk Management Framework Research Articles

An Integrated Risk Management Framework for Global Supply Chains

In this study, a risk management framework is developed to support risk management decisions in global supply chains. The proposed framework covers all phases of risk management, namely, risk identification, risk miti-gation and control. In the risk identification phase of the framework, the supply chain is decomposed into either material-level or product-level sub-networks according to the decision maker’s preference. Afterwards, the most crit-ical sub-network is modelled to evaluate different risk mitigation strategies. In particular, a combination of redun-dancy and flexibility strategies is considered for risk mitigation. These strategies are evaluated by simulation models in terms of their effectiveness and efficiency. While inventory holding cost is used as efficiency measure, effective-ness of the strategies is measured by premium freight ratio. The proposed framework provides a comprehensive and reliable decision support since it covers all phases of risk management and relies on quantitative data, and statistical analysis in risk modelling. Moreover, it is flexible as it can be easily adapted to any change in supply chain environ-ment and strategy. In order to show the applicability of the framework, a practical demonstration is presented for a European automotive company. The results indicate that the proposed framework improves the supply chain perfor-mance in terms of efficiency and effectiveness.

A farmer-centric agricultural decision support system for market dynamics in a volatile agricultural supply chain

PurposeIn a volatile agricultural postharvest market, producers require more personalized information about market dynamics for informed decisions on the marketed surplus. However, this adaptive strategy fails to benefit them if the selection of a computational price predictive model to disseminate information on the market outlook is not efficient, and the associated risk of perishability, and storage cost factor are not assumed against the seemingly favourable market behaviour. Consequently, the decision of whether to store or sell at the time of crop harvest is a perennial dilemma to solve. With the intent of addressing this challenge for agricultural producers, the study is focused on designing an agricultural decision support system (ADSS) to suggest a favourable marketing strategy to crop producers.Design/methodology/approachThe present study is guided by an eclectic theoretical perspective from supply chain literature that included agency theory, transaction cost theory, organizational information processing theory and opportunity cost theory in revenue risk management. The paper models a structured iterative algorithmic framework that leverages the forecasting capacity of different time series and machine learning models, considering the effect of influencing factors on agricultural price movement for better forecasting predictability against market variability or dynamics. It also attempts to formulate an integrated risk management framework for effective sales planning decisions that factors in the associated costs of storage, rental and physical loss until the surplus is held for expected returns.FindingsEmpirical demonstration of the model was simulated on the dynamic markets of tomatoes, onions and potatoes in a north Indian region. The study results endorse that farmer-centric post-harvest information intelligence assists crop producers in the strategic sales planning of their produce, and also vigorously promotes that the effectiveness of decision making is contingent upon the selection of the best predictive model for every future market event.Practical implicationsAs a policy implication, the proposed ADSS addresses the pressing need for a robust marketing support system for the socio-economic welfare of farming communities grappling with distress sales, and low remunerative returns.Originality/valueBased on the extant literature studied, there is no such study that pays personalized attention to agricultural producers, enabling them to make a profitable sales decision against the volatile post-harvest market scenario. The present research is an attempt to fill that gap with the scope of addressing crop producer's ubiquitous dilemma of whether to sell or store at the time of harvesting. Besides, an eclectic and iterative style of predictive modelling has also a limited implication in the agricultural supply chain based on the literature; however, it is found to be a more efficient practice to function in a dynamic market outlook.

Integrated Risk Analysis of Aggregators: Policy Implications for the Development of the Competitive Aggregator Industry

One of the important goals of the EU is to ensure a secure, sustainable, and competitive energy system that is less dependent on external energy supply. Greater independence is planned to be achieved by diversifying energy sources, as well as investing in renewables and energy efficiency. One of the mechanisms is the demand response (DR) that provides a high level of energy independence for the consumer. In this paper, we explore perspectives of the development of DR with a mediating effect of the independent aggregators from an EU member state standpoint. We use a hybrid research methodology that combines instruments of strategic analysis, i.e., PESTLE framework and SWOT analysis, along with the integrated risk management framework in order to identify, evaluate and rank prominent risks to which this initiative is exposed. Interdependencies between the identified risk factors are also included and efficient mitigation measures are proposed. The findings of this exploratory research are aimed at developing the policies and strategies for the aggregators’ development in the medium term. The most emphasized risks detected in analysis are the investment risk, the legal risk, the risk of substitute technologies, the consumer behavior risk, the risk of opportunistic behavior and the risk of entry barriers.

An integrated FMEA and MCDA based risk management approach to support life extension of subsea facilities in high-pressure–high-temperature (HPHT) conditions

The majority of facilities installed in offshore oil and gas fields during the 1980s and 1990s were designed to operate in ‘normal’ conditions. However, during the operational life of the fields, some new high pressure/high temperature (HPHT) wells may be discovered and tied back to older facilities. Operating these facilities beyond their design parameters in harsh environments may lead to catastrophic failures, resulting in significant economic losses and environmental problems. Managing the risks associated with failure of ageing subsea facilities in HPHT environments is considered as a very complex and critical task. To overcome such challenge, there is a need for development of decision-making methods that are capable of estimating precisely the risks associated with HPHT conditions as well as prioritising the risk mitigation and remediation strategies. This paper aims to propose an integrated risk management framework – based on Failure Mode and Effects Analysis (FMEA) approach and a hybrid Multi-Criteria Decision Analysis (MCDA) model – for evaluating the risks and prioritising mitigation strategies over the extended lifetime of subsea facilities in HPHT environments. For the purpose of illustrating the model, a case study of subsea manifold and flowlines is provided and the results are evaluated and discussed. Our findings indicate that the proposed approach offers significant improvement to the classical risk management processes applied to subsea oil and gas facilities as it can assist asset managers, risk analyst, regulators and policy makers with a decision model which considers both subjective (qualitative) judgements and objective (quantitative) evaluation measures.

How enterprise risk management (erm) can affect on short-term and long-term firm performance: evidence from the Iranian banking system

Enterprise risk management (ERM) has emerged as a more integrated risk management (IRM) framework in recent years. Many studies have been conducted in recent years to determine the effects of ERM implementation on other parts of an organization. The purpose of this research was to explore the relationship between ERM implementation and organizational performance. The research sample consisted of Iranian banks that either had a license from the central bank of Iran (CBI) or were active in the stock market. A novel measure of ERM implementation was employed in this study. Furthermore, the return on equity (ROE) and Tobin's Q ratio were used as two measures of organizational performance. The results showed that there was a positive and significant relationship between ERM implementation and Tobin's Q ratio, whereas such a significant relationship was not observed between ERM implementation and ROE. The study findings suggested that the adoption of an ERM strategy influences the long-term performance of a firm, not its short-term performance.

Improving health and health care efficiency through risk management

It has been over a decade since the Institute of Medicine (IOM) reported a high prevalence of preventable adverse events due to medical error and emphasized the need for a national effort to make health care safe (1). Despite intense efforts to increase the safety within healthcare systems, the adverse event rate has not improved significantly (2-6). The question remains, why are we not observing a demonstrable and measurable clinical improvement? Fernández-Castelló and colleagues (7) pose a standardized approach to examine the clinical risks to be managed under the integrated risk management framework and conclude that the risk management framework is essential for the prevention of adverse events by allowing hospitals to continuously identify areas of risk, to manage uncertainties and ultimately optimize organizational readiness to addressing clinical risks.

Integrated Risk Management Framework for Tolerance-Based Mitigation Strategy Decision Support in Modular Construction Projects

AbstractManaging excessive geometric variability risks in modular components and assemblies represents a major challenge in construction projects because of incompatibility between process capabili...

Ensuring health and environmental protection in hydraulic fracturing: A focus on British Columbia and Alberta, Canada

Unconventional natural gas resources recovered using hydraulic fracturing (HF) is contributing to national energy self-sufficiency and could be a significant factor in the global transition to a low carbon economy. Using an integrated risk management framework, we conduct a comparative analysis of practices and review recommendations of a regulatory, economic, advisory, community-based, or technological nature for British Columbia and Alberta, Canada. Lessons learned from international assessments of risk issues are also considered. Overall, there is much less emphasis on potential impacts on human health than on the environment. The analysis also identifies a need for a strong and adequately resourced regulatory framework that works in concert with enhanced technological requirements; evidence-based emissions standards; regulated and/or community-based setbacks and buffer zones; operational surveillance, reporting, and disclosure of value-chain activities in an accessible and transparent way; community participation in the development of these mechanisms; and provision for legacy sites. Economic options such as performance-based taxes and fees, industry-funded studies, the role of carbon taxes, and cost allocations to protect or improve determinants of health are the least advanced option. This analysis provides support for the development of a risk management policy agenda with respect to broad and persistent HF risk management issues.

Toward performance-driven seismic risk monitoring for geothermal platforms: development of ad hoc fragility curves

Earthquakes, despite being a mostly natural phenomenon, may also be induced by a wide range of anthropogenic activities such as mining, fluid injection and extraction, hydraulic fracturing and geothermal reservoir processes. In recent years, the occurrence of induced and triggered seismicity and its potential impact on the built environment have heightened both public concern and regulatory scrutiny, motivating the need for an integrated risk management framework. Non-standard monitoring approaches provide valuable tools for mitigating the risk associated with earthquakes. These solutions include the use of advanced sensors and the implementation of performance-based rapid response systems for infrastructure, as well as monitoring the structural response of buildings and infrastructure in real time. Such technical solutions can be further used for validating damage forecasts determined by probabilistic approaches. The goal of this study is to establish a performance-driven monitoring system for induced seismicity. For this purpose, it is necessary to integrate analytical fragility curves in real time. These fragility curves can be derived by simplified vulnerability models that require input obtained from advanced exposure-monitoring techniques. Considering the case of induced seismicity, this also requires the expected damage to refer to non-structural components. Hence, the derived fragility curves are based on the non-structural damage criteria of typical residences. Therefore, a new approach is presented for defining analytical fragility curves of traditional or historic masonry structures, which can be found in large numbers near the geothermal platforms considered in this work.

Developing an integrated risk management framework for agricultural water conveyance and distribution systems within fuzzy decision making approaches

Irrigation canal networks, as the primary agricultural water conveyance and delivery systems, are exposed to a variety of hazards affecting the water distribution processes. This study, for the first time, develops a comprehensive risk management framework for the canal network through a Fuzzy Hierarchical method. In this regard, the risk is analyzed by a combination of probability, consequence, and vulnerability against identified hazards based on the hierarchical framework. The developed model is based on fuzzy numbers to consider the uncertainties arise from experts' opinion. To aggregate the calculated risk in the hierarchical framework, the Fuzzy Simple Additive Weighting (FSAW) approach was employed. To enhance the reliability of the water distribution system and decrease the risk of failure, six risk management alternatives are proposed based on the risk assessment results and the most significant hazards. To prioritize managerial scenarios, two sets of criteria were selected including quantitative criteria (consisting of cost of operation and risk reduction) and a qualitative set (compromising social and operational criteria). The risk management scenarios were prioritized based on two rational multi-criteria decision-making (MCDM) methods of a Technique for Order Preference by Similarity to Ideal Solution (TOPSIS) and Simple Additive Weighting (SAW). Regarding different degrees of importance of the criteria, a pair-wise comparison was conducted by a group of experts to determine the relative weight of the criteria. According to the risk assessment results, the riskiest hazards are poor maintenance, seepage, unexpected event, drought, and vandalism of the structure. Moreover, employing the MCDM model in risk-based decision-making reveals that “maintenance improvement” is ranked as the first scenario, with score values of 0.851 and 0.237 employing the SAW, and TOPSIS approaches, respectively.

Korean Housing Cycle: Its Implications for Risk Management (Factor-Augmented VAR Approach)

This paper proposes an integrated risk management framework that includes 1) measuring risk of credit portfolios, 2) implementing (macro) stress-test, and 3) setting risk limits by using the estimated systematic latent factor specific to capture the housing market cycle. To this end, we extract information from a set of real-estate market variables based on the FAVAR methodology proposed by Bernanke, Boivin and Eliasz (2005). Then, we show how to apply the estimated systematic factor to the risk management specific to the housing market in an integrated way within the Vasicek one-factor credit model. Our proposed methodology is very fitted to analyze risk of slow-moving and low-defaultable capitals such as alternative investments.

Development of methodological approaches to establishing an integrated risk management framework for leasing transactions in Ukraine

Based on studies of domestic and foreign researchers, the article gives a modified and extended classification of risks related to leasing transactions which includes a new classify cation attribute ‘by types of leasing activities’ (in terms of risk management). Risk mitigation techniques for leasing transactions are described in detail, as well as their essence, ways of introducing and expected outcomes. The advantages of securitization are summarized and key reasons for low efficiency of this method in the domestic leasing market are identified. For these reasons, the domestic stock market is less developed and Ukraine’s current legislation on leasing is imperfect.It is pointed out that success in development of Ukraine’s financial market relies on the growth of leasing along with the efficiency of financial and credit mechanism that supports leasing transactions and determines the quality of risk management framework as an integral part of such a mechanism.The process of risk management for leasing transactions is formalized. A comparative analysis of fragmentary and complex approaches applied in Ukraine towards establishing a risk management framework for leasing companies is undertaken. The paper justifies the necessity of establishing an integrated risk management framework for leasing transactions as part of financial and credit mechanism that supports leasing transactions.The need for establishing such a framework is driven by the following market trends: globalization; increased competition; company consolidation; product standardization; product life cycle decrease; technological innovation; increased attention to risks given by the state, society, stockholders and board of directors.It is stated that establishing an integrated risk management framework for leasing transactions involves the following progressive steps: setting goals and targets, identifying and evaluating risks, planning for potential risks, monitoring risks and introducing risk management process.The article highlights the main goal of an integrated risk management framework for leasing transactions, long-term tasks for achieving this goal, major function that the framework should perform and principles that it should preserve.

Statistical Transformation Indicators of Short-Term to Long-Term Using Flood Regional Coefficients (Case Study: East Azarbaijan Province, Iran)

Changing contexts in a long-term and short-term perspective should be managed within an integrated risk management framework that accounts for both temporary management strategies and permanent preventive measures to reduce the impact of natural hazard processes. In this study, statistical transformation indicators of short-term (20 year) to long-term (30 year) used flood regional coefficients. After the tests of data validation and the reconstruction of missing and outlier data, the data of 18 hydrometric stations were completed for 30 years (1985 to 2014). In the next phase, the return period values were prepared for 20-year and 30-year statistical periods (1985 to 2004 and 1985 to 2014) using the HYFA software. Thus the 20-year to 30-year ratio for various return period discharges obtained and these dimensionless values were plotted for the return periods of 2, 5, 10, 20, 50 and 100 years, also fitted the logarithmic trend line and the values of coefficients of the relationship were obtained. The statistics including average, standard deviation, coefficient of variation (CV), skewness coefficient (CS) and Kurtosis coefficient (CK) were calculated for 20-year data period for each station and we identified the statistics as independent parameters and the coefficients of A and B as dependent parameter, thus analyzed using linear multivariate regression, and regional factors were obtained. In the hydrometric station with 17-027 code, the discharge using the regional factors was calculated and compared with the discharge values of 30 years data. The results showed that there is little difference between the observed and estimated values from regional factors thus this method can be used in projects that require at least 30 years of data.

An integrated environmental risk assessment and management framework for enhancing the sustainability of marine protected areas: The Cape d'Aguilar Marine Reserve case study in Hong Kong

Marine protected areas (MPAs), such as marine parks and reserves, contain natural resources of immense value to the environment and mankind. Since MPAs may be situated in close proximity to urbanized areas and influenced by anthropogenic activities (e.g. continuous discharges of contaminated waters), the marine organisms contained in such waters are probably at risk. This study aimed at developing an integrated environmental risk assessment and management (IERAM) framework for enhancing the sustainability of such MPAs. The IERAM framework integrates conventional environmental risk assessment methods with a multi-layer-DPSIR (Driver–Pressure–State–Impact–Response) conceptual approach, which can simplify the complex issues embraced by environmental management strategies and provide logical and concise management information. The IERAM process can generate a useful database, offer timely update on the status of MPAs, and assist in the prioritization of management options. We use the Cape d'Aguilar Marine Reserve in Hong Kong as an example to illustrate the IERAM framework. A comprehensive set of indicators were selected, aggregated and analyzed using this framework. Effects of management practices and programs were also assessed by comparing the temporal distributions of these indicators over a certain timeframe. Based on the obtained results, we have identified the most significant components for safeguarding the integrity of the marine reserve, and indicated the existing information gaps concerned with the management of the reserve. Apart from assessing the MPA's present condition, a successful implementation of the IERAM framework as evocated here would also facilitate better-informed decision-making and, hence, indirectly enhance the protection and conservation of the MPA's marine biodiversity.

The Role and Relevance of Option Implied Volatility in Financial Markets

The research paper is an effort to review the relevance of option implied volatility in the modern day financial markets. Volatility indices such as VIX, VFTSE and India VIX act as efficient predictors of market volatility over the near term. The role implied volatility plays in providing a measure of investors fears, explaining stock returns, credit default swap valuation, measuring bank risk, and understanding interest rate models for pricing contingent claims has been emphasized. The cases of Euro dollar option markets, S&P 100 index options, agricultural commodities on New York Board of Trade, sweet crude oil futures on NYMEX have been discussed in particular.This measure of investors fear gauge is found to be superior to logit regression and Altman’s Z. It would have been helpful in predicting the UK Banking Crisis 2008. This important determinant of volatility must be incorporated in risk management strategies to lead to a robust and integrated risk management framework.

An Integrated Risk Management Framework

Organizational risk management should not only rely on protecting data and information but also on protecting knowledge which is underdeveloped in many cases or measures are applied in an uncoordinated, dispersed way. Therefore, we propose a consistent top-down translation from the organizational risk management goals to implemented controls to overcome these shortcomings. Our approach adopted from the domain of IT security management allows to measure how well knowledge protection is actually pursued in organizations. This affects organizations' abilities to prove compliance to risk management standards, laws, guidelines, or frameworks and creates transparency throughout the whole knowledge protection processes. After introducing our integrated risk management framework, we demonstrate how the technical part of the framework can be implemented by using process mining in a case study of an Italian aerospace company.

Research on Integrated Risk Management Framework of Manufacturing Engineering Project

As the scale of investment on projects increases, manufacturing project integrated risk management becomes more important. The content and relationship of the integrated risk manufacturing management framework are discussed in the paper. The framework is composed of five parts which are the integration of risk management targets, total life cycle, processes and methods, organization and information system. In the different phase of total life cycle, depending on the risk management information system, project risk management organization who is in the form of virtue team promotes the risk management loop which is composed of the risk identification, risk evaluation, risk handling and risk monitoring (IEHM), to achieve the project targets. The integrated risk management framework is presented by the systematic method. The framework provides the basis for further development of integrated risk management.

Perceptions of Institutional Environment and Entry Mode

Multinational companies from emerging and developing economies (EMNCs) are becoming major players in the globalized world economy and are likely to wield growing influence on economic dynamics in OECD, emerging, and developing countries alike. This paper presents data gathered from Turkish firms investing in the transitional economies of the Central Asian Republics. Using an integrated risk management framework (Miller 1992) as a platform for investigating executives' perceptions of environmental uncertainty in entry mode decisions, we extend the framework through the addition of variables, such as corruption, which synthesise institutional level factors. The findings indicate that greater ethical-societal uncertainties result in a preference for joint venture over wholly owned subsidiary. There is a strong correlation between the perceived risk of intervention and joint venture entry mode. We find only limited support for the Uppsala internationalisation model.

Managing the risks of bovine spongiform encephalopathy: a Canadian perspective

This paper reviews the history of the risk management challenges faced by many countries and regions of the world which have had cases of bovine spongiform encephalopathy (BSE) from 1986 to the present. The paper first summarises the nature of prion diseases from a scientific perspective, and then presents an overview of the findings of an extensive set of country case studies, devoting special attention to the Canadian case. It derives from these studies the need to reconstruct the frameworks which have been guiding risk management decision making, using forma schemata based on a step-by-step approach. The paper presents and illustrates a revised format for an integrated risk management framework, including a set of specific and explicit objectives that should guide the use of this framework in practice, and concludes by raising policy issues that are currently outstanding with respect to the management of prion disease risks.

The process approach to the management of loan portfolios

Many factors impacted the credit risk environment in the past decade, the most significant of which were the Basel II Capital Accord requirements. Foremost in the financial industry’s focus was, and still is, the implementation of these requirements and their associated outcomes. In the aftermath of the Basel II implementation, credit risk managers’ focus will return to understanding the portfolio philosophy in managing their credit portfolios. They will be required to adapt an integrated risk management framework, taking into account the interdependence of various building blocks, data fields and model outcomes. This paper develops and proposes a portfolio approach to the management of loan portfolios within an integrated risk management framework. The significance of this approach for the credit portfolio risk management environment and its role in maximising shareholder value are highlighted.