Risk Management Mechanism Research Articles

Can directors’ and officers’ liability insurance improve corporate ESG performance?

Directors’ and Officers’ liability insurance (abbreviated as “D&O insurance”) was born in the United States in the 1930s and has been widely used in Western countries. In contrast, China introduced D&O insurance in 2002, and its development has been relatively slow. With the revision and improvement of Chinese regulatory laws and regulations, such as the new Securities Law in March 2020, which further regulates the obligations and responsibilities of corporate management, and increases the penalties for information disclosure violations of listed companies, the risk to directors and executives performing their duties is promoted. This makes D&O insurance the focus of China’s capital market, with huge potential for future development. Therefore, it is of urgent practical importance to study the impact of director liability insurance on corporate governance in China. At the same time, D&O insurance, as an effective risk management mechanism, has not yet reached a unified conclusion in the academic circles on its corporate governance effectiveness. On the one hand, D&O insurance may encourage directors and senior executives to be proactive to enhance the company’s market value by taking risks, and on the other hand, it may induce opportunistic behavior of managers and reduce the company’s value. Under the new development form, analyzing and researching the governance effect of D&O insurance from different angles will help to provide a theoretical basis for its further development and popularization in China’s capital market. Thus, using a sample of Chinese A-share listed companies from 2011 to 2020, this study investigates the impact of D&O insurance on corporate ESG performance. The results show that D&O insurance significantly improves corporate ESG performance. Additional analysis suggests that the contribution of D&O insurance to ESG performance is achieved by improving independent director function-performing effectiveness and increasing corporate risk-taking. The findings of this paper have policy implications for a better understanding of the governance role of D&O insurance, encouraging companies to improve corporate ESG performance.

Agricultural Insurance, Climate Change, and Food Security: Evidence from Chinese Farmers

As an effective risk management mechanism, agricultural insurance can reduce the risk of uncertainty in agricultural production and guarantee food security. Based on Chinese provincial panel data from 2003 to 2020, this study uses the Entropy Method to measure food security and systematically examines the impact of climate change and agricultural insurance on food security as well as its mechanisms. The present study found that climate change, especially extreme temperatures, has a significant negative impact on food security and food production. The promotion effect of agricultural insurance on food security increases with increased investments in technology, education, and other factors. Furthermore, our findings suggest the presence of geographical variations in the contribution of agricultural insurance to ensuring food security, with greater coverage in major food-producing regions. Additionally, maize yields are better protected by agricultural insurance than wheat and rice yields. To encourage sustainable agricultural development, the Chinese government should set up a diversified subsidy scheme with various planting scales and plant structures.

Social Responsibility, Risk Management and Financial Performance of Military Enterprises

How to make a benign interaction between military enterprises’ social responsibility and financial performance is of great significance for military enterprises to actively undertake social responsibility, but the academic research on corporate social responsibility and financial performance has not reached a consistent conclusion, and there is a lack of intermediate variables in the study of the relationship between the two. Taking the listed companies of the A-share military industry in 2011-2019 as the research sample, the relationship between military enterprise social responsibility and financial performance and the role mechanism of risk management were explored. It is found that the social responsibility of listed military enterprises positively affects financial performance; corporate social responsibility will promote corporate risk management, which can significantly improve corporate financial performance, that is, risk management plays an intermediary role between corporate social responsibility and financial performance. The research conclusion provides practical guidance and experience reference for military enterprises to clarify the relationship between social responsibility and financial performance and its functional mechanism.

Introduction of a Corporate Security Risk Management System: The Experience of Poland

To ensure the economic security of companies, it is necessary to introduce a risk management system based on the use of various tools, especially financial ones. The purpose of the article is to scientifically substantiate the paradigm of integration of the risk management mechanism into the system of economic security in companies on the basis of risk-oriented management. The main study method was an online survey of 50 Polish companies in January–April 2021 using a developed questionnaire consisting of 40 questions. According to the results of the expert survey, it is determined that regardless of the type of economic activity of the enterprise, the main goal of introducing risk-oriented management is to preserve assets and increase the efficiency of financial and economic processes. The introduction of risk-oriented management is perceived as a tool to increase the value of the company and ensure the achievement of strategic goals. Fraud is a significant risk to the state of economic security for modern enterprises. To prevent the fact of fraud, taking into account the specifics of the operation of companies, it is suggested to conduct an annual examination. As a result, the suggested procedure should include an audit (audit of financial statements, forensics, transition to international financial reporting standards, audit of systems and processes), assessment (assessment for audit and reporting in accordance with international financial reporting standards, risk management assessment in accordance with international standards, assessment of the effectiveness of economic security), tax analytics (identification of tax risks, analysis of compliance with tax legislation, tax audit), and a due diligence procedure for investment objects.

Development of a Composite Project Performance Index for the New Engineering Contract (NECPPI) of construction projects in Hong Kong: a Delphi study

Over the past three decades, a basket of research studies on New Engineering Contract (NEC) has been conducted in the construction management discipline. In fact, there is adequate evidence that an increasing number of client organisations have been adopting a NEC approach to undertake their building and construction projects both locally and worldwide during the last three decades. With the perceived benefits that NEC brings about, research into the Key Performance Indicators (KPIs) to evaluate the success of NEC projects in construction becomes all the more important because it can help set a benchmark for measuring the overall performance level of NEC projects. Although there are some related studies and papers on this research area, few, if any, comprehensive and systematic studies have focused on developing a comprehensive, objective, reliable and practical performance evaluation model for NEC projects. A benchmarking model has been developed in this paper using the Delphi survey technique to objectively measure the performance of the Engineering and Construction Contract (ECC) of NEC projects in Hong Kong based on a consolidated KPIs’ conceptual framework for NEC projects. Four rounds of Delphi questionnaire survey were conducted with 16 construction experts in Hong Kong and the United Kingdom. The results revealed that the top seven weighted KPIs to evaluate the success of NEC projects in Hong Kong include: (1) time performance; (2) safety performance; (3) quality performance; (4) development of mutual trust and cooperation; (5) cost performance; (6) equitable risk management mechanism; and (7) project team satisfaction. A statistically significant consensus on the top seven weighted KPIs was also obtained. Finally, a composite Project Performance Index for NEC projects (NECPPI) in Hong Kong was derived to provide an all-round assessment of NEC project performance. Different NEC projects can now be assessed on the same basis for benchmarking purposes. Construction senior executives and project managers can thus use the Index to measure, evaluate and improve the performance of their NEC projects to strive for construction excellence. Although the NECPPI was established locally in Hong Kong, the research methodology could be replicated in other parts of the world such as the United Kingdom or other European countries to produce similar indices for international comparisons. Such and extension would aid the understanding of managing NEC projects across different geographic locations.

Resilience: Analyzing the Crisis Management of Ski Resorts in China

Resilience has become an important concept for the ski resorts of China, which have suffered heavy losses due to COVID-19. In order to help China's ski resort service industry successfully adapt to the crisis and achieve sustainable development, the goal of this paper is to develop the definition of resilience of the ski resort service industry through interviews based on the concept and general analysis framework of resilience. The ski resort resilience theory analysis framework is then constructed from the three basic elements (market, skiing, and stakeholders) and four system features (flexibility, adaptability, and collaborative learning ability). The results indicate several measures that can be taken to spread risk: enrich the product supply; eliminate risks and build a multi-agent networked industrial governance system; and establish a risk prevention and management mechanism based on a multi-organization alternative learning mechanism to overcome the difficulties encountered in the development of ski resorts.

The impact of operational disruptions on performance in surgical settings: moderating roles of risk management infrastructure and information exchange

PurposeDrawing on normal accident and high-reliability organizational theories, this study examines the impact of magnitude and likelihood of disruptions on surgical procedure performance. More importantly, the authors investigate the moderating role played by information exchange and risk management infrastructure in mitigating the negative effect of disruption on performance.Design/methodology/approachA nationwide multi-respondent survey was administered to operating room personnel to collect information on their experiences with disruptions experienced in surgeries. The survey data are analyzed to examine the relationship between operational disruptions and procedure performance. Additionally, the moderating roles of risk management infrastructure and information exchange on the relationship between disruptions and performance are investigated. The results obtained from the empirical analysis are validated using data from an ethnographic investigation of surgeries at a major hospital.FindingsThe results show that both the magnitude and the likelihood of a disruption adversely impact procedure performance. Interestingly, the authors find that risk management infrastructure and information exchange play different roles in mitigating the effect of disruptions on performance. The authors find that while risk management infrastructure helps mitigate the effect of magnitude of service disruptions, information exchange helps reduce the effects of likelihood of disruptions. The findings lend strong support to the theoretical assertions. By means of the participant–observer data collected from over 100 surgeries as part of the ethnographic investigation, the authors validate the key findings. The findings suggest that disruptions are common occurrences in surgical settings, but their performance impact may be lessened or altogether avoided with the proper information and risk management mechanisms in place.Originality/valueThis survey research extends the understanding of risk management by considering a context that is highly prone to disruptions. The authors adopt existing constructs pertaining to supply chain disruptions within this context and find new insights. The findings of the study show differential roles played by information exchange and risk management infrastructure in mitigating disruptions. This nuanced understanding provides directions for aligning efforts towards risk mitigation in surgical settings in a more focused way. This study supplements findings from survey data analysis with an examination of data collected by means of ethnographic investigation.

Adaptive confidence regions for indirect tracking of moving tumors in radiotherapy

Target motion in the course of radiotherapy is one of the largest factors affecting the treatment quality of highly dynamic sites such as lung. A critical component of real-time motion management is not only the prediction of tumor location at a future point in time but assessment of positional uncertainty for the purposes of margin adjustment and optimization of validationschemes. In this study, we propose to investigate the ability of a confidence estimator to accurately reflect the reliability of individual target position predictions and prospectively detect large prediction errors by relying exclusively on a surrogatesignal. This work uses a Bayesian framework for indirect tracking. While constant covariance estimates are commonly used to express the uncertainty of the models involved, in this study new adaptive estimates are derived from the surrogate behavior to reflect increasing uncertainty when the breathing conditions differ from the reference conditions observed during the training step. The accuracy of the resulting 95% predicted confidence regions (CRs) is evaluated on nine breathing sequences involving changes of respiratory types (free, thoracic, abdominal, deep). The breathing motions are collected simultaneously from a lung target and two different surrogate signals (an external marker and an anatomical location within the liver). Receiver operating characteristic (ROC) analysis is performed to evaluate the ability of the predicted uncertainty to prospectively detect large predictionerrors. Higher CR accuracy is obtained when using the proposed adaptive estimates over using constant estimations: on average over the cohort, the proportion of actual target positions lying within the 95% CR is increased by 40 and 35 p.p. with the internal and external surrogates. The time-dependent inflation of the CR width tends to match the magnitude variation of the prediction errors: the adaptive CR effectively enlarges when the target position cannot be predicted reliably, which corresponds to potentially high prediction errors. More precisely, the ROC analysis indicates that the proposed uncertainty estimate can detect if prediction errors are greater than 5 mm with on average high sensitivity (90%) and modest specificity (54% and 47% from internal and external surrogates, respectively). While relying exclusively on the surrogate motion characteristics being continuously monitored, the Bayesian framework coupled to adaptive uncertainty estimations can provide reliable CR able to detect large prediction errors. The findings of this study could be further used to automatically trigger risk management mechanisms prospectively.

Modelling and filtering for dynamic investment in the precious-metals market

ABSTRACT Taking financial positions on precious metals could serve as risk management mechanism against both inflation and economic downturn. The demand for precious metals depends on their consumption- and investment-asset role. We consider the accurate and efficient price modelling of gold, silver, platinum and palladium under a hidden Markov model (HMM) multivariate framework. The interplay of various computational implementation aspects is underscored. Recursive model parameter estimates are generated, which are then utilized to test several dynamic investment strategies. We consider the pure-switching, mixed-switching and mean-variance strategies. The pure switching strategy outperforms the other two strategies 61.76% of the time. Benchmarking against the asset-only strategy and within the 25-year data examined in our study, investing in palladium is found to be better than the above-mentioned strategies. A general mean-variance strategy for any number of assets is also presented in conjunction with a filtering-based parameter estimation for any number of HMM states.

Future of artificial intelligence and its influence on supply chain risk management – A systematic review

Supply Chain Risk Management (SCRM) is a rapidly growing field of research encompassing identification, assessment, mitigation, and monitoring of the risks or unexpected and unprecedented events. Among the researchers, there has been a significant focus on identifying, mitigating, and managing the risks that affect the supply chain (SC). Though the research on SCRM remains for an extended period, still the industries are facing difficulties in managing the SC risks. Also, the SC managers have begun to focus on decision-making based on numerous data sources for predicting the uncertainties more accurately to achieve a proactive and predictive intelligent risk management mechanism. These attributes make Artificial Intelligence (AI) and Machine learning (ML) suitable techniques in the SCRM field. The application of these techniques in SCRM is in a nascent stage. In this view, this paper presents a systematic and descriptive review of the literature and identifies the various AI and ML methods applied in different phases related to SCRM. Also, it investigates the different categories of SC risks and the existing articles based on the AI technique used. This analysis focuses on research articles related to SCRM from three scientific databases published between 2010 and 2021 for detailed study. Finally, this review provides unexplored and missing aspects in current research, challenges on implementing AI technologies, and describes promising avenues for the future.

Balkan countries on the way to the European Union: experience for Ukraine

Summary. Fluctuations that change the business environment, such as pandemics and hostilities, necessitate a change in the paradigm of business management, in which risk management and digitalization are the basis of competitive business models, which makes the topic relevant in today’s complex business realities. The aim of the article is to substantiate the institutional support of risk management and digital tools as a necessary component of business models in modern conditions. Research methodology. The article uses methods of systematic approach and structuring as a basis for identifying the main problems and trends in the development of risk management mechanism in the context of digitalization. And also used such general scientific methods as analysis, synthesis and dialectics. Novelty. The article identifies the dynamics of changes in risk management paradigms in the enterprise management system. It is substantiated that multilevel and multifaceted nature of risk requires study of the structure of risks and the mechanism of their impact on the enterprise through the prism of the institutional environment, which determines the features and specification of the transformation of the factor into a source of risk in a given period and territory. It is proposed to apply the coefficient of digitalization of business processes, which will determine the degree of dependence of the business process on digital threats. It is proposed to determine the institutional support for risk discrimination, through the results of institutions aimed at monitoring and identifying external business risks and those based on operational data on fluctuations in the economic system. Conclusions. The institutions of risk management in the conditions of digitalization are defined and characterized and the risks that threaten in these conditions are identified. Key global trends in corporate security have been studied. The digital tools such as cognitive computing, ERP and MES systems and SAS-style software for risk management and for building an effective business model in the face of new social challenges are described.

Developing a mechanism for agile risk management in telecommunications

Subject. The relevance of this topic is underpinned by the growing number of failures of agile projects due to realization of unique set of risks and the fact that standard agile practices neglect important risk management steps. The paper fills the research gaps in this area and addresses inefficiencies in explicit agile risk management frameworks. Objectives. The aim is to develop a risk control mechanism and tools for flexible projects implemented by information and communication industry (ICT) companies. Methods. The theoretical and methodological basis of the research was the explorations of domestic and foreign scientists in the field of risk management of agile projects. We also applied general scientific research methods, including data analysis and synthesis. Results. We developed the mechanism’s concept and the block diagram for scrum framework. They include risk controlling tools, like risk-based release planning, system of key risk indicators, and agile risk controlling, using the effectiveness evaluation tree. Unlike peers mentioned in existing studies, the mechanism provides a holistic approach to the agile risk management while keeping the agile spirit. It addresses risk governance issues, ensures integration and coordination of risk management activities, both inside the team and across the company, and provides for efficient tools. Conclusions. The developed mechanism can be adapted for other agile frameworks and can be applied by scrum masters and project managers in the ICT industry, as well as by the researches who are interested in further enhancement of agile risk management practices.

Market Mechanisms for Risk Management in Energy

Energy is a strategically important sector for the Bulgarian economy as significant public and private financial and human resources are concentrated in the sector. Energy resources represent about 20% of the imports and 15% of exports. The development of the sector is important for the consumption of energy resources, the management of which requires significant financial and material resources. Furthermore, sustainability of energy is one of the main objectives of the Europe 2030 strategy. In this context, the EU sets itself goals aimed at integrating European energy markets and thus ensuring energy security and improving energy efficiency. The need for a high degree of dynamism in the Energy sector is indisputable as it requires timely and adequate risk management measures to be taken. Thus, the paper aims to present how, through the application of various market mechanisms, prevention can be achieved and how it contributes to good risk management in the sector. The main tasks are: to identify the risk factors influencing energy security, to systematize them and to assess them. Emphasis is placed on the disclosure of market mechanisms and the new market regulations in the Energy law and resp. on the instrument for reducing energy risk. The main results are focused on summarizing guidelines for risk management in the energy sector.

SUSTAINABLE DEVELOPMENT OF STATES AND SOCIETIES IN THE CONTEXT OF GLOBAL WORLD PROCESSES

The article is devoted to the study of issues of sustainable development of the state and society, in the context of global processes taking place in the world. Very often most researchers, when considering the problems of SD, single out such spheres of the modern world as ecology, socio-political, economic and cultural. Based on the analysis of the factors influencing the provision of "SD", the author believes that the characteristic of all studies is the emphasis not on the stable state of a particular community, but on the potential of this community to implement qualitative changes that should ensure the survival of this community. In turn, the issues of practical implementation of SD require research and development of effective risk and security management mechanisms aimed at achieving the “development goals of the millennium”. The author in his article emphasizes that the existing concept of sustainable development does not give an answer on how to protect humanity from the economy of uneven growth, which in interstate relations leads to the onset of wars between them, and the uneven, one-sided distribution of income within the country between rich and poor leads to destabilization of the internal political situation. The time and reality of today, the challenges of today require new approaches to the development of criteria and mechanisms for sustainable development of countries and people, which were defined in the 2002 Action Plan in Johannesburg. The author notes that the current development of economic and socio-political processes in the world is characterized by a state of instability. Periodic financial and economic crises are typical in the field of economics. Theoretical concepts of the global social crisis, which were predictive before, have become a reality, and in different parts of the world they develop into political ones. Today, humanity is alarmed by the state of ecology, which has become a victim of consumeristic, unreasonable use of the biosphere. In this situation, the study of the problems and prospects of sustainable development (SD) is of great relevance and significance today.

A marginal indemnity function approach to optimal reinsurance under the Vajda condition

To manage the risk of insurance companies, a reinsurance transaction is among the myriad risk management mechanisms the top ranked choice. In this paper, we study the design of optimal reinsurance contracts within a risk measure minimization framework and subject to the Vajda condition. The Vajda condition requires the reinsurer to take an increasing proportion of the loss when it increases and therefore imposes constraints on the indemnity function. The distortion-risk-measure-based objective function is very generic, and allows for, for example, an objective to minimize the risk-adjusted value of the insurer’s liability, and for heterogeneous beliefs regarding the loss distribution by the insurer and reinsurer. Under a mild condition, we propose a backward-forward optimization method that is based on a marginal indemnity function formulation. To show the applicability and simplicity of our strategy, we provide three concrete examples with the Value-at-Risk: one with the risk-adjusted value of the insurer’s liability, one with an objective function that follows from imposing Pareto optimality, and one with heterogeneous beliefs. We conclude this paper with an empirical application with Danish fire insurance losses and the Value-at-Risk and the Tail Value-at-Risk.

Identification and analysis of key risk factors for prehospital delay in patients with stroke

BackgroundAlthough recent advances have been made in the treatment of acute stroke, only a few patients have received reperfusion therapy. Studies on prehospital delay in patients with stroke have revealed a wide range of associated factors in different countries. However, a unified risk management system for stroke remains unavailable. There are no published risk management systems to manage prehospital delay in stroke patients across China. AimThis study aimed to identify key risk factors that affect the prehospital delay risk prediction of acute ischemic stroke (AIS) patients and develop a crux of recommendations using the identified risk factors. MethodsPrehospital delay predictors were collected through literature and expert interviews. We also developed a risk assessment questionnaire via two rounds of expert inquiry. From October 2017 to July 2019, 447 patients admitted for AIS and 202 relevant medical personnel from the Heilongjiang province of China were recruited. The risk factors were analyzed using the Technique for Order Preference by Similarity to an Ideal Solution (TOPSIS) to extract those that significantly impacted prehospital delay. ResultsA total of seven key risk factors were extracted from the 22 factors that were evaluated. Of these factors, five were associated with the patient delay stage and two with the transportation delay stage. ConclusionsA multi-dimensional and whole-process risk management mechanism should be established for AIS patients. These patients should be advised to improve their risk coping ability and relevant departments should formulate complete medical treatment procedures and medical systems to ameliorate prehospital delay effectively.

Does risk governance mediate the impact of governance and risk management on banks’ performance? Evidence from a selected sample of Islamic banks

PurposeRelying on the agency theory and the financial intermediation theory, the purpose of this paper is to examine to what extent risk governance would improve corporate governance and risk management effectiveness. The paper especially investigates the mediating role that would have the risk governance mechanisms in explaining both of the following relationships: the corporate governance–the banks’ performance, and the risk management–the banks’ performance.Design/methodology/approachThis research uses the Baron and Kenny’s (1986) approach to investigate the mediating effect of risk governance; besides, the study refers to structural equation modeling in carrying out the appropriate panel regressions. The data collection was based largely on Bank scope Database, but some missing qualitative data were gathered manually from the banks’ annual reports available on the banks’ websites.FindingsThe study findings illustrate the significant role of risk governance mechanisms in improving both corporate governance and risk management’s effectiveness. Especially, this paper finds that risk governance is fully explaining the corporate governance–bank performance relationship, but risk governance would explain partially the risk management–bank performance relationship. Further, findings suggest that the internal corporate governance mechanisms seem to be more relevant than the external ones in improving the sample bank performance, and that risk management mechanisms seem to impede rather the sample bank performance.Practical implicationsThe findings would make an important contribution to the current debate on the need to reinvent the optimal organization of the bank’s board and directorates and would allow readers to develop more cost-effective governance and risk-management thinking. Besides, the findings may help bank deciders and boards to rationalize costs and to focus only on the relevant corporate governance and risk management mechanisms. Finally, findings might illustrate to regulatory instance the importance of recommending risk governance in their coming corporate governance guidance.Social implicationsThe global credit crisis of 2008 caused significant difficulties to financial institutions, so it would be worth enlightening practitioners and policymakers, even regulators, on the importance of considering the level of potential risk and risk monitoring as a key component in the decision-making process, to strengthen the stability and resilience of banks in an increasingly uncertain environment.Originality/valueThe issues raised in the paper are important in that Islamic banking is an integral part of the global banking and finance industry. This paper extends the knowledge of the potential importance of the new concept of risk governance with specific reference to Islamic banking industry peculiarities. It also provides a telling illustration of the need for the enhancements of the Basel Committee’s prudential requirements as well as the accounting and auditing organization for Islamic financial institutions and Islamic Financial Services Board set out especially regarding the consideration of risk in the strategic decision process.

Risk management of supply chains in the digital transformation era: contribution and challenges of blockchain technology

PurposeThe high degree of likely disruption challenges organizations at all levels to develop and implement innovative strategies. Ensuring supply chain continuity even during emergency and complex situations is critical for organizations. Therefore, this study explores some strategies adopted by firms based on innovation and blockchain-enabled digital transformation to reduce risk in their supply chain.Design/methodology/approachThis study follows the qualitative form of enquiry. The authors interviewed 26 professionals from the supply chain domain. After three-layered coding and mapping multiple layers to the data of interviews, the authors identified emerging themes and sub-themes through a thematic analysis.FindingsThe authors identified type of risks that can affect global supply chains along with both the role of blockchain and innovation culture in minimizing the degree of such risks and the challenges in adopting blockchain technologies. This led us to develop a framework to address supply chain risk through digital transformation through innovation and blockchain.Practical implicationsThis research offers exciting implications for practice by drawing on the insights gathered to facilitate supply chain risk management through innovation and blockchain applications for organizations that are strongly impacted by digital transformation practices around the world. The study also offers the utilization of a framework followed by propositions to reduce supply chain risks in the digital transformation era.Originality/valueThis study focuses on presenting a mechanism of supply chain risk management through the application of innovation and blockchain technology for the digital transformation of a value chain. Blockchain can offer an innovative platform to ready the supply chain for future dynamic situations.

Do Satellite Data Correlate with In Situ Rainfall and Smallholder Crop Yields? Implications for Crop Insurance

Adverse weather is one of the most prevalent sources of risk in agriculture. Its impacts are aggravated by the lack of effective risk management mechanisms. That is why resource-poor farmers tend to respond to weather risks by adopting low-capital investment, low-return, and low-risk agricultural practices. This challenge needs to be addressed with innovative risk management strategies. One of the tools that is gaining traction, especially in the developing countries, is weather-index-based insurance (WII). However, WII uptake is still low because of several constraints, one of which is basis risk. This study attempts to address this problem by evaluating the suitability of TAMSAT, CHIRPS, MODIS, and Sentinel-2 data for WII. We evaluated the first three datasets against in situ rainfall measurements at different spatial and temporal scales over the maize-growing season in a smallholder farming area in South Africa. CHIRPS had higher correlations with in situ measured rainfall data than TAMSAT and MODIS NDVI. CHIRPS performed equally well at 10 km and 25 km spatial scales, and better at monthly than daily and 16-day time steps (maximum R = 0.78, mean R = 0.72). Due to the lack of reliable historical yield data, we conducted yield surveys over three consecutive seasons using an objective crop cut method. We then assessed how well rainfall and NDVI related with maize yield. There was a poor relationship between these variables and maize yield (R2 ≤ 0.14). The study concludes by pointing out that crop yield does not always have a linear relationship with weather and vegetation indices, and that water is not always the main yield-limiting factor in smallholder farming systems. To minimize basis risk, the process of designing WII must include identification of main yield-limiting factors for specific localities. Alternatively, insurers could use crop water requirement methods to design WII.

«Green» Finance: The Concept and System

The paper is devoted to the concept of «green» finance. Based on the analysis of the points of view available on this issue, the author concluded that «green» finance can be defined using a narrow approach (as bonds, loans and other financial instruments aimed at financing activities to ensure sustainable development of the environment) and a broad approach (as the whole complex of economic relations related to financing measures to protect the environment and combat climate change). The paper also defines the types of social relations that make up «green» finance that are included in the subject of financial law, classifies mandatory payments related to ecology and the environment, concludes which payments can be classified as «green», highlights climate risks of financial organizations and types of «green» financial instruments. The author makes proposals for further improvement of the climate risk management mechanism in the financial market.