Operational Risk Management Research Articles

Innovative tools for risk management of the production activities of agricultural enterprises in an institutional environment

The security of agricultural sector development is increasingly becoming a relevant issue in modern conditions, as the agricultural sector determines the sustainability of the economy and ensures the country’s food security. Growing risks, such as climate change, economic difficulties and geopolitical conflicts, highlight the need to improve the security of agricultural production systems, which makes the study relevant. The study aimed to conduct a systematic analysis of innovative tools for managing the risks of production activities of agricultural enterprises and their impact on the formation of secure development in the agricultural sector of Ukraine. To achieve this goal, the method of analysis and modelling was used. Study results indicate that innovative approaches to risk management have a decisive impact on the sustainability and efficiency of agricultural production systems. To achieve a stable level of safe development of agricultural enterprises, it is necessary to focus on the implementation of key areas, such as maintaining the food base at a level sufficient to ensure a healthy diet, ensuring an adequate level of effective demand for the population and eliminating dependence on imports, aimed at protecting the interests of domestic producers of agricultural raw materials. The study demonstrated that institutional factors of risk management form an integrated system, where efficiency depends on the implementation of specific strategies for the development of agricultural institutions aimed at introducing innovative tools into the production cycle of agricultural enterprises. Furthermore, due to the accumulation of large amounts of production, financial, logistical and innovative potential of agricultural enterprises in the Forest-Steppe and Polissia regions, the level of safe development of agricultural enterprises is significantly increasing. This indicates their high capacity for sustainable reproduction of production and making a significant contribution to the agricultural sector of Ukraine. The study is of practical importance for agricultural enterprises, research institutions and government agencies, which can use the results to improve risk management strategies and increase the level of security of agricultural sector development

The Association Between Physical Activity and Health Care Risk Management in Individuals With Disabilities.

Despite the increasing economic burden of people with disabilities (PWDs) over time, the impact of physical activity on PWDs in the Republic of Korea (ROK) remains relatively unexplored. Thus, we examined the association between physical activity and disease risk, health care utilization, and expenditures for PWDs in the ROK. We considered gender differences across eight diseases using the National Health Insurance (NHI) panel data from 2013 to 2019. The sample consisted of PWDs who underwent regular medical check-ups and were aged 40 years and above, aligning with the NHI's health screening program targeting beneficiaries in this age range. The final sample included 281 142 healthy PWDs. Among them, 44.1% (n = 124 061) engaged in physical activity, while the remaining 45.9% (n = 157 081) did not participate in any physical activity. The results show a negative association between physical activity and the incidence of various diseases among both genders. Health care utilization exhibited gender and disease-based variations, with men and women demonstrating higher utilization rates in the absence of physical activity. Health care expenditures also differed based on gender and disease, as men and women displayed higher costs in the absence of physical activity. Consequently, public policymakers should establish tailored activity programs for PWDs, adhering to activity guidelines designed for this population.

Research on human dynamics characteristics under large-scale stock data perturbation

The group behavior of financial and economic systems is the driving force behind many complex economic phenomena. A quantitative understanding of the behavior of the financial and economic systems is an important research topic in modern behavioral science. However, most of the existing research uses mathematical statistics and other traditional methods to mine the characteristics of financial data. Few of them integrate the group behavior of the financial and economic system with high-frequency stock data. In this paper, we innovatively integrate human behavior dynamics indicators with financial analyses. Based on the dynamic factors of 215,029,800 high-frequency financial data of 3364 stocks in 11 industries during the Sino-US trade war period, we construct a stock price volatility model to analyze the group behavioral characteristics of the stock market under different external disturbances. It is found that different types of stock prices and yields have different power rates and paroxysmal characteristics under different external disturbances. Meanwhile, the kinetic characteristics of stock returns are also significantly different. This paper applies the method of human group dynamics to study the evolution behavior of the financial system under external disturbance, which provides a new perspective for the study of stock price fluctuation and some practical guidance for the practical operation of financial risk management.

Bahasa Indonesia

Risk management is a series of procedures and methodologies used to identify, measure, monitor and control risks arising from bank business activities. However, however, risk remains a barrier to an activity or activities that we plan, because risk is also the possibility of causing unexpected or unwanted losses. This research discusses operational risk and how to implement operational risk management at the head office of BCA Syariah. The results of the discussion show that operational risk is caused by inadequate or non-functioning internal processes, human errors, system failures or external events that have an impact on operational activities. The implementation of operational risk management at BCA Syariah seeks to raise risk awareness for each work unit at BCA Syariah in order to foster a strong and risk-aware culture to mitigate potential risks.

Developing resilience of MNEs: From global value chain (GVC) capability and performance perspectives

External shocks create various risks for enterprises. Multinational enterprises (MNEs) work to develop resilience and improve their global risk management capability. The COVID-19 pandemic has compelled MNEs to improve their global value chain (GVC) capability to enhance their global risk management and operational performance, which could eventually impact their overall performance. Developing GVC capability is a challenge for MNEs. This study aims to examine the influence of global risk management capability on MNEs’ GVC capability to become more resilient to withstand such crises and further enhance their performance. Building on the resource-based view (RBV), dynamic capability view (DCV), and the existing literature, a conceptual research model was prepared. The model was then validated using the PLS-SEM technique to analyze the responses of the 323 managers at different MNEs. The study found a significant positive impact of global risk management capability on GVC capability, which eventually impacted MNE performance.

How blockchain manages supply chain risks: evidence from Indian manufacturing companies

PurposeThis study aims to investigate the contribution of blockchain technology to supply chain risk management and its impact on performance among Indian manufacturing companies.Design/methodology/approachDrawing on a resource-based view, dynamic capability and system of systems theory, this study examines the direct relationships between blockchain, supply chain risk management and supply chain performance. The authors validate the mediating effects of three supply chain risk management components, namely supply risk management, demand risk management and cyber security management, on financial transaction reliability and information reliability. Data were collected from 204 Indian manufacturing companies that have adopted blockchain technology.FindingsThe results demonstrate that companies adopting blockchain technology have experienced positive outcomes in managing supply chain-related risks, financial transaction reliability and information reliability. These findings provide valuable guidance to managers, highlighting blockchain as a competitive advantage for supply chain management.Originality/valueTo the best of the authors’ knowledge, no previous research on blockchain-based risk management capabilities has been conducted.

The Role of Risk Management in Competitiveness at PT Bank Central Asia TBK with an ERM (Enterprise Risk Management) Approach using Likelihood Table

The key to BCA's success has survived to this day. Because BCA is able to seize opportunities for bank development that arise from time to time and turn them into competitive advantages. The purpose of this study is to determine the role of risk management in competitiveness at PT Bank Central Asia Tbk. with an ERM (Enterprise Risk Management) approach using a likelihood table so that it can easily handle risks that occur in the future, and the integrity of BCA can be maintained consistently in banking world’s the research method is a survey through structured interviews with questionnaires. Observation data collection techniques, interviews and document studies. The sample in this study is the entire population of 26 people. Data analysis techniques with Fishbone and heatmap. The results showed that there were 21 KTD risk categories with a risk score of 5.03 to 10.92. With the implementation of Operational risk management, BCA has become stronger at the level of competition in the banking world.

Corporate Risk Management Disclosures and Financial Performance of Listed Deposit Money Banks in Nigeria

The relationship between corporate risk management disclosures and the financial performance of Nigerian listed deposit money banks was empirically examined in this study. The study is important because it shows how much corporate risk management disclosures affect the performance of banks. Corporate risk management disclosures (CRMDs) and financial performance were found to be correlated through the use of CRMD key proxy variables in the study. These variables included Financial Risk Management Disclosure (FRMD), Strategic Risk Management Disclosure (SRMD), Operational Risk Management Disclosure (ORMD), and Technological Risk Management Disclosure (TRMD). Return on equity (ROE) was used as a proxy for financial performance. The study was guided by four hypotheses, and the panel least squares regression model was utilized to perform a statistical test of the parameter estimates. Ex Post Facto design was employed in the study's analysis. The Nigerian Exchange Group (NGX) Factbook, published annual financial reports, and accounts of listed deposit money banks in Nigeria from 2015 to 2022 provided the secondary data for the study. Overall, the results showed a positive and significant relationship between the financial performance of listed deposit money banks and the Financial Risk Management Disclosure (FRMD), Strategic Risk Management Disclosure (SRMD), Operational Risk Management Disclosure (ORMD), and Technological Risk Management Disclosure (TRMD) have a positive and significant relationship with the financial performance of Nigerian listed deposit money bank sat 1–5% significant level of. The study comes to the conclusion that corporate risk management disclosures protect Nigerian banks' bottom lines. Since corporate risk management affects banks' performance in Nigeria, the study recommended that banks reveal more information about financial risk management, strategic risk management, operational risk management, and technological risk management in their annual reports for the consumption of financial statement users.

On the wicked problem of quantifying and managing non-financial risks and the role of digital technology in providing solutions

The management of operational risk in financial institutions has all the characteristics of a ‘wicked problem’. Certainly, the repeated efforts of the Bank of International Settlements, (BIS) Basel Committee on Banking Supervision (BCBS) to have banks control and mitigate their operational risks speak to the tractability of extant approaches to addressing them effectively. The original ‘Principles for the Sound Management of Operational Risk’1 and its recent revisions,2 the BCBS ‘Principles for Effective Risk Data Aggregation and Risk Reporting’3 and the ‘Principles for Operational Resilience’,4 collectively offer a sound foundation for addressing this enduring problem. Why then are solutions so elusive for banks to implement? This paper first outlines the institutional and social web of conditions and factors that contribute to the existence of this ‘wicked problem’. It then identifies how AI-based digital technologies can once and for all effectively address the problem of operational risk in large banks. Nevertheless, as powerful as today's digital technologies are, they require an organising vision, particularly if they are to contribute to the management of operational risk. This paper informs such a vision and identifies a comprehensive artificial intelligence-based digital architecture to realise it.

Operational Risk framework and Standardised Measurement Approach (SMA)

On December 2017, the Basel Committee published the “Basel III: Finalising post-crisis reforms” (also known as Basel IV) that introduces the Standardised Measurement Approach (SMA) to define the Pillar I operational risk capital requirement that is foreseen to entry into force on the 1st of January 2025, replacing all the existing approaches. This approach not only introduces a new method to be used to calculate the operational risk capital requirement but details several updates that have to be applied to the main components of the framework such as Governance, Loss Data Collection and Risk Self-Assessment. With the entry into force of the SMA, banks have the chance to fully re-think their operational risk Management Framework (ORMF) integrating the different components and making it more efficient and effective in terms of data governance, process management and reporting. This paper describes the SMA methodology to be implemented to calculate the Pillar I operational risk capital requirement and provides an overview of the expected impact on the different components of the ORMF of the banks.

Analysis of Human Factors that Influence Contractors' Risk Management Attitudes in Sumatra Island in Construction Projects

Project risk assessment serves as an effective tool for overseeing cost, and time, and achieving technical performance in construction projects. The construction industry frequently contends with various uncertainties, which can lead to potential risks such as delays, cost overruns, and compromised quality in building and road construction ventures. Consequently, adept project risk management becomes crucial in the decision-making process of construction companies, ultimately determining project success or failure. This paper aims to assess the prioritize the specific factors influencing contractors' risk attitudes in these companies. The study employed simple random sampling under probability techniques. Data collection involved a thorough review of pertinent literature and the use of a questionnaire employing a five-point Likert scale ranging from (1) very low/very disagree to (5) very high/very agree. The sample size used for analysis was 47 companies, with a particular focus on the Sumatra construction companies. This study was analyzed using Statistical Package for Social Science (SPSS) version 23.0 for Microsoft Windows and a reliability test with Cronbach's alpha. The finding of this study is primary factors influencing contractors' risk attitudes are as follows: educational background, physical health, emotional intelligence, work experience, and professional competence, The results of this research can provide decision-makers with valuable insights into strategies for effectively managing contractors' risk attitudes, thus furnishing stakeholders with the requisite knowledge to enhance risk management performance within the Sumatera construction companies.

Financial Literacy and MSME Performance: Mediation and Moderation Analysis

This research examines the mediating role of access to finance, financial risk management, and competitive advantage in the relationship between financial literacy and Micro, Small, and Medium Enterprises (MSME) performance. This research also tests demographic factors such as the owner's gender, company size, company age, and number of employees in moderating the influence of the variables studied. The sample for this research is MSMEs in Jakarta Province, Indonesia. Five hundred and fifty MSMEs participated in the study using a web-based self-administered questionnaire. The data was analyzed using Partial Least Square Structural Equation Modeling (PLS-SEM). The research results show that financial literacy positively affects access to finance, financial risk management, competitive advantage, and MSME performance. Access to finance, financial risk management, and competitive advantage positively affect MSME performance and can mediate the relationship between financial literacy and MSME performance. The research also uncovers the moderating role of demographic factors, suggesting that the strength of the connections between financial literacy, access to finance, financial risk attitude, competitive advantage, and MSME performance may vary based on these factors. These findings carry significant implications for owners, managers, and governmental stakeholders, emphasizing the importance of enhancing financial literacy among MSMEs to enhance their performance.

THE INFLUENCE OF RISK MANAGEMENT ON PROJECT PERFORMANCE

Through the project, an idea is implemented, based on several interconnected steps. The project is composed of several elements, without it cannot exist, mandatory elements that complete the project, by means of a well-developed project management. Thus, a link is created, positive or negative, between the elements of the project, which are interdependent and cannot exist one without the other. The present research is part of a broad analysis of the elements of project management, however, for the present research only two elements of the project were considered, namely risk management and performance, in order to discover the relationship created between them, the influences and effects on a project. It will also aim to outline some solutions to maintain, strengthen or improve, if necessary, the relationship between the elements of the project subject to the current research: risk management and project performance.

Risk assessment of aflatoxin B1 in herbal medicines and plant food supplements marketed in Malaysia using margin of exposure and RISK21 approaches

Aflatoxin B1 (AFB1) is a mycotoxin produced by several species of Aspergillus fungi which can cause liver cancer in animals and humans. This study aims to perform the risk assessment of AFB1 in herbal medicines and plant food supplements (PFS) in Malaysian market. A total of 31 herbal medicines and PFS were purchased through online platforms and over the counter using a targeted sampling strategy. Of 31 samples analysed using the ELISA method, 25 (80.6%) were contaminated with AFB1 at levels ranged from 0.275 to 13.941 μg/kg. The Benchmark Dose Lower Confidence level of 10 (BMDL10) of 63.46 ng/kg bw/day and the estimated dietary intake of the adult population ranged from 0.006 to 10.456 ng/kg bw/day were used to calculate the Margin of Exposure (MOE). The MOEs for 24 (96%) out of the 25 positive samples were lower than 10,000. The RISK21 matrix revealed that AFB1 exposure levels from herbal medicines and PFS differed greatly over the world. The calculated population risk of acquiring liver cancer from AFB1 exposure ranged from 0 to 0.261 cancers/100,000 populations/year and accounted for an estimated percentage of liver cancer incidence ranged from 0.002 to 4.149%. This study revealed a moderate risk of liver cancer attributable to AFB1 from herbal medicine and PFS among Malaysian populations and emphasised an urgency for risk management actions.

Assessing the Accuracy of ChatGPT Use for Risk Management in Construction Projects

Artificial Intelligence (AI) is considered promising digital technology that has important opportunities for enhancing project oversight and delivering improved decision-making in the risk management domain. However, there is a limited amount of research that has evaluated AI tools’ performance in risk management. Therefore, with the intention of sustaining more accurate risk-based decision-making process in the construction industry, this paper investigates the accuracy of ChatGPT in risk management for different project types. In this context, Key Performance Indicators (KPIs) related to each risk management sub-process were determined, and then a questionnaire that consisted of prompt templates was prepared for collecting data from ChatGPT. Afterwards, ChatGPT’s responses were evaluated by experts with focus group sessions. The findings indicate that ChatGPT has a moderate level of performance in managing risks. It provides more accurate knowledge in risk response and risk monitoring rather than risk identification and risk analysis sub-processes. This research paves the way for future studies by demonstrating an implication of ChatGPT use for risk-based decision making. In addition, gaining insight into the precision of ChatGPT in the risk-based decision-making process will empower decision-makers to establish resilience in business operations through technology-driven risk management.

Risk Management Methods and Performance of Construction Projects; A Case of Rwanda Education Board School Construction Project in Selected Districts

Risk Management Methods and Performance of Construction Projects; A Case of Rwanda Education Board School Construction Project in Selected Districts

Credit Risk Management and Financial Performance of Savings and Credit Co-operative Organizations: A Case of Selected SACCOs in Makindye Division, Kampala Uganda

The purpose of this paper is to assess the effect of credit risk management on the financial performance of Savings and Credit Co-operative Organizations (SACCOs) in Makindye division, Kampala. Specifically, the paper looked at how credit risk identification, credit risk assessment and credit risk control affect the way that SACCOs perform financially. A cross-sectional field survey design that adopted both qualitative and quantitative approaches to collecting and analyzing data was adopted. Twenty (20) registered active SACCOs were purposively selected from Makindye Division for data collection using both questionnaires and interview guides. Data was collected from managers, treasurers or accountants, and secretaries of the registered SACCOs. Descriptive and inferential statistics were generated and interpreted to meet the study objectives. Findings showed that credit risk management has a positive and significant effect on the financial performance of SACCOs. This implies that the way a SACCO performs financially is influenced by the way credit risk is identified, assessed and controlled within that SACCO. SACCOs should train their members on strategies of identifying, assessing as well as controlling risks if they are to register and sustain good financial performance. This paper contributes to literature in regard to credit risk management strategies within SACCOs in Uganda.

Evaluation of IT Risk Management in DISKOMINFO of Magelang Regency using COBIT Framework 2019 Objectve EDM03 & APO12

Purpose: This research aims to measure the current condition level (capability level) of DISKOMINFO and then conduct a Gap analysis so that it can provide recommendations for improving IT governance related to IT risk management.Design/methodology/approach: The framework used is COBIT 2019, which will focus on 2 objectives: EDM03 (Evaluate, Direct, and Monitor) & APO12 (Align, Plan, and Organize). The data used in this study were obtained through interviews, observation, and distribution of questionnaires which had been mapped using the RACI Chart.Findings/result: The results of the assessment show that the capability level/capability level according to DISKOMINFO is level 2 for each objective. Recommendations focus on making documentation of risk management activities in the form of risk guidelines, risk acceptance, activities for risk management methods, as well as the application of risk management evaluation of IT which is used by DISKOMINFO on a regular basis.Originality/value/state of the art:From various types of risk management research with different frameworks, this research will use the COBIT 2019 performance standards to carry out information technology risk management. Where COBIT 2019 is the latest version of COBIT which was prepared to help companies manage and manage resources to achieve existing goals. COBIT 2019 has a broader scope than ISO SO/IEC 17799:2005 which includes a combination of principles that have been embedded and known as reference models (such as COSO), and are aligned with IT standard infrastructure.

The impact of management performance on risk-taking behavior in a dual banking system: A cross-country analysis

In an era defined by global economic uncertainty, the role of management performance in influencing bank risk-taking has become pivotal. This urgency stems from the evolving dynamics of the banking sector and the need for robust risk management strategies. This study investigates the relationship between management performance and banks’ risk-taking behavior, drawing data from 248 banks across eight countries comprising Indonesia, Malaysia, Bangladesh, Pakistan, Saudi Arabia, Oman, Bahrain, and the United Arab Emirates spanning 2013–2021 using panel data analysis. The study reveals that management performance measured by a cost-to-income ratio (β = –0.44, p < 0.01) has a negative and significant relationship with bank risk-taking behavior. In essence, a bank with superior management performance, indicated by a lower cost-to-income ratio, tends to have greater financial stability, as evidenced by a higher Z-score. Notably, external factors like the financial crisis and institutional development as moderating variables do not significantly alter the relationship between management performance and banks’ risk-taking behavior. The study also discovers that Islamic banks (β = 0.31, p < 0.01) outperform their conventional counterparts in risk management and management performance. However, it is worth noting that the results of regional analysis demonstrate variations across the Southeast, South, and Middle East regions. After conducting several robustness check tests, the findings of this study remain consistent, offering valuable implications for both policymakers and bank management. These insights emphasize the importance of formulating appropriate regulations and frameworks to enhance management performance at the banking level. AcknowledgmentThe authors gratefully acknowledge the support from Direktorat Penelitian dan Pengabdian Masyarakat (DPPM) Universitas Islam Indonesia No: 006/Dir/DPPM/70/Pen.Unggulan/III/2023 for providing a research grant to this study.

Planning the activities of agricultural enterprises and agro-industrial complex: key stages and risk management

The article discusses key aspects of planning the activities of agricultural enterprises and risk management in conditions of a state of war. The research aims to improve practical planning and management of agricultural enterprises in situations of instability and risks arising from military conflicts. The study identifies the main stages of planning the activities of agricultural enterprises, taking into account the industry’s specifics and current conditions. Criteria for evaluating the effectiveness and adaptability of agricultural enterprise activity plans are developed. The components of a negative feedback mechanism in planning agricultural enterprise activities are outlined, including monitoring, plan comparison, adjustments, and risk management. The article analyzes the main risk groups faced by agricultural enterprises during military conflicts and provides recommendations for their management. The research emphasizes the importance of systematic examination of plans, effective task coordination, responsibility distribution, the establishment of monitoring and control systems, and the negative feedback mechanism to achieve successful planning and management in conditions of war. The article outlines key directions for enhancing efficiency and risk management in times of instability and conflict. The research results will contribute to improving practical planning and management of agricultural enterprises during wartime. Agricultural enterprises in Ukraine have significant potential but also face serious challenges, including military conflicts and emergencies. The presence of appropriate strategies and collaboration with various structural units are crucial components of successful planning and management in times of uncertainty and turbulence. Active cooperation with government and international organizations is key to reducing the impact of military conflicts on the activities of agricultural enterprises.