Risk Management Tasks Research Articles

Efficient Simulation Designs for Valuation of Large Variable Annuity Portfolios

The valuation of large variable annuity portfolios is an important enterprise risk management task but is computationally challenging due to the need for simulation. Existing methods in the literature only use simple experimental designs with significant room for improvement. This article identifies three major components in an efficient valuation framework. In addition, we propose optimal experimental designs and provides analytical insights for each component. Our numerical results show that our proposal achieves significantly higher accuracy than state-of-the-art alternatives without requiring any additional computational resource.

A risk-based fuzzy boundary interval two-stage stochastic water resources management programming approach under uncertainty

Establishing an optimal water allocation scheme is a challenging yet crucial task for effective risk management of water resources. The dynamic and complex interaction among various risk-related components in a water resources management system cannot be easily modeled to characterize the system response under different risk control settings. In this study, a risk-based fuzzy boundary interval two-stage stochastic water resources management programming (RFITSWMP) model is developed for the optimization of water consumption. This model incorporates a series of risk control constraints, such as water availability, maximum allowable penalty, and allowable benefit violation constraints into a fuzzy boundary interval two-stage stochastic programming framework for water resources management. It can address the uncertainties presented as fuzzy boundary intervals and probability distributions. It can also tackle the recourse action to minimize penalties based on interactive influences of different risk control measures, further generating optimal water allocation alternatives and guiding water resources management. This developed model is applied to a case study of water consumption optimization in the middle reaches of the Heihe River Basin in China. Feasible water allocation schemes under given risk levels, as well as the associated economic benefit, actual benefit and penalty loss are generated. The results can help decision makers to gain an insight into the inherent conflicts and tradeoffs amid risk, benefit and water allocation. The performance of developed model is further demonstrated by comparing it with a fuzzy boundary interval two stage stochastic water resources management programming (FITSWMP) model. In addition, a multiple factorial analysis (MFA) approach is employed to analyze the impacts of interactive risk parameters on the optimal decisions. The result disclosed that (1) the higher individual risk-parameter levels correspond to higher water shortage, penalty loss and benefit value-at-risk but higher economic benefit. (2) The combination of risk parameters can achieve robust water allocation and economic benefit as the constraints concerned with risk parameters affect and limited by each other. (3) The condition that water violated probability (p) is 0.2, penalty violated risk level (β) is 1 and benefit violated risk level (γ) is 1 has the highest water allocation and biggest economic benefit.

ОСОБЛИВОСТІ ЗАСТОСУВАННЯ СИСТЕМНОГО ПІДХОДУ В ПРОЦЕСІ УПРАВЛІННЯ РИЗИКАМИ НА ПІДПРИЄМСТВАХ ОПТОВОЇ ТОРГІВЛІ

The article substantiates the need to use a systematic approach in the process of risk management in wholesale enterprises, in particular, states that its ultimate goal is to group all the essential factors, which, in turn, create positive conditions for safe operation and development of the enterprise. not only to approach the solution of many topical problems in a new way, but also to analyze specific positions, actions, situations and goals in a set of logical factors. The task of risk management at wholesale enterprises is defined. In particular, it is noted that the system approach involves the study of the object of study in six aspects: elemental (definition of system elements, its strength, the level of commonality of the system), structural (determining the type of structure, connections, interdependencies at the quantitative and qualitative level), functional (definition of system functions, subsystems), integrative (identification of system goals, contradictions and ways to eliminate them, definition of the main link), communicative (identification of connections with other systems) and historical (study of the stages of development of the system, forecasting its prospects). In order to substantiate the need for a systematic approach to risk management in wholesale trade, a comparative analysis of traditional and systematic approaches, which revealed that according to the results of studying the practice of risk management in wholesale trade, traditional in the industry is fragmentary risk identification. then, when applying a systematic approach, the process of risk management in wholesale enterprises should be coordinated by the head of the trading company, and the task of identifying and minimizing risks becomes part of the responsibilities of each manager. In addition, the application of a systems approach provides the ability to make management decisions at the tactical and strategic levels, taking into account the probability of possible losses of operating profit due to risk situations in the areas of procurement, transportation and sales. That is, the process of risk management in wholesale enterprises should be continuous and cover all activities of the trading company. The necessity of application of the system approach to risk management at the wholesale enterprises which provides continuity, cyclicity, complexity and completeness of functions of such management is proved. Perspective directions of research of risk management at the enterprises of wholesale trade are defined, namely to perspective directions of research on the specified question it is offered to carry definition of integrated indicators of an estimation of quality of risk management at the enterprises of wholesale trade.

Machine Learning for Financial Risk Management: A Survey

Financial risk management avoids losses and maximizes profits, and hence is vital to most businesses. As the task relies heavily on information-driven decision making, machine learning is a promising source for new methods and technologies. In recent years, we have seen increasing adoption of machine learning methods for various risk management tasks. Machine-learning researchers, however, often struggle to navigate the vast and complex domain knowledge and the fast-evolving literature. This paper fills this gap, by providing a systematic survey of the rapidly growing literature of machine learning research for financial risk management. The contributions of the paper are four-folds: First, we present a taxonomy of financial-risk-management tasks and connect them with relevant machine learning methods. Secondly, we highlight significant publications in the past decade. Thirdly, we identify major challenges being faced by researchers in this area. And finally, we point out emerging trends and promising research directions.

Nurses role in cardiovascular risk assessment and communication: Indian nurses perspective

Background: Internationally, the implementation of cardiovascular disease (CVD) prevention programs by nurse practitioners is being encouraged. Evidence suggests the effectiveness of nurse-led clinics for the primary and secondary prevention of CVDs. However, in India, nurses are underutilized for this task. The present study was undertaken to check the feasibility of task shifting of CVD risk assessment and management by nurses and have concluded that given appropriate training, nurses can do this task. However, to facilitate the implementation of these tasks by nurses at the larger level, barriers need to be identified and lifted. Hence, the experiences of nurses who participated in the study were assessed. Methodology: Qualitative approach was adopted to explore the experiences of nurses who participated in the study to determine the potential barriers and facilitators to implementing CV risk assessment and management using the World Health Organization/International Society of Hypertension (WHO/ISH) charts as routine practice by nurses. In-depth interviews were conducted with the help of the topic guide. These interviews were transcribed verbatim for analysis. A total of six in-depth interviews were conducted. No new themes emerged after the first four interviews. Results: A total of six nurses participated in the study. All the nurses were female, with the mean age of 38 ± 9.2 years. The analysis resulted in seven key themes which are crucial to the nurses involvement in CVD risk assessment and management. The themes are (1) Use of WHO/ISH charts in routine nursing practice, (2) Lack of contact with patients, (3) Time, (4) Lack of appraisal and Performance-based appraisal, (5) Increasing the scope of task shifting, (6) Infrastructure, (7) Training facilities for nurses, (8) Team member support. Conclusion: The study concludes that despite the challenges and barriers participating nurses expressed their willingness to do the task of CVD risk assessment and management. Appropriate training and continuous feedback from the higher health-care professional is essential for the successful implementation of CVD risk assessment and communication as routine practice by nurses. The availability of adequate workforce and time were the key concerns raised by participating nurses.

The use of purified waste water for agricultural irrigation

Agricultural production is highly dependent on water and is also the largest consumer. In developing countries, on the other hand, rapid urbanisation has led to increased volumes of wastewater being used as a low-cost alternative to conventional irrigation, turning a 'waste' into a new resource to support local agriculture. The re-use of water could thus potentially reduce the need for supplementary applications of inorganic fertiliser. End-users should be informed of the nutrient content of purified water.In the field of purified wastewater, it is not only necessary to make the use of this new resource possible, but also to increase social acceptability by overcoming technical, economic, political and social barriers in order to make greater use possible. Government and research activities should demonstrate the benefits of using purified wastewater and the limitations of doing so, although again such efforts would need to be funded. European geography and climate lead to a disparity in the distribution of water in the EU, in fact we observe a European Union in two gears, a Central Europe rich in water resources and therefore without commercial economic interests in recycling residual water, while a Southern Europe at risk of desertification and interested in a clear, rational and pragmatic regulation of water resources to minimize waste. More than 60% of the water used in Southern Europe is for irrigation, with extraction peaks of up to 80% in some watersheds. The opportunity to use purified urban and industrial wastewater for agricultural irrigation is therefore the most effective strategy to combat drought, a consequence of climate change. Currently, the practice of water reuse is established in only a few Member States and is implemented far below its potential. To facilitate and stimulate the reuse of water for agricultural irrigation, the EU has issued the Regulation on Minimum Requirements for Reuse, setting minimum requirements for purified water quality and monitoring, assigning crucial risk management tasks, and introducing a harmonized approach for the reuse of irrigation water across the EU. The new rules will increase legal certainty in this field, where currently the rules vary widely from one Member State to another.

Estimation of distributed flow resistance in vegetated rivers using airborne topo‐bathymetric LiDAR and its application to risk management tasks for Asahi River flooding

AbstractThis report describes a method of extracting vegetation conditions and topo‐bathymetric data of rivers using airborne LiDAR with near‐infrared and green pulsed lasers. Parameters related to flow resistance attributable to vegetation in rivers were found using point cloud data of LiDAR with support from supervised classification. Comparison of data obtained from simulations and observations was used to assess the applicability of the proposed method for examination of lower Asahi River flooding that occurred in Japan in September 2011. Results demonstrated that the methodology used herein can estimate flow resistance parameterisation of vegetation distributed on a reach scale. This study also used numerical tests to elucidate effects of established vegetation for flood control at the lower Asahi River bifurcation point using a historically important fixed weir. Results of these numerical tests demonstrated that the method can elucidate effective means of managing vegetation removal around the bifurcation point.

Cyber Threat Intelligence for Improving Cybersecurity and Risk Management in Critical Infrastructure

Cyber-attack is one of the significant threats affecting to any organisation specifically to the Critical Infrastructure (CI) organisation. These attacks are nowadays more sophisticated, multi-vectored and less predictable, which make the Cyber Security Risk Management (CSRM) task more challenging. Critical Infrastructure needs a new line of security defence to control these threats and minimise risks. Cyber Threat Intelligence (CTI) provides evidence-based information about the threats aiming to prevent threats. There are existing works and industry practice that emphasise the necessity of CTI and provides methods for threat intelligence and sharing. However, despite these significant efforts, there is a lack of focus on how CTI information can support the CSRM activities so that the organisation can undertake appropriate controls to mitigate the risk proactively. This paper aims to fill this gap by integrating CTI for improving cybersecurity risks management practice specifically focusing on the critical infrastructure. In particular, the proposed approach contributes beyond state of the art practice by incorporating CTI information for the risk management activities. This helps the organisation to provide adequate and appropriate controls from strategic, tactical and operational perspectives. We have integrated concepts relating to CTI and CSRM so that threat actor's profile, attack detailed can support calculating the risk. We consider smart grid system as a Critical Infrastructure to demonstrate the applicability of the work. The result shows that cyber risks in critical infrastructures can be minimised if CTI information is gathered and used as part of CSRM activities. CTI not only supports understanding of threat for accurate risk estimation but also evaluates the effectiveness of existing controls and recommend necessity controls to improve overall cybersecurity. Also, the result shows that our approach provides early warning about issues that need immediate attention.

Securing human rights through risk-management methods: Breakthrough or misalignment?

AbstractThis is a study of three authoritative instruments that promote a common idea: economic activities and development should be conducted with respect for human rights. The World Bank Framework, the International Financial Corporation Performance Standards and the UN Guiding Principles on business and human rights are examined to get clarity on how human rights risk management differs from more conventional management approaches. The focus here is on prevention of human rights impacts. Do the three instruments employ approaches adequate for handling human rights risks? To understand prevention, one needs to reflect on what makes human rights a particular type of impact and account for the regulatory context of protecting human rights transnationally. The analysis identifies four ‘offsets’ through which economic decision-makers can distort their human rights performance and place causal observers at a disadvantage. Prevention becomes an issue of how to relate to ‘residual impacts’ on human rights. This article finds that the ‘hierarchy or mitigation’ and even ‘human rights due diligence’ under illuminate the challenge. The proposal here is to add ‘reduction at source’ as a parameter of human rights risk management. The sources for this analysis are the three instruments, and the practice of implementing organizations, particularly IFC projects, CAO cases, impact assessments, and CSR reports. In conclusion, the potential for cross-fertilization among instruments is genuine. Increased clarity on prevention of human rights impacts should assist economic decision-makers in their risk management task and casual observers in assessing their performance.

Estimation of risk contributions with MCMC

Determining risk contributions of unit exposures to portfolio-wide economic capital is an important task in financial risk management. Computing risk contributions involves difficulties caused by rare-event simulations. In this study, we address the problem of estimating risk contributions when the total risk is measured by value-at-risk (VaR). Our proposed estimator of VaR contributions is based on the Metropolis-Hasting (MH) algorithm, which is one of the most prevalent Markov chain Monte Carlo (MCMC) methods. Unlike existing estimators, our MH-based estimator consists of samples from the conditional loss distribution given a rare event of interest. This feature enhances sample efficiency compared with the crude Monte Carlo method. Moreover, our method has consistency and asymptotic normality, and is widely applicable to various risk models having a joint loss density. Our numerical experiments based on simulation and real-world data demonstrate that in various risk models, even those having high-dimensional (≈500) inhomogeneous margins, our MH estimator has smaller bias and mean squared error when compared with existing estimators.

Risk, discretion, accountability and control: Police perceptions of sex offender risk management policy in England and Wales

This article argues that understanding current approaches to sex offender risk management and its operationalization must account for front line situational decision-making practices and the culture from which they develop and operate. The research utilizes a mixed-methods approach, combining an online questionnaire survey ( N = 227) with a series of semi-structured interviews ( N = 27) with members of the police service of England and Wales. Analysis identifies ambivalence about the effectiveness of the current system of categorizing sex offenders and suggests concerns about accountability and a lack of resources results in discretion being used to engage with but also negotiate policy in practice. The article suggests that the task for sex offender risk management is to create classification tools that work with this discretion rather than against it.

Securing Human Rights Through Risk-Management Methods: Breakthrough or Misalignment?

This is a study of three authoritative instruments that promote a common idea: economic activities and development should be conducted with respect for human rights. The World Bank’s Framework, the International Financial Corporation’ Performance Standards and the UN Guiding Principles on business and human rights are examined to get clarity on how human rights risk management differs from more conventional management approaches. The focus here is on prevention of human rights impacts. Do the three instruments employ approaches adequate for handling human rights risks? To understand prevention one needs to reflect on what makes human rights a particular type of impact and account for the regulatory context of protecting human rights transnationally. The analysis identifies four ‘offsets’ through which economic decision-makers can distort their human rights performance and place causal observers at a disadvantage. Prevention becomes an issue of how to relate to ‘residual impacts’ on human rights. This article finds that the ‘hierarchy or mitigation’ and even ‘human rights due diligence’ under illuminate the challenge. The proposal here is to add ‘reduction at source’ as a parameter of human rights risk management. The sources for this analysis are the three instruments, and the practice of implementing organizations, particularly IFC projects, CAO cases, impact assessments, and CSR reports. In conclusion, the potential for cross-fertilization among instruments is genuine. Increased clarity on prevention of human rights impacts should assist economic decision-makers in their risk management task and casual observers in assessing their performance.

Модель комплексного управления рисками при обеспечении ресурсо- и энергосбережения процессов на примере сложных теплотехнологических систем

Under the conditions of constantly growing complexity of the processes used in technological systems, the main risk management tasks cannot be solved by using the traditional methods implying exact representation of problem situations. This is because such tasks are characterized by a large number of parameters, uncertainty and data ambiguity. The external environmental conditions for such systems are characterized by instability and uncertainty, which are caused, on the one hand, by high variability of the external environment and, on the other hand, by uniqueness of the emerging problem situations. The problem is formulated, and a cascade-composition integrated risk management model in setting up resource and energy saving processes is proposed taking complex thermal processing systems (CTPS) as an example. The proposed model is based on a fuzzy approach and on fuzzy model hybridization and integration methods. The need for comprehensively managing the risks in setting up resource and energy saving processes in a CTPS is primarily stemming from the requirement of keeping the violation risks within the acceptable level. It should be noted that the acceptable level of risk can be established not only for violation of technological processes in a CTPS as a whole, but also for all stages and for individual technological processes. The proposed cascade-composition model includes fuzzy models for carrying out a component-wise analysis of the technological processes in the CTPS, for estimating the resource and energy efficiency of technological processes, and for assessing the risks in setting up resource and energy savings. The article describes an approach to solving the problem of integrated risk management in setting up resource and energy saving processes in the CTPS using the proposed model. The approach implies specification of different combinations of control parameters at each stage for all technological processes with taking into account all constraints imposed on these processes, and modeling and determining the combinations of control parameters that will make it possible to improve the resource and energy efficiency of technological processes in the CTPS while keeping the violation risks within the acceptable level. The article presents the experimental results of integrated risk management in setting up resource and energy savings using the proposed model and approach taking as an example the process of drying phosphate pellets in the calcining conveyor machine. The obtained results are supposed to be used for integrated risk management in setting up resource and energy saving for various processes in CTPSs.

Risk Management Based on Model of Competences when Introducing Innovative Information Technology

Economic expediency and attractiveness of life quality improving are accompanied by risks of increasing instability and possible collapse of the world system. Forecasts of the labour market change connected with automation of working places and mass unemployment cause concerns. The task of risk management in the personnel training system for introduction of new information technology is considered. The purpose of the research is development of the methodology based on the models of competences including requirements for safe application of information-measuring systems, as well as for an education level, work experience and permit-to-work documents in new conditions. A complex of new mathematical models, methods and technologies providing safety of the process of information technology introduction owing to the systemic approach to risk minimization is taken as a basis of the methodology. Invariant models provide economic effectiveness of processes of designing the system of safety and planning of educational paths. Models of personal paths of development and classes of competences provide didactic safety. Decision-making methods provide information, psychological, social and economic safety of the process of information technology introduction. The methodology is realised when introducing distance learning technologies in educational organisations of Chelyabinsk and the Chelyabinsk region.

Modelling Value-at-Risk in investment banks: “Empirical evidence of JP Morgan, Merrill Lynch and Bank of America”

The objective of paper is to assess the efficiency of financial model to capture increasing volatilities across asset class markets of the three investment banks. For which data will be collect to forecast the credit risk, and to know how well our standard tools forecast volatility, particularly during the turmoil that extend throughout the globe. Volatility prediction is a critical task in asset valuation and risk management for investors and financial intermediaries. The paper will focus on Value-at-Risk (VaR) which is a standard model that has been forecasted using both non-parametric and parametric approaches and then Backtesting procedure had been applied to achieve the both outcome. One is to detect the underlying credit risk which is associated with the market as well as portfolio risk, and other is to perceive model which provide more accurate forecasting.

Innovative Approach for Forecasting Corporate Default Risk

        Innovative Approach for Forecasting Corporate Default Risk       Submitted To: Journal of Global Economy                              By: Prashanta Kumar Behera, PhD                              Email: pkb_behera@yahoo.in . Ph : 91+8108932693Abstract: Present time corporate default risk parameters are dynamic in nature and understanding how these parameters change in time is a fundamental task for risk management. In this research paper I am trying to forecast for corporate default rates.  I work with historical credit migrations data to construct some time series of interest and to visualize default rates dynamics and also, I use some of the series constructed and some additional data to fit a forecasting model for corporate default rates and to shows some back testing and stress testing. A linear regression model for corporate default rates is presented but the tools and concepts described can be used in combination with other forecasting methodologies.Keywords: Default risk, back testing, stress testing and transition matrix.

Probabilistic floodplain mapping using HAND-based statistical approach

Detection of 100-year floodplains is one of the major tasks in flood risk management. In recent years, a variety of DEM-based methods have been developed for preliminary estimations of 100-year floodplains over large regions. The higher efficiency of these methods for large-scale problems and data-scarce regions compared to the conventional hydrodynamic methods is a big advantage. However, unlike considerable advances in the field of probabilistic mapping by hydrodynamic models, these methods are mostly deterministic and cannot provide a probabilistic presentation of the floodplains. In this study, a new method is proposed to combine both advantages of probabilistic mapping compared to deterministic ones and DEM-based methods against conventional models. This method includes a probabilistic function, which uses a morphologic feature, Height Above Nearest Drainage (HAND), as the independent variable. HAND is defined as the difference in elevation between a given point and the nearest stream based on the flow direction and can be calculated from a Digital Elevation Model (DEM). The parameters of the probabilistic function are determined by using a heuristic optimization algorithm named Particle Swarm Optimization (PSO) by minimizing the error of a predicted 100-year floodplain map compared to a reference map. The results illustrate that a linear function with one parameter is an appropriate function for the study site. In addition, a comparison of the proposed method with its deterministic version demonstrates the higher effectiveness and reliability of the proposed probabilistic method for a flat watershed where the overpredictions and underpredictions generated by a deterministic threshold method are reduced.

РИЗИК-МЕНЕДЖМЕНТ В УПРАВЛІННІ ФІНАНСОВОЮ БЕЗПЕКОЮ СУБ’ЄКТІВ ГОСПОДАРЮВАННЯ


 
 
 The article deals with the essence of financial security and the place of risk management in ensuring the necessary state of financial security of economic entities. The relationship between the concepts of risk and the threat to the financial security of business structures and the peculiarities of their interaction is shown. The essence of the system of financial risk-management is determined on the basis of system, institutional, process and functional approaches. Formulated principles, functions, objects, tasks of financial risk management as an instrument for achieving financial security of enterprises. The basic methods of risk assessment of business structures in the system of their financial security have been identified. Depending on the levels of implementation of financial risk management, strategic, tactical, operational risk management can be identified.
 
 

Numerical Method to Compute Water Surface Profile for Converging Compound Channel

Water surface profile prediction is an important task in flood risk management in the urban area. In the present research, based on the principle of the momentum balance a numerical method is investigated to predict the water surface elevations in compound channels with converging floodplains. Experimental data series are collected from literature on converging compound channels for different geometry and flow conditions to test the present model. The developed method requires the percentage of flow in the main channel. To deal with it, various existing flow distributions model is used in the developed numerical method to estimate the water surface elevation. The flow distribution model which provides less error in water surface profile computation for converging part of the compound channel is selected. Finite difference method is used to solve the numerical model using MATLAB tool. The results obtained from the simulation show a good agreement with the experimental datasets. Statistical error analysis has been performed to verify the strength of the present model and the other prevailing water surface profile models. The present model found to provide the minimum error in terms of mean absolute error, mean absolute percentage error and root mean square error.

Novel Approaches for the MS-Based Detection of Food Allergens: High Resolution, MS³, and Beyond.

The prevalence of allergic reactions to food is believed to be increasing in industrialized countries worldwide. One of the major tasks in risk management is, therefore, the analytical surveillance of allergen contamination in food and targeted proteomics using MS, which is of hugely growing interest due to its specificity and sensitivity and the possibility to analyze multiple allergens in parallel. Though approximately 200 different foods have been described as having the potential to elicit allergic reactions, current regional labeling requirements are focused on the 5-14 priority allergens that elicit the vast majority of severe reactions or that pose a risk as hidden allergens in food production. MS-based detection methods have been published for the majority of priority allergens, and this review provides an overview of the different methodological approaches, namely multiple-reaction monitoring-, high-resolution MS-, and triple-stage MS-based methods. In addition, requirements for the identification and validation of specific marker peptides and the influence of thermal processing and structural heterogeneity of allergens are discussed.