Risk Management Theory Research Articles

Theoretical Frameworks for Integrating Sustainability Factors into Institutional Investment Decision-Making

This paper explores key theoretical frameworks instrumental in understanding the relationship between sustainability and institutional investment decisions. The study identifies and analyzes various theories, including Behavioral Finance Theory, Modern Portfolio Theory, Risk Management Theory, and others, to explain how sustainability considerations increasingly influence investment choices. By examining these frameworks, the paper highlights how investors integrate Environmental, Social, and Governance (ESG) factors to optimize financial outcomes and align with broader societal goals.

Assessment of Community Knowledge, Attitudes, and Perceptions Toward Effluent Quality Discharged from the Shirere Wastewater Treatment Plant to the Isiukhu River, Kakamega County, Kenya

For waste removal, advanced infrastructural technologies can be adopted in the drainage channels of effluents into water bodies though they are limited and scarce. The aim of the study was to asses community knowledge, attitude and perception towards effluent quality discharged from Shirere wastewater treatment plant up to river Isiukhu. Correlation and descriptive survey were the main research approaches adopted. The measurement of the knowledge, perception and attitude was limited to only the community members, as well as Kakamega County Water and Sanitation Company (KACWASCO) staff members. The study was anchored by the risk management theory to demonstrate the vulnerability of community hazards like water pollution. The social-economic sampling approaches applied were stratified for the community members and random for the KACWASCO workers. The population targeted was eighty community members and four KACWASCO staff members. The questionnaires were pretested through a pilot study to ascertain their reliability. This pre-test was conducted at a different Waste Water Treatment Plant (WWTP) at Nabongo. The Pearson coefficient (r) was used to compute the correlation coefficient between the two test scores. Data was analyzed using regression and correlation methods. For socio-economic, reliability test was administered by use test- retest method. A code book was prepared and scores of the first test correlated with scores of the second test, and Pearson product moment of correlation was computed using SPSS software version 21.0. By applying the analysis of variance (ANOVA), researcher was able to determine whether differences observed between groups are likely due to actual variations in their perceptions or simply due to chance. From the reliability test, all of the variables obtained had Cronbach's Alpha greater than 0.7, indicating that they met the necessary 0.7 for data internal consistency. The Bartlett's test for validity was examined using the chi-square test, which revealed that all of the variables were significant at the 5% (0.000) level of significance. Only 82 of the 84 questionnaires provided to the sampled respondents (KACWASCO staffs and community members) were filled out and returned in this study. From the study findings the value of R-square was 0.429. The ANOVA test indicated that in this model the independent variable namely; knowledge of the residents is important in predicting of waste water treatment as indicated by significance value=0.002 which is less than 0.05 level of significance (p=0.002 < 0.05). Additionally, the response under attitude and perception, the value of R-Square was 0.045 which implied that, 4.5% of variation of Wastewater Treatment Plant in Shirere was explained by attitude and perception of the residents within the area. The study also revealed that attitude and perception of the residents in Shirere had a significant influence on wastewater treatment at Shirere in Kakamega County (t-statistic = 25.674, p-value = ). Therefore, it was concluded that, at 5% level of significance, indicating that community knowledge, perception and attitude had a positive influence on waste water treatment at Shirere in Kakamega County. Likewise, for every unit increase in attitude of the residents there was a corresponding increase in wastewater treatment at Shirere in Kakamega County by 0.628. The study recommended that, the community members need more sensitization on matters pollution as revealed by this study.

A Study on Enterprise Risk Management in the Chinese Context

Abstract: The establishment of the market economy, accompanied by the emergence of risks, requires enterprises to consider not only the economy and profitability but also the risk. Therefore, enterprise risk management problems arise. Many developed countries see risk management, strategic management, and operation management as the three main management functions of modern economic organizations, which will become a critical factor in the competitiveness of businesses in the future. Therefore, the paper reviews the development of traditional risk management theory, financial risk management theory, and internal control theory, with a focus on Enterprise Risk Management (ERM). After analyzing the current situation of ERM in Chinese enterprises, the paper proposes suggestions for improving risk management methods, strengthening the internal control system, and enhancing staff quality. Finally, the paper emphasizes the importance of Enterprise Risk Management (ERM) development in China and suggests the need for a risk management system tailored to the countrys specific circumstances.

THỰC TRẠNG TRIỂN KHAI CÁC HOẠT ĐỘNG PHÒNG NGỪA, KIỂM SOÁT VÀ XỬ LÍ RỦI RO TẠI MỘT SỐ TRƯỜNG TIỂU HỌC, THÀNH PHỐ HÀ NỘI

Preventing, controlling, and handling risks is essentially taking actions to minimize negative, adverse, and unexpected impacts that affect the ability to achieve goals and expected results of organizations in general and schools in particular. These risk mitigation actions are identified as Eliminating risk, avoiding risk, transferring risk, minimizing risk, and accepting risk - turning risk into opportunity. This study is based on the theory of risk management, and surveys the current situation of risk prevention, control, and handling in some primary schools in Hanoi, thereby helping managers have an overview and more effective on an important stage in school risk management.

Research on investment and financing risk problems and countermeasures of PPP construction projects

This study analyzes financing costs, capital liquidity, policy changes and contract execution risks in PPP project investment and financing, and puts forward strategies such as optimizing financing platforms, reducing costs, strengthening regulations, regulatory coordination and improving prevention capabilities. By exploring the causes and effects of risks, combined with domestic and foreign cases to verify the effectiveness of the strategy. This study enriches the theory of PPP risk management, provides guidance for the practical operation of the project, and promotes the healthy development of the PPP project.

Urban Flooding Disaster Risk Assessment Utilizing the MaxEnt Model and Game Theory: A Case Study of Changchun, China

This research employs the maximum entropy (MaxEnt) model alongside game theory, integrated with an extensive framework of natural disaster risk management theory, to conduct a thorough analysis of the indicator factors related to urban flooding. This study conducts an assessment of the risks associated with urban flooding disasters using Changchun city as a case study. The validation outcomes pertaining to urban flooding hotspots reveal that 88.66% of the identified flooding sites are situated within areas classified as high-risk and very high-risk. This finding is considered to be more reliable and justifiable when contrasted with the 77.73% assessment results derived from the MaxEnt model. Utilizing the methodology of exploratory spatial data analysis (ESDA), this study applies both global and local spatial autocorrelation to investigate the disparities in the spatial patterns of flood risk within Changchun. This study concludes that urban flooding occurs primarily in the city center of Changchun and shows a significant agglomeration effect. The region is economically developed, with a high concentration of buildings and a high percentage of impervious surfaces. The Receiver Operating Characteristic (ROC) curve demonstrates that the MaxEnt model achieves an accuracy of 90.3%. On this basis, the contribution of each indicator is analyzed and ranked using the MaxEnt model. The primary determinants affecting urban flooding in Changchun are identified as impervious surfaces, population density, drainage density, maximum daily precipitation, and the Normalized Difference Vegetation Index (NDVI), with respective contributions of 20.6%, 18.1%, 13.1%, 9.6%, and 8.5%. This research offers a scientific basis for solving the urban flooding problem in Changchun city, as well as a theoretical reference for early warnings for urban disaster, and is conducive to the realization of sustainable urban development.

Cohesion Model and Scenario Simulation for Risk Prevention of “Blockchain + Agriculture Crowdfunding” from the Synergistic Perspective

Aiming at the problems such as scattered subjects, static mode and single function, this paper explores a dynamic synergistic risk prevention mode of agricultural crowdfunding that adapts to the age of data intelligence. Based on multiple prevention subjects, the blockchain technology and cohesion principle are introduced into agricultural crowdfunding prevention, and then a risk prevention dynamic model of “blockchain + agricultural crowdfunding” is constructed from the synergistic perspective. Fuzzy cognitive map model and its reasoning mechanism are used to simulate four scenarios of 1-subject, 2-subjects, 3-subjects, and 4-subjects respectively in the dynamic model and the static model. The results show that: as the number of risk prevention subjects increases, so does the cohesion, and the cohesion of multi-subjects reaches a higher state in less time and the steady-state faster, even though the fluctuation range reduces. The risk value for the multi-agent reduces rapidly and reaches a lower risk value in a shorter period of time. Overall, cohesion increases while risk reduces. In the same scenario, dynamic mode cohesion is stronger than static mode cohesion, and it takes less time to attain the steady-state value. Under various scenarios, the dynamic model’s cohesiveness steady-state value increases with the number of subjects, which is stronger than the static model’s. This study not only enriches and develops the theory of risk management of agricultural crowdfunding, but also provides a decision-making basis for the enterprises and the government, etc., to formulate, adjust, and implement risk prevention measures.

Ensuring Information Security of Information Systems to be Integrated Based on Trust

Relevance. Information systems are integrated with each other, which leads to the need to ensure the protection of the integrated system. The level of trust requires formalizing the concept of trust and studying its nature and structure.The purpose of the article is to remove the contradiction between the needs to provide access to the resources of the resulting integrated system and ensure compliance with the information security requirements of each of the integrated systems by formulating the concept of trust from the information security perspective. Methods used: systems analysis, risk management theory, resolutions, iSoft operator equation synthesis method.Results. Main shortcomings of existing approaches to the formalization of the concept of “trust” are identified. Based on the FIST information system model, a functional trust structure has been developed and formalized in IDEF0 notation for all levels of integrated information systems: supporting level, personnel level, hardware and software levels. Examples of violation of trust and examples of tools for creating trust for each level of the information system are given. The adequacy of the model is illustrated by the example of real integration of information systems. Application of the proposed trust model made it possible to identify features that increase information security risks for the integrated information system from the example. Novelty. An interpretation of trust as a measure of information security is proposed, in contrast to “risk” as a measure of danger. A tool for quantitative assessment of trust is proposed. A necessary and sufficient condition for creating maximum trust in an information system is formulated and proven by the resolution method Practical significance. The proposed trust model can be used in the development of guidance documents regulating the process of integration of information systems, in setting requirements for service personnel and creating training programs for them, for developing information security tools and methods for their application.

Theory and Practice of Quantitative Investment Strategies

This paper provides an overview of the theory and practice of quantitative investment strategies, beginning with the definition of quantitative investment, its history of development, and its importance in financial markets. It then delves into the theoretical foundations of quantitative investment, including financial market theory, the application of mathematical and statistical methods, and the theory of risk management and portfolio optimisation. Common quantitative investment strategies, such as spread trading, momentum strategy, mean reversion strategy, etc., are then detailed, as well as the design, implementation process and practical application of these strategies. Examples of successful and failed strategies are further analysed, as well as the challenges and problems faced, such as data quality, model overfitting, and market changes. Finally, future trends in quantitative investing are looked at, including the application of artificial intelligence and big data, advances in algorithmic trading, changes in the regulatory environment, and the impact of sustainable investing and ESG factors. This paper aims to provide investors, researchers and market regulators with a comprehensive understanding and outlook of quantitative investing.

The ‘Black Swan’ theory in aviation safety

Abstract The article is a review and focuses on the analysis and interpretation of Nassim Nicholas Taleb’s ‘Black Swan’ theory in the context of aviation safety, considering various aspects of risk management and preparation for unforeseeable events in aviation. We present the thesis that the Black Swan theory has significant implications for the development of risk management strategies in aviation, emphasising the need to prepare for rare but catastrophic events that traditional risk analysis methods may overlook. The aim of the research is to understand how the Black Swan theory can be integrated into existing aviation safety frameworks and how it can contribute to the aviation industry being better prepared for extreme events. The article stands out for its original approach to the analysis of the Black Swan theory in the context of the specific nature of aviation safety, highlighting new perspectives in aviation risk management. It provides valuable insights into the practical aspects of applying the Black Swan theory to aviation, offering a novel approach to predicting and responding to unexpected aviation events. This is important for both aviation safety theorists and practitioners in this field. The research covers extensive literature analysis, including case studies, risk management theories and current aviation safety strategies, providing a comprehensive overview of the issue.

Psychosocial risks in the Canadian construction and extractive industries

Workers in the Canadian construction and extractive industries (CEIs) are exposed to psychosocial risk factors (PRFs) and experience a greater prevalence of mental health issues than the public. Guided by risk management theory, the purpose of this quantitative, nonexperimental, correlational study was to examine the relationship between five predictors (age, gender, residence type, employment arrangement, and rotation status); and 15 response variables (measures of Canadian CEI workers’ perspective of PRFs). Using a cross-sectional design, an 84-question survey was administered to workers (N = 174) over the age of 18 to obtain demographic and contextual data and scores for the PRFs using the Copenhagen Psychosocial Questionnaire – Canadian version. Analysis of variance was used to compare means across groups to determine if there was a difference in views of PRFs. The findings revealed significant relationships between the predictors and workers’ views on their influence at work, development opportunities, meaning of work, role conflict, work-life conflict, and social community. While workers’ experiences are largely unique, there are also clear influences on PRFs based on age, gender, and employment arrangement.

Prioritizing cybersecurity initiatives in aviation: A dematel-QSFS methodology

The aviation industry's growing dependence on digital technologies necessitates robust cybersecurity measures to counter advanced threats. This study integrates the Decision-Making Trial and Evaluation Laboratory (DEMATEL) method with Quantum Spherical Fuzzy Sets (QSFS) to enable precise and reliable decision-making under uncertainty. Key criteria, identified through expert evaluations, include Threat Detection Systems (TDS), Data Encryption Protocols (DEP), Regulatory Compliance (RC), Incident Response Plans (IRP), User Training (UT), Access Control Mechanisms (ACM), and Network Security Solutions (NSS). Analysis using the proposed method revealed that “Regulatory Compliance” and “Threat Detection Systems” are the most influential factors, emphasizing the need for strict adherence to standards and advanced threat detection capabilities. Additionally, the significance of “User Training” and “Data Encryption Protocols” underscores the importance of comprehensive training programs and strong encryption measures. By incorporating strategic management theories such as the Resource-Based View (RBV), Contingency Theory, and Risk Management Theory, this study presents a strategic framework to assist aviation organizations, policymakers, and researchers in developing effective cybersecurity strategies, ensuring the safety and security of global air travel.

Fraud Prevention Strategies and Financial Stability of Insurance Companies in Kenya

Insurance companies play a crucial role in reducing risks and uncertainties, making them a vital part of the economy. However, they are vulnerable to various types of fraudulent activities, such as false claims, premium misuse, and financial record manipulation. While efforts have been made to address these challenges, more investigation is needed to determine the effectiveness of fraud prevention methods in maintaining financial stability. This research project aims to bridge this gap by exploring the empirical connections between internal control frameworks, transaction monitoring processes, financial audit procedures, and the overall financial stability of insurance companies in the Kenyan market. The goal is to understand how these techniques can deter fraud, promote regulatory compliance, and strengthen the organizational structures in the industry. Additionally, the study examines established theories like agency theory, risk management theory, institutional theory, and game theory to clarify the theoretical basis supporting these tactics and their impact on the financial stability and longevity of insurance companies. The conclusion of the study offers valuable insights regarding the correlation between fraud prevention measures and financial stability within the insurance sector.

Risk factors for cognitive biases when making management decisions

Decision-making in case of sudden changes in the external environment of the enterprise can occur in a situation of time interval restrictions. Cognitive biases inherent in a manager can influence such decisions when there is not enough time. The purpose of this work is to clarify the influence of cognitive biases on the subjective perception of the probability of events occurring when making decisions. Such cognitive biases can also affect risk analysis and assessment, consumer behavior etc. The development of anti-risk control impacts will be implemented with this in mind. The research is based on the methodological tools of the operational theory of risk management, the fundamentals of behavioral economics developed in the works of D. Kahneman and A. Tversky, and the so-called «theory of two systems (Systems 1 and Systems 2)». Individual examples of cognitive biases in decision-making under the influence of System 1 are considered. The results of an experiment to identify quantitative estimates of the perception of the probability of events occurring based on a visual series of images presented to subjects with System 1 turned on and System 2 suppressed are described. The solutions to predictive problems are assessed. It seems reasonable to take into account all the problems identified during the implementation of the experiment. It is planned to conduct a new series of experiments with specified conditions, since expanding and clarifying the understanding of the subjective perception of probability by economic agents can help revise many theories in the field of preparing managerial decision-making and consumer behavior. Recommendations for the introduction of anti-risk control impacts with the inclusion of System 2 to minimize the impact of cognitive distortions on decisions are proposed

Role of Policy-Supported Hog Insurance in Promoting Green Total Factor Productivity: The Case of China during 2005–2021

Hog insurance and rural environmental protection are complementary to each other. Studying the environmental effects of hog insurance is imperative for safeguarding food safety and promoting the long-term development of the agricultural insurance industry. Informed by the risk management theory and sustainable development theory, this paper constructs a theoretical framework for the impact of policy-supported hog insurance on the green total factor productivity (GTFP) of hog farming. Utilizing panel data from China’s hog-dominant production areas spanning from 2005 to 2021, the slacks-based measures of directional distance functions (SBM-DDF) model and multiple-time-point difference-in-differences (DID) approach were used to measure GTFP and explore the effects of hog insurance on GTFP and the underlying mechanisms. The findings indicate a substantial enhancement in GTFP due to hog insurance. The conclusion drawn was robust to various tests. The mechanism is that hog insurance fosters GTFP by expanding the breeding scale, adjusting the planting–breeding structure, and promoting technological progress. Furthermore, the environmental effects of hog insurance policy are more pronounced in economically developed regions, with significant effects observed on the GTFP of free-range, small-scale, and medium-scale hog-farming households. This study contributes new evidence to the field of assessing the environmental impact of agricultural insurance policies and provides valuable insights for furthering green transformation and development in the hog insurance-supported breeding industry.

The Effect of ESG Performance on Bank Liquidity Risk

In recent years, investors have increasingly focused on the environmental, social, and governance (ESG) performance of businesses, driven by the rising importance of social and environmental challenges. This trend highlights the critical role of ESG factors in the financial sector. This study leverages stakeholder theory, risk management theory, and ESG investment theory, utilising financial data and ESG scores from Chinese listed banks to comprehensively analyse ESG elements and examine their impact on the liquidity risk of commercial banks. The results show that: (1) Enhanced ESG performance can mitigate liquidity risk in commercial banks by reducing the proportion of non-performing loans and improving overall financial performance. (2) By standardising and implementing sustainable business practices, ESG elements can improve commercial banks’ liquidity management levels and lessen the incidence and effects of liquidity risk. As a result, it is critical to lower banks’ liquidity risk and support the long-term growth of commercial banks from five angles: information disclosure, differentiated reform, digital transformation, education and training, and international cooperation.

Methods for assessing risks in the aviation safety management system

The relevance of the topic is due to the fact that the civil aviation of the Republic of Azerbaijan is intensively implementing the recommendations of the international organization ICAO on the “Theory and Practice of Risk Management” in order to reduce the accident rate in air transport. It is proposed to determine the safety indicators of aviation systems through risk in order to carry out an objective measurement of the level of safety, taking into account many possible risk factors. The problem of risk management currently cannot be solved in an integrated form, since the necessary tools are missing. Therefore, a particular problem is proposed for solution, which consists in risk management exclusively in the field of flight safety. Investigated based on the results of a synthesis of materials from scientific foreign publications on the problems of creating promising flight safety management systems in civil aviation using risk management methods in the sense of ICAO definitions. This article also discusses the problem of risk identification, risk definition, many different risk management methods and different principles for their classification. A generalization is made on risk management within the framework of new directions for assessing flight safety, taking into account statistical data and monitoring results in civil aviation (CA).

Embracing certainty in uncertain times: Macroeconomic uncertainty, third‐party assurance, and CSR performance

AbstractOur study investigates whether macro‐level uncertainty on the future economic prospects, referred to as macroeconomic uncertainty, affects corporate social responsibility (CSR) performance. Two competing theories, namely, the real options theory and the risk management theory, offer different perspectives on whether firms would increase or decrease their CSR performance in response to macroeconomic uncertainty. Existing literature documents inconclusive empirical evidence about this matter. Employing a novel and unbiased measure of macroeconomic uncertainty and drawing upon data from U.S. firms between 2006 and 2017, we find that CSR performance is negatively associated with macroeconomic uncertainty. We also document that the negative association between macro uncertainty and CSR performance is attenuated for firms that have their CSR reports independently assured by third‐party experts. The results are robust to controlling for firm characteristics, an alternative measure of macroeconomic uncertainty, and an alternative sample period excluding the 2008–2009 Financial Crisis.

Risk Management Techniques on Financial Performance of State-Owned Sugar Companies in Kenya

Financial performance of sugar companies in Kenya is generally poor and has been fluctuating over a long period. The state-owned sugar companies are worse compared to the privately owned companies. The sugar sector has been orbiting around sugar scarcity, inefficiencies, failure to pay farmers, failure to renovate and modernize production unit, failure to battle with imported sugar, recurrent losses and political interference. The main objective of this study was to evaluate the effect of risk management techniques on financial performance of state-owned sugar companies in Kenya. The specific objectives guiding the study were; to establish the effect of risk avoidance on financial performance of state-owned sugar companies in Kenya, and to assess the effect of risk acceptance on financial performance of state-owned sugar companies in Kenya. The study was anchored on the risk management theory, model risk management and the theory of financial control. The study adopted a descriptive research design with a target population of fifty four respondents being employees from the six state-owned sugar companies in Kenya. Questionnaires were the main data collection tool. Data was analyzed with the help of statistical package for social science version 28, Analysis of Variances, Correlation and regression analysis tools were used to establish the relationship between the variables. The findings of the study revealed a statistically significant regression effect and indicative of accomplished prediction of financial performance of state-owned sugar factories through the F-calculated value which showed that the model was significant. Risk avoidance explained 53.9% of financial performance and risk acceptance explained 61.9% of financial performance of state-owned sugar factories in western Kenya. The findings of the study will provide an insight to finance practitioners on the risk management techniques and their relationship with organizational financial performance as well as contributing to the scholarly literature on risk management techniques in other sectors of the economy. Keywords: Risk, Risk Avoidance, Risk Acceptance, Financial Performance, Risk management Techniques

From isolation to revival: trade recovery amid global health crises

BackgroundThe COVID-19 pandemic has highlighted the importance of designing effective trade recovery measures in response to global health events (GHEs). This study combines international trade risk management theory and multi-case comparative analysis of past GHEs to present a theoretical framework for designing national trade recovery measures for future events.ResultsThe research finds that during GHEs, trade risks shift to fundamental uncertainty, requiring spatial–temporal-subject dimension recovery measures. The study suggests changing the focus of trade recovery policy design from emergency-oriented and single-dimension measures to reserve-oriented and enduring-effect measures of comprehensive dimensions at micro- and macroeconomic levels.ConclusionThe study contributes to the debate on managing trade risks in times of crisis, where there is a need to develop effective trade recovery measures that account for the complexities of global trade and the unique challenges of GHEs. The findings provide practical guidance for trade officials and policymakers to design measures in response to GHEs to improve a country’s overall trade recovery.