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1 – 10 of over 24000The second major area of the so-called risk treatment is risk financing. Risk financing includes measures to finance the costs of losses, risks, and uncertainties. Historically…
Abstract
The second major area of the so-called risk treatment is risk financing. Risk financing includes measures to finance the costs of losses, risks, and uncertainties. Historically, risk financing has been virtually synonymous with buying insurance. However, over time alternatives to insurance have evolved – self-insurance, pools, captives, large deductible programmes, finite insurance programmes, banking arrangements, and capital market-based solutions. The concept of risk financing has expanded to include products that address a range of financial risks such as interest rate and credit risk. These products include derivatives and some new innovative securities.
Today, the rapid development of the risk financing market has created several practical problems. Notably, regulatory and legal structures have not always kept pace with change, leading to much confusion about risk financing alternatives. Many products look and function almost identically to others, and yet history and custom have dictated very different treatment by regulators, tax authorities, and others. There is growing pressure for significant legal and regulatory realignment.
For newcomers to the field, risk financing measures can be thought of as existing on a continuum, ranging from pure retention (all losses paid directly out of pocket) to pure transfer (where a third party accepts and bears the full costs of risk). An important recognition of the continuum of risk financing is that there are no products that are fully retention or transfer, but rather a varying blend of the two. Hedging of risk, for example, is arguably here a near perfect blending of a retention and a transfer of risk.
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Khalid Almarri and Halim Boussabaine
The level at which risk is priced and the magnitude of risks transferred to the private sector will have a significant impact on the cost of the public–private partnership (PPP…
Abstract
Purpose
The level at which risk is priced and the magnitude of risks transferred to the private sector will have a significant impact on the cost of the public–private partnership (PPP) deals as well as on the value for money analysis and on the section of the optimum investment options. The price of risk associated with PPP schemes is complex, dynamic and continuous throughout the concession agreement. Risk allocation needs to be re-evaluated to ensure the optimum outcome of the PPP contract.
Design/methodology/approach
This paper provides a coherent theoretical framework for dealing with scenarios of potential gain and loss from retaining or transferring risks.
Findings
The outcome indicates that using the proposed framework will provide innovative ways of deriving risk prices in PPP projects using several risk determinants strategies.
Practical implications
In costing risks, analysts have to take into consideration the balance between the cost of risk transfer and the cost of losses if risk is retained.
Originality/value
This paper contributes to the PPP literature and practice by proposing a framework which is consistent with a risk allocation approach in PPP projects, where the key proposition is that risk pricing can overload project debt leading to loss of value.
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Wiebke Reim, Vinit Parida and David Rönnberg Sjödin
The purpose of this paper is to propose a product-service systems (PSS) risk management decision-making framework for PSS operation, which can enable global manufacturing…
Abstract
Purpose
The purpose of this paper is to propose a product-service systems (PSS) risk management decision-making framework for PSS operation, which can enable global manufacturing companies to offer PSS successfully. Thus, the authors aim to contribute primarily to developing the PSS literature by integrating insights from the literatures on risk management and decision making.
Design/methodology/approach
This study is based on an exploratory, single case study with a Swedish manufacturing company that has long-term experience with providing PSS. In total, the authors conducted 25 semi-structured interviews with diverse respondents from different functional units.
Findings
The study’s main findings include identifying and proposing an interconnection between the operational risks associated with providing PSS, possible risk management responses, and decision criteria, all of which enable decision makers to select an appropriate risk management response.
Research limitations/implications
The study contributes to the literature in three ways. First, the authors classify PSS operational risks into three categories related to delivery competence risks, technical risks, and behavioural risks. Second, the authors explain conditions under which each risk can be mitigated using different risk management strategies (avoidance, reduction, sharing/transfer, and retention). Finally, the authors combine different risk categorizations, decision criteria, and risk responses into an integrated decision framework of PSS risk management.
Originality/value
The novel contribution is developing a PSS risk management decision support framework, which holds theoretical and practical value.
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This paper aims to explore how perceived risk affects customer loyalty in e-commerce and how switching costs mediate in the relationship between perceived risk and customer…
Abstract
Purpose
This paper aims to explore how perceived risk affects customer loyalty in e-commerce and how switching costs mediate in the relationship between perceived risk and customer loyalty.
Design/methodology/approach
In this paper, structural equation modeling was conducted, and data on Internet shopping habits of 382 consumers in Taiwan were examined.
Findings
The findings of this study revealed that lowering perceived risks can increase switching costs, which leads to customer loyalty with the service provider in e-commerce.
Research limitations/implications
A sample bias may exist because the sampling was conducted through an online survey in a specific Web site. This study affirmed the theoretical framework regarding the mediation effect of switching costs on perceived risk and customer-loyalty relationships.
Practical implications
To avoid the single effect of reducing perceived risk on customer loyalty, practitioners should be difficult for competitors to imitate. This can increase the barriers to competition, further lock in the customer and can prevent the switch to other service providers.
Originality/value
The findings provide a new feasible approach to customer retention: a business can reduce customers’ perceived risk to increase switching costs against the competition for customer retention in e-commerce.
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M. Saleem Ullah Khan Sumbal, Irfan Irfan, Susanne Durst, Umar Farooq Sahibzada, Muhammad Adnan Waseem and Eric Tsui
The purpose of this article is to investigate how organization retain the knowledge of Contract Workforce (CWF) and to understand the associated challenges in this regard.
Abstract
Purpose
The purpose of this article is to investigate how organization retain the knowledge of Contract Workforce (CWF) and to understand the associated challenges in this regard.
Design/methodology/approach
Adopting an inductive approach, 15 semi-structured interviews were conducted with senior managers, project heads and consultants working in leading oil and gas companies across eight countries (USA, Australia, UAE, KSA, Pakistan, UK, Thailand and Russia). Thematic analysis was carried out to analyze the data collected.
Findings
CWF appears to be a significant source of knowledge attrition and even knowledge loss in the oil and gas sector. There are various risks associated with hiring of CWF, such as hallowing of organizational memory, repeated training of contractors, no knowledge base, workforce shortage among others which can impede the knowledge retention capability of O&G companies in the context of contract workforce. Various knowledge retention strategies for CWF have been revealed, however, there is interplay of various factors such as proportion of CWF deployed, proper resource utilization, cross-functional multi-level teams' involvement and strength of transactional ties. Maintaining strong relationships (Transactional ties) is crucial to maintain a virtual organizational memory (partial knowledge retention) and to follow a adopting a rehired when required policy.
Originality/value
The knowledge retention issue in the context of CWF has not be addressed in past researches. This article attempts to fill this gap.
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This paper aims to study the design of bank capital regulation and points out a conceptual downside of risk-sensitive regulation. The author argues that when a bank is better…
Abstract
Purpose
This paper aims to study the design of bank capital regulation and points out a conceptual downside of risk-sensitive regulation. The author argues that when a bank is better informed about its risk than the regulator, designing regulation is subject to the Lucas critique. The second-best regulation could be risk-insensitive, which provides an explanation for the leverage ratio as a backstop to risk-based capital requirements. This paper offers empirical predictions and implications for policy.
Design/methodology/approach
The argument in the paper is based on analytical results from mechanism design.
Findings
Optimal bank regulation could be risk-insensitive, as is observed in practice in the form of the leverage ratio rule.
Originality/value
Counter to conventional wisdom, the paper argues and provides a new explanation for why bank regulation should not be sensitive to the risk of the bank. The paper then offers empirical predictions and implications for policy.
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Christian Parker, Arun Srivastava, Paul Severs and Cameron Saylor
To highlight that the risk retention rules associated with the holding of securitization investments, commonly thought to apply only to the sponsors and manufacturers of…
Abstract
Purpose
To highlight that the risk retention rules associated with the holding of securitization investments, commonly thought to apply only to the sponsors and manufacturers of securitisations, also affect EU institutional investors and potentially impact non-EU fund managers that invest in these assets.
Design/methodology/approach
To address which classes of investor are affected and then to provide an overview of the obligations on affected investors that do invest in securitization investments.
Findings
There is much that is straightforward about the relevant obligations but there are a number of quirks that have not necessarily been fully appreciated by the market: these include the applicability to investors on a “look through” basis that may, inter alia, affect US credit fund managers with EU institutional investors.
Practical implications
EU institutional investors that do invest in this asset class should be considering the need to take practical steps to prepare written due diligence materials; non-EU credit managers that run e.g. ABS funds offered into the EU or in which there may be EU institutional investors should consider if they may have any obligations under the EU Securitization Regulation.
Originality/value
The aspects of the Securitization Regulation that affect institutional investors and regular fund managers have not been addressed as thoroughly as they have by the main securitization sector (banks, CLO managers and similar). This article seeks to remedy that and should prove of value to compliance, legal and other professionals at those types of institution.
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Draws on the results of a survey into alternative risk transfer by Marsh Risk Finance covering major corporations over three years. Covers the needs of the buyers rather than the…
Abstract
Draws on the results of a survey into alternative risk transfer by Marsh Risk Finance covering major corporations over three years. Covers the needs of the buyers rather than the suppliers. Shows how alternative risk transfer can be of value to the insurance world in particular. Highlights a need for this technique to reach a wider audience as buyer perceptions change.
Abdulaziz M. Jarkas and Theodore C. Haupt
The purpose of this paper is to identify, explore, rank the relative importance and determine the prevalent allocation response trends of the major construction risk factors…
Abstract
Purpose
The purpose of this paper is to identify, explore, rank the relative importance and determine the prevalent allocation response trends of the major construction risk factors considered by general contractors operating in the State of Qatar.
Design/methodology/approach
A structured questionnaire survey comprising 37 potential risk factors was distributed to a statistically representative sample of contractors. The influence ranks of the factors explored were determined using the “Relative Importance Index (RII)” technique, whereas the prevalent trend of contractors’ attitudes toward risk allocation of each factor investigated was quantified and expressed as a percentage, based on the number of respondents who selected a specific option, in relation to the total number of respondents.
Findings
The results obtained indicate that risks related to the “client” group are perceived as most critical, followed by the “consultant”, “contractor” and “exogenous” group-related factors, respectively. The outcomes further show that the “transfer” option is the contractors’ prevalent response to “client” and “consultant”-related risks, while the “retention” decision is the principal pattern linked to “contractor” and “exogenous” group-related risk factors.
Research limitations/implications
The dominant respondents’ perception that the crucial construction risks are related to clients and consultants suggests that these two parties have an essential role in controlling the negative ramifications of the associated factors.
Practical implications
The findings suggest that increasing designers’ awareness of the significant effect of applying the constructability concept can considerably help reducing the risks concomitant of the construction operation. Policy makers may contribute, moreover, in alleviating the risk of incompetent technical staff and operatives’ employment by controlling the migration of inexperienced and unskilled construction workforce into the State.
Originality/value
Given the knowledge gap for the major construction risk factors considered by general contractors in Qatar, the results reported in this study can provide clients, industry practitioners and policy makers with guidance to effectively manage the significant risks determined, which can further assist in achieving a reasonable level of competitiveness and cost-effective operation.
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The purpose of this study is to examine whether lengthy audit delays lead to auditor changes in the subsequent year. The paper hypothesizes that a lengthy interaction between…
Abstract
Purpose
The purpose of this study is to examine whether lengthy audit delays lead to auditor changes in the subsequent year. The paper hypothesizes that a lengthy interaction between clients and their auditors reflects high audit risk factors relating to management integrity, internal controls, and the financial reporting process. It argues that auditors are more likely to drop clients with long audit delays because they would like to avoid these types of audit risks.
Design/methodology/approach
Using logistic regressions, the paper first tests whether a lengthy audit delay leads to an auditor change. It then examines whether as audit delays increase, auditor changes are more likely to be downward than lateral.
Findings
The results support the hypothesis that Big N auditor‐client realignments occur following long audit delays. Further, as the length of the delay increases, the paper finds that there are more downward changes.
Research limitations/implications
An implication of our study is that a long audit delay represents a publicly observed proxy for the presence of audit risk factors that lead to an auditor change.
Practical implications
This study suggests that all else constant, investors should consider a lengthy audit delay as indicating that there has been deterioration in the quality of the client‐auditor interaction. An audit delay also presents an observable proxy for successor auditors to consider while evaluating risks associated with a new client.
Originality/value
The results of our study increase our understanding of how Big N auditors manage their client portfolios to mitigate their exposure to risk factors.
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