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Book part
Publication date: 3 May 2016

Benjamin A. T. Graham, Noel P. Johnston and Allison F. Kingsley

Political risk is a complex phenomenon. This complexity has incentivized scholars to take a piecemeal approach to understanding it. Nearly all scholarship has targeted a…

Abstract

Political risk is a complex phenomenon. This complexity has incentivized scholars to take a piecemeal approach to understanding it. Nearly all scholarship has targeted a single type of political risk (expropriation) and, within this risk, a single type of firm (MNCs) and a single type of strategic mechanism through which that risk may be mitigated (entry mode). Yet “political risk” is actually a collection of multiple distinct risks that affect the full spectrum of foreign firms, and these firms vary widely in their capabilities for resisting and evading these risks. We offer a unified theoretical model that can simultaneously analyze: the three main types of political risk (war, expropriation, and transfer restrictions); the universe of private foreign investors (direct investors, portfolio equity investors, portfolio debt investors, and commercial banks); heterogeneity in government constraints; and the three most relevant strategic capabilities (information, exit, and resistance). We leverage the variance among foreign investors to identify effective firm strategies to manage political risk. By employing a simultaneous and unified model of political risk, we also find counterintuitive insights on the way governments trade off between risks and how investors use other investors as risk shields.

Details

Strategy Beyond Markets
Type: Book
ISBN: 978-1-78635-019-0

Keywords

Article
Publication date: 28 June 2022

Cristian Camilo Fernández Lopera, José Manuel Mendes and Eduardo Jorge Barata

Climate-related disasters are the most representative in terms of recurrence and impacts. To reduce them, risk transfer is a key strategy for climate risk management…

Abstract

Purpose

Climate-related disasters are the most representative in terms of recurrence and impacts. To reduce them, risk transfer is a key strategy for climate risk management. However, this approach does not consider the socioeconomic vulnerability of each population group, limiting its effectiveness. The objective of this paper is to improve and increase the usefulness of risk transfer through the Differential Risk Transfer (DRT) approach.

Design/methodology/approach

A comprehensive and systematic review of the state of the art on Differential Approach (DA) is presented, and its connection with existing models of vulnerability to disasters is analysed. Through epistemic deliberations, an operational definition of Differential Risk Transfer (DRT), as well as its advantages are discussed. Finally, general guidelines are presented for the implementation of the DRT in a specific context.

Findings

The results confirm that DA presents a clear relation with the models for the study of disaster vulnerability. The small group discussions agree with the usefulness of DRT for improving climate-related risk management.

Practical implications

This paper argues for the inclusion of the DRT approach in the climate risk management strategies aiming to fill the disaggregated data gaps that limit the potentiality and accuracy of risk transfer schemes worldwide.

Originality/value

This innovative approach improves the accuracy of the risk transfer mechanisms through the recognition of the differences of ethnicity, gender and life cycle that increase socioeconomic vulnerability to climate-related disasters.

Details

Disaster Prevention and Management: An International Journal, vol. 31 no. 5
Type: Research Article
ISSN: 0965-3562

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Article
Publication date: 2 June 2022

Maria Flavia Mogos, Anna Fredriksson, Erlend Alfnes and Jan Ola Strandhagen

This paper explores the operationalization of production network coordination – the production transfer (PT) – and the relationships between transfer risk sources…

Abstract

Purpose

This paper explores the operationalization of production network coordination – the production transfer (PT) – and the relationships between transfer risk sources, preventive actions, supply chain disruptions, corrective actions and losses to better understand how to mitigate the risk and achieve an effective transfer process.

Design/methodology/approach

A longitudinal field study of a PT process from Norway to Spain was studied in depth for 25 months.

Findings

The paper presents the implications of three areas of importance for PT success: (1) how the transfer influences the plant roles, (2) the cross-locational management of the transfer project at the sender and receiver and (3) whether adapting the transferred production to the receiver's environment is an enabler or an inhibitor of transfer success.

Practical implications

The findings about how to mitigate the transfer risk and the frameworks of risk sources, supply chain disruptions, losses and preventive and corrective actions, along with the examples from the in-depth study, can aid the practitioners in managing PTs and achieving the relocation goals.

Originality/value

This is one of the first studies of PT, which is from the perspective of both transfer parties, and addresses both preventive and corrective actions and all the transfer phases. Moreover, this study addresses the operational aspects of production network coordination, which received limited attention in earlier research.

Details

Journal of Manufacturing Technology Management, vol. 33 no. 6
Type: Research Article
ISSN: 1741-038X

Keywords

Book part
Publication date: 4 April 2022

Peter C. Young

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…

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.

Details

Public Sector Leadership in Assessing and Addressing Risk
Type: Book
ISBN: 978-1-80117-947-8

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Article
Publication date: 31 March 2020

Min Guo, Naiding Yang and Yanlu Zhang

The purpose of this paper is to explore that relational capability plays a mediator role in the relationship between focal enterprises' control on knowledge transfer risks

Abstract

Purpose

The purpose of this paper is to explore that relational capability plays a mediator role in the relationship between focal enterprises' control on knowledge transfer risks in R&D network.

Design/methodology/approach

The paper reviews the related literature from which it proposes a theoretical hypothesis and conceptual framework which is tested empirically adopting regression methodology by mathematical statistics software.

Findings

The results reveal that focal enterprises' control (core technological capability and network position) have a positive effect on knowledge transfer risks without the mediation of relational capability. Moreover, relational capability mediates the positive relationship between core technological capability and knowledge transfer risks.

Research limitations/implications

The cross-sectional data of this research has difficult in testing causality between the variables, and future research should take account of the potential factors that can impact on knowledge transfer risks.

Practical implications

The results provide more valuable information to managers in alleviating knowledge transfer risks in R&D networks. For one thing, the study indicates how focal firms' control (core technological capability and network position) can be taken advantage of improving R&D efficiency and reducing the knowledge transfer risks. For another, the results emphasize that relational capability plays an important role in interacting with cooperative enterprises in the process of R&D activities.

Originality/value

Few studies present a theoretical discussion on focal firms control as the important determinants of knowledge transfer risks especially in the R&D network. Moreover it expands the related risk management theory by relational capability that mediates the relationship between focal firms control and knowledge transfer risks.

Details

European Journal of Innovation Management, vol. 24 no. 3
Type: Research Article
ISSN: 1460-1060

Keywords

Article
Publication date: 1 January 2000

Richard Cantor and Stanislas Rouyer

Although issuers may benefit generally from securitization, some asset securitizations transfer more credit risk than others. When a lender uses securitization to replace…

1029

Abstract

Although issuers may benefit generally from securitization, some asset securitizations transfer more credit risk than others. When a lender uses securitization to replace on‐balance‐sheet financing, that lender transfers to investors some of the risks, and, in the form of credit enhancements, some of the offsetting, i.e., claims‐paying, economic resources (e.g., assets, cashflows), as well. Therefore, securitization only reduces an issuer's net (i.e., residual) exposure to credit losses when a securitization has transferred proportionately more credit risk than claims‐paying assets. The authors discuss the distinction between “gross” versus “net” transfers of credit risk. To illustrate this point, they provide conceptual examples of the net effect of an asset securitization on the residual credit risk retained by an issuer. In these examples, providing credit enhancement (e.g., overcollateralization, subordination) may implicitly lever or delever an issuer's balance sheet. The authors outline the general conditions under which this indirect economic recourse to the issuer, in effect a form of “self‐insurance,” may result in a net dilution of the claims of unsecured creditors.

Details

The Journal of Risk Finance, vol. 1 no. 2
Type: Research Article
ISSN: 1526-5943

Article
Publication date: 9 August 2011

Marco A. Espinosa‐Vega and Juan Solé

The purpose of this paper is to show how network analysis can be used for effective cross‐border financial surveillance, which requires the monitoring of direct and…

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Abstract

Purpose

The purpose of this paper is to show how network analysis can be used for effective cross‐border financial surveillance, which requires the monitoring of direct and indirect systemic linkages.

Design/methodology/approach

This paper illustrates how network analysis could make a significant contribution in this regard by simulating different credit and funding shocks to the banking systems of a number of selected countries. After that, the authors show that the inclusion of risk transfers could modify the risk profile of entire financial systems, and thus an enriched simulation algorithm able to account for risk transfers is proposed.

Findings

Finally, the authors discuss how some of the limitations of the simulations are a reflection of existing information and data gaps, and thus view these shortcomings as a call to improve the collection and analysis of data on cross‐border financial exposures.

Originality/value

This paper is one of the very few to take a cross‐border perspective on financial networks. It is also unique in accounting for risk transfers and in proposing a methodology to include the analysis (and monitoring) of risk transfers into a network model.

Article
Publication date: 13 August 2021

Yang Zhao, Jin-Ping Lee and Min-Teh Yu

Catastrophe (CAT) events associated with natural catastrophes and man-made disasters cause profound impacts on the insurance industry. This research thus reviews the…

Abstract

Purpose

Catastrophe (CAT) events associated with natural catastrophes and man-made disasters cause profound impacts on the insurance industry. This research thus reviews the impact of CAT risk on the insurance industry and how traditional reinsurance and securitized risk-transfer instruments are used for managing CAT risk.

Design/methodology/approach

This research reviews the impact of CAT risk on the insurance industry and how traditional reinsurance and securitized risk-transfer instruments are used for managing CAT risk. Apart from many negative influences, CAT events can increase the net revenue of the insurance industry around CAT events and improve insurance demand over the post-CAT periods. The underwriting cycle of reinsurance causes inefficiencies in transferring CAT risks. Securitized risk-transfer instruments resolve some inefficiencies of the reinsurance market, but are subject to moral hazard, basis risk, credit risk, regulatory uncertainty, etc. The authors introduce some popular securitized solutions and use Merton's structural framework to demonstrate how to value these CAT-linked securities. The hybrid solutions by combining reinsurance with securitized CAT instruments are expected to offer promising applications for CAT risk management.

Findings

The authors introduce some popular securitized solutions and use Merton's structural framework to demonstrate how to value these CAT-linked securities. The hybrid solutions by combining reinsurance with securitized CAT instruments are expected to offer promising applications for CAT risk management.

Originality/value

This research reviews a broad array of impacts of CAT risks on the (re)insurance industry. CAT events challenge (re)insurance capacity and influence insurers' supply decisions and reconstruction costs in the aftermath of catastrophes. While losses from natural catastrophes are the primary threat to property–casualty insurers, the mortality risk posed by influenza pandemics is a leading CAT risk for life insurers. At the same time, natural catastrophes and man-made disasters cause distinct impacts on (re)insures. Man-made disasters can increase the correlation between insurance stocks and the overall market, and natural catastrophes reduce the above correlation. It should be noted that huge CAT losses can also improve (re)insurance demand during the postevent period and thus bring long-term effects to the (re)insurance industry.

Details

China Finance Review International, vol. 11 no. 4
Type: Research Article
ISSN: 2044-1398

Keywords

Article
Publication date: 1 August 2003

Pamela Edwards and Jean Shaoul

Partnerships are the British government’s preferred method of procuring public sector services, and the policy is usually justified in terms of delivering value for money…

6293

Abstract

Partnerships are the British government’s preferred method of procuring public sector services, and the policy is usually justified in terms of delivering value for money. Ex ante financial methodologies are prescribed to ensure that decision making is based on a sound appraisal of alternatives and the government has called for an evaluation of implemented projects. This paper seeks to contribute to that evaluative process by exploring ex post facto some of the issues and problems that arose in practice. Using a case study approach, the paper considers two failures of information technology partnerships to examine how risk transfer, which is at the heart of the partnership policy, works in practice. The cases show that the contracts failed to transfer risk in the way that had been expected. The public agencies, not the commercial partner, bore the management risk and costs fell on the public at large and/or other public agencies.

Details

Accounting, Auditing & Accountability Journal, vol. 16 no. 3
Type: Research Article
ISSN: 0951-3574

Keywords

Article
Publication date: 18 November 2020

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…

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.

Details

Built Environment Project and Asset Management, vol. 11 no. 1
Type: Research Article
ISSN: 2044-124X

Keywords

1 – 10 of over 65000