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The purpose of this paper is to determine optimal pooling strategies from the perspective of an insurer's shareholders underlying a default probability driven premium loading and convex price-demand functions.

The authors use an option pricing framework for normally distributed claims to analyze the net present value for different pooling strategies and contrast multiple risk pools structured as a single legal entity with the case of multiple legal entities. To achieve the net present value maximizing default probability, the insurer adjusts the underlying equity capital.

The authors show with the theoretical considerations and numerical examples that multiple risk pools with multiple legal entities are optimal if the equity capital must be decreased. An equity capital increase implies that multiple risk pools in a single legal entity are generally optimal. Moreover, a single risk pool for multiple risk classes improves in relation to multiple risk pools with multiple legal entities whenever the standard deviation of the underlying claims increases.

The authors extend previous research on risk pooling by introducing a default probability driven premium loading and a relation between the premium level and demand through a convex price-demand function.

Since the early 1990s there has been a growth in local authorities of risk management. However, despite a range of different strategies, initiatives and practices the issue of financing the risks to which authorities are exposed has remained problematic. The traditional dependence on the commercial insurance market has proved to be a flawed strategy. This paper aims to analyse an alternative risk financing strategy which has been successful in local authorities in other countries, that of risk pooling.

The paper analyses the rationale behind risk pools, investigates the legislative environment that appears to make these acceptable to central government and evaluates the likely benefits to local authorities of their adoption.

The paper finds that the perceived main legislative barrier to risk pools may no longer exist. Given that, there is a strategic, financial and operational case to be made for at least exploring the possibility of risk pooling. The experience from the USA would suggest that pools can have an important role to play in risk financing, and evidence now exists that a number of UK local authorities are actively pursuing pool formation.

The development of risk pools is likely to result in a significant reduction in the use of conventional insurance by local authorities. The evidence would suggest that this will be beneficial, but this is subject to the proviso that actuarial, financial and managerial practice within pools is rigorous.

This is an under‐researched area, with almost no extant UK‐relevant academic, or indeed practitioner, literature. The paper adds to the understanding of public sector risk management and financing for both academic and practitioner audiences.

Recent trends of outsourcing in global competition make the firms vulnerable to operational risks. The purpose of this paper is to illustrate how firms implement supply chain strategies to reduce operational risks, especially risk exposure involving catastrophic events.

Drawn on risk management and supply chain research, the concepts of operational risk and the underlying demand and supply uncertainties are delineated. Then, based on literature review and numerical demonstrations, the authors evaluate the effectiveness of supply chain strategies in reducing operational risks. The paper examines the benefit of these strategies and illustrate how to setup risk pooling and dual sourcing programs.

Employing the strategies of risk pooling and dual sourcing, an agile and diversified supply chain can be built to cope with the demand or supply uncertainties and in turn reduce the operational risks.

Leaders in any organization should consider operational and supply risk critically when planning their competitive strategy. They could foster creative solutions in supply chain strategies and essentially enhance competitiveness.

The paper highlights the tension between outsourcing trend in pursuit of competitive advantage and risk exposure to catastrophic events. This paper fulfils a practical need for better understanding of how supply chain strategies could be implemented to reduce operational risks.

Definitions of pooling effects in insurance companies may convey the impression that the achieved risk reduction effect will be beneficial for policyholders, since typically lower premiums are paid for the same safety level with an increasing number of insureds, or a higher safety level is achieved for a given premium level for all pool members. However, this view is misleading and the purpose of this paper is to reexamine this apparent merit of pooling from the policyholder's perspective.

This is achieved by comparing several valuation approaches for the policyholders' claims using different assumptions of the individual policyholder's ability to replicate the contract's cash flows and claims.

The paper shows that the two considered definitions of risk pooling do not offer insight into the question of whether pooling is actually beneficial for policyholders.

The paper contributes to the literature by extending and combining previous work, focusing on the merits of pooling claims (using the two definitions above) from the policyholder's perspective using different valuation approaches.

Globalization and outsourcing have rendered Indian automotive companies more vulnerable to supply chain (SC) risks. Consequently, companies adopt different supply chain risk management (SCRM) strategies to mitigate SC risks. The purpose of this paper is to explore SCRM strategies in Indian automobile industry and to classify automobile firms based on SCRM dimensions.

A survey instrument on SCRM dimensions was designed and data were collected from 79 automobile firms. Principle component analysis (PCA) was performed on the collected data to derive the factors underlying SCRM dimensions. Further, cluster analysis using extracted factors as a clustering variate was performed to identify strategic groups from the given set of firms.

PCA derived seven factors, namely: avoidance, supplier development, flexibility, risk pooling, redundancy, integration and control strategies. The surveyed firms were classified into two clusters as low and high SCRM level.

A limitation of this study is that data were collected from a single industry and in a single country.

Understanding of SCRM dimensions shall increase the use of these dimensions and firms can mitigate negative effects of SC risks. The detailed operationalization of SCRM strategies highlights the importance of three strategies: avoidance, integration and supplier development. Managers’ understanding of SCRM strategies will improve the firm's performance and business excellence.

This research empirically validates SCRM strategies and investigates how these create differences among firms.

Public risk management is a relatively new but important element of public management and public budgeting. As research in this area is limited, this study attempts to advance knowledge on two specific elements of public risk management based on a survey sent to the Public Risk Management Association (PRIMA) members in 2002. 1) How do public entities use various risk funding techniques (e.g., purchasing insurance, self-insurance, and intergovernmental risk pools)? 2) Have public entities implemented integrated risk management in their risk management practices? The survey found evidence that integrated risk management is emerging in public risk management practice. As this is an exploratory study, the author also identifies a series of questions for future research.

Introduction In recent years considerable attention has been given to the role of the State in the financing and provision of education. Public financing of education has, in particular, been widely justified on the grounds that there are external benefits from education (1). Underinvestment in education occurs because the individual equates private benefits and private costs. But social costs equal private costs while social benefits exceed the private ones. This situation can be corrected by reducing private costs through public subsidies.

Portfolio risk in crop insurance due to the systemic nature of crop yield losses has inhibited the development of private crop insurance markets. Government subsidy or reinsurance has therefore been used to support crop insurance programs. The purpose of this paper is to investigate the possibility of converting systemic crop yield risk into “poolable” risk. Specifically, this study examines whether it is possible to remove the co-movement as well as tail dependence of crop yield variables by enlarging the risk pool across different crops and countries.

Hierarchical Kendall copula (HKC) models are used to model potential non-linear correlations of the high-dimensional crop yield variables. A Bayesian estimation approach is applied to account for estimation risk in the copula parameters. A synthetic insurance portfolio is used to evaluate the systemic risk and diversification effect.

The results indicate that the systemic nature – both positive correlation and lower tail dependence – of crop yield risks can be eliminated by combining crop insurance policies across crops and countries.

The study applies the HKC in the context of agricultural risks. Compared to other advanced copulas, the HKC achieves both flexibility and parsimony. The flexibility of the HKC makes it appropriate to precisely represent various correlation structures of crop yield risks while the parsimony makes it computationally efficient in modeling high-dimensional correlation structure.

The purpose of this paper is to introduce the continuous auditing system based on continuous monitoring and its implementation methodology; also to present a systematic case study of actual continuous auditing systems implemented in the financial industry and the manufacturing industry.

The paper examines the method of implementing the continuous auditing system in the enterprise resource planning (ERP) environment, and suggests how the continuous auditing system can take firm root by looking at the successful introduction of the continuous auditing system in the financial industry and the manufacturing industry.

The proposed method of implementing the continuous auditing system has the 2stage approaches which can be applied to various kinds of companies in the ERP‐based environment. In addition, the proposed cases have the important practical implications acquired in the process of implementing the continuous auditing system in the financial industry and the manufacturing industry.

This study will help many corporations facing various types of corruption or circumvention of internal control, with their internal auditing, by showing them how to use the continuous auditing system to reinforce internal control. Also, it will make the independent auditor understand audited company's continuous monitoring system and lead to use the infrastructure for efficient and effective external auditing.

The proposed method and cases of implementing the continuous auditing system offer an innovative approach to auditing in the ERP‐based environment because it facilitates both internal auditor and external auditor to achieve the audit objectives efficiently and effectively.

The purpose of this paper is to analyze the use of telematics in insurance and its consequences for the insurability of risks. Empirical results on monitoring policyholders or insured objects and its consequences for asymmetric information, as well as claims frequency and severity are discussed. Furthermore, potential future research questions that arise from the use of telematics in risk management and insurance are outlined.

The paper systematically reviews existing studies and then investigates the consequences of telematics using Berliner’s insurability criteria. The results are based on 52 academic studies and industry papers published from 2000 to 2019.

The findings emphasize the effects of new information on information asymmetry and risk pooling, the implications of new technologies on loss frequency and severity, legal restrictions and ethical consequences of the use of telematics in the insurance field. Problems with the insurability impede the market development of innovations such as telematics tariffs.

Despite its increasing relevance for businesses at present, research on telematics in insurance is limited. Some papers can be found in the IT domain, but relatively little research has been done in the business and economics literature. The authors illustrate where the research stands currently and outline directions for future research.