International Journal of Risk Assessment and Management (11 papers in press)
A probabilistic graphical models approach to model interconnectedness
by Alexander Denev, Adrien Papaioannou, Orazio Angelini
Abstract: In this paper, we show that using multiple models when executing a specific task almost unavoidably gives rise to interaction between them, especially when their number is large. We show that this interaction can lead to biased and incomplete results if treated inappropriately (which we believe is the current standard in the financial industry). We propose the use of probabilistic graphical models, which is a technique widely used in machine learning and expert systems, as a remedy to this problem. We discuss some numerical aspects of our approach that will be present in any practical implementation. We then examine, in detail, a practical example of using this method in a stress testing context.
Keywords: probabilistic graphical models; model interconnectedness; stress testing; machine learning.
Binary approaches to biological risks
by Ange-Helene Yebga Hot, Toualy Serge Ouina, Marie-Pierre Baudin-Maurin, Marina Koussemon, Jean-Michel Panoff
Abstract: Concerning biological risks, European Union and Governments policies mainly rely on two scientific classifications (2000/54/EC; 2009/41/EC). However, recent health concerns (e.g. Avian Flu Epidemic) and environmental damages (e.g. GMOs) have questioned the limitations of those categorisations, stressing the need for accurate tools to assess and manage biological risks. The aim of this study is to provide an original analysis of the biological risks, beyond the common categorisations, taking into account, by using binary approaches, the biological risks diversity. This research work has non-exhaustively identified 10 couples such as microbiology/ macrobiology, natural/provoked risks, naturally pathogenic biological agents/genetically modified organisms, indigenous/invasive states, health/environment, primary target/collateral consequences, synthetic/natural biology, exobiology/endobiology, proven/potential risks and assessment/management.
This present study will likely be useful to improve the decision-making process regarding biological risks.
Keywords: biological risk; biology; risk; hazard; assessment; management.
Recovery from natural disaster: a study on tsunami-affected micro, small and medium enterprises in Galle and Matara districts in Sri Lanka
by Sarath. W.S.B. Dasanayaka, W. Jayarathna, Omar Al Serhan, Kimberly Gleason
Abstract: Natural disasters occur with high frequency, leaving behind an obscene path of destruction that immobilises communities. The main objective of this study is to show recovery and re-establishment of tsunami affected micro, small and medium enterprises (MSMEs) in Galle and Matara districts in Sri Lanka. The secondary data and information for this study were obtained from available literature, web sites and publications. Primary data and information were collected from sample surveys in these two districts and interviews formed an important source of supplementary information. Results showed that the needs of tsunami-affected MSMEs were ignored and that there were many governance-related problems in the recovery process in both districts. Further, the rate at which businesses in the Galle and Matara districts returned to pre-tsunami levels of operations six years post-tsunami was low, at around 62%. The financial loss arose primarily from damage to plant and machinery as well as inventory. Hence, expenditure should have been in the direction of procurement of tools, equipment and machinery for the affected units. Owing to the large scale of the disaster, its wide geographical spread, and involvement of a large number of agents, institutions and parties involved in the distribution of benefits and in the recovery process, it is hard assign blame to any single entity regarding accountability of government or other institutions for their conduct and performance in recovery process. Our results are of use to policy makers and NGOs in their efforts to assist entrepreneurial ventures in resource allocation that more efficiently assist entrepreneurs in reestablishing business operations following natural disasters worldwide.
Keywords: tsunami; natural disasters; economic recovery; micro; small and medium enterprises; governance; Sri Lanka.
Rethinking capabilities in information security risk management: a systematic literature review
by Martin Lundgren
Abstract: Information security risk management capabilities have predominantly focused on instrumental onsets, while largely ignoring the underlying intentions and knowledge these management practices entail. This article aims to study what capabilities are embedded in information security risk management. A theoretical framework is proposed, namely rethinking capability as the alignment between intent and knowing. The framework is situated around four general risk management practices. A systematic literature review using the framework was conducted, resulting in the identification of eight identified capabilities. These capabilities were grouped into respective practices: integrating various perspectives and values to reach a risk perception aligned with the intended outcome (identify); adapting to varying perspectives of risks and prioritizing them in accordance with the intended outcome (prioritize); security controls to enable resources, and integrate/reconfigure beliefs held by various stakeholders (implement); and sustaining the integrated resources and competences held by stakeholders to continue the alignment with the intended outcome (monitor).
Keywords: information security; risk management; capability; intent; knowing.
Flood risk assessment and management for urban areas in Brazilian Pantanal using free and open source GIS software
by Rodrigo Moreira, Cleiton Santos
Abstract: The present work provides decision makers with a tool to strategically deploy a risk assessment and management method, including statistical, technological and graphical features, by using a GIS approach. The analysed period is the years between 1977 and 2017, comprising a historical series of 40 years of maximum quotas and maximum flows. Researchers used the QuantumGis 2.18 platform to deploy flood risk mapping. Maps with flood risk levels within the urban area of study are presented, also, 3D models of flood risk are presented. The calculation of the return period estimation for flood risk is a reliable tool to understand the dynamics of a water body inserted in an urban area. Thus, it is possible to deploy scenarios with statistical background to aid decision making with regard to risk assessment. Technology-based information is key to support decision making, helping cities to raise funds to deploy risk management actions. The use of a free and open source GIS software such as QuantumGis presents a low cost, efficient and interface-friendly platform to solve flood management issues.
Keywords: QuantumGis; return period estimation; assessment; Alto Taquari river basin.
Special Issue on: Digital Management of Safety in Structural Complex Systems in Economics
Predictive modelling of economic safety using the example of an ecosystem of small and medium-sized business
by Marina Vlasova, Inna Kruglova, Andrey Khlutkov, Olga Stepchenkova
Abstract: The article examines the problems of monitoring the activities of small and medium-sized businesses in the framework of ensuring the economic security of the Russian Federation. The lack of economic information on the activities of small and medium-sized businesses hinders a competent assessment of the effectiveness of state support programs for business and the development of entrepreneurial ecosystems. The authors propose to use methods of predictive modelling to improve the economic security of the state and create effective innovative business ecosystems.
Keywords: economic security; predictive modelling; small and medium business; entrepreneurial ecosystem.
Data structures, logical-probabilistic models and digital management of the safety and quality of systems in economics
by Eugene Solozhentsev, Ekaterina Karaseva
Abstract: In this paper, we are considering data structures in economic systems. These structures can be used to construct logical-probabilistic risk models intended for digital management of safety and quality of systems. Transformation of any database into a system of logical equations is described, which is the basis for constructing logical-probabilistic models of safety or quality. We give examples how the database is used to construct models of the credit risk in banking and the risk and efficiency of restaurants. Also, we present examples of using complex structure data to construct a model for management of a country's innovation system quality and simple structure data for constructing a model for assessment of the failure risk for one innovation. The special software programs Arbiter and Expa for management in economics are described. The term "digital management" is defined, and computer network components for digital management of systems in the economics are given.
Keywords: data structure; social and economic systems; logical-probabilistic risk models; safety; quality; efficiency.
Combined approach to the complex objects control and stability analysis of management decisions
by Dmitry Ivanov, Boris Sokolov, Elena Serova, Rafael Yusupov
Abstract: The main problems and features of a combined approach to the complex objects control and management stability analysis are investigated in the paper. Analytical-simulation scenarios and scenarios of intelligent models and systems execution for complex objects control and management stability analysis are given. The investigations have shown successful possibility of risk evaluation by the combined implementation of the analytical-simulation models and algorithms, and ANFIS method the method of hybrid neural-fuzzy modelling.
Keywords: combined approach; complex objects; coordination of models; simulation systems; hybrid modelling.
The impact of the digitization of the financial industry on the modeling and pricing of financial assets
by Maria Sigova, Igor Klyuchnikov, Sergey Vasilev, Anna Zatevakhina
Abstract: Digital financial services continue to expand and replace the delivery of traditional financial services to the customers. The purpose of the study is twofold. First, to consider the growing interest in price modelling for financial assets, and second to trace the role of digitisation in finance on changes in the methodology of both modelling and pricing of financial assets. Digitisation automates the financial product and services, as a result of which the quality of financial services is increasing, the set of offers is expanding, and the financial markets are growing numerically. The transformation of finance to 'digit' allows us to provide a real basis for the widespread introduction of Bayesian methods of modelling and valuation of financial assets. The article introduces preliminary premises for the demarcation of classical and digital finance, as well as traditional and new methods of pricing and predictive modelling in connection with the wide implementation of Big Data and 'digit'.
Keywords: digital finance; financial modelling; methodology; Bayesian method in finance; pricing.
The digital management of structurally complex systems in economics
by Eugene Solozhentsev, Vasily Karasev
Abstract: As a result of the analysis we establish throughout the world, there is a critical situation in economic management. A way out of the critical situation, based on new knowledge, solving new tasks and event-based digital management of structural complex systems in economics, is proposed. The new objects in management of economics are chosen. They are as follows: public authorities, socio-economic systems, processes of quality management of the socio-economic life of a person, and safe living space. The management criteria are safety and quality of objects and systems. The new knowledge for management in economics is introduced. The knowledge covers new types of Boolean event-proposition, risk scenarios for system failure, and new types of logical and probabilistic risk model. We propose to solve the following new tasks in economics: modelling, analysis and management of one system and a group of logically unified systems (models); management of the State and development of systems; and quality assessment of control systems. The concept of digital management of structurally complex systems in economics is stated. The connection of digital economics and digital management is established. The special software for event-related managing economics is described. The content of the training course for additional education for economists and teachers is given.
Keywords: digital management; event-related management; structurally complex systems; government departments; economics; business; the safe space of mankind; knowledge; logical-probabilistic models; safety criterion; quality criterion.
Concerning the evaluation of the impact of ethics on a national economy's competitiveness
by Maria Bakumenko, Anatoliy Sigal
Abstract: This study aims to evaluate the impact of the ethical behaviour of firms on a national economys competitiveness, based on data given in Global Competitiveness Reports. The firm is a complex open dynamic socio-economic system. Firms sustainable development is impossible without a good reputation. In its decision making, the firm must comply with the code of ethics. The introduction of new technologies and innovations can result in extra risks and threats for the firms external environment. Firms must do no harm to their external environment. The firms ethical behaviour contributes to preservation of its competitiveness and, accordingly, to its safety. This research paper constructs several models (linear equations) of dependence between the ethical behaviour of firms and the Global Competitiveness Index. We checked the constructed models for adequacy using an F-test. Our findings testify to a rather strong impact of the ethical behaviour of firms on a national economy's competitiveness globally.
Keywords: firm; complex system; ethics; corporate reputation; corporate safety; competitiveness; sustainable development; national economy; advanced technologies; risk; threat; decision making; ethical behaviour of firms; Global Competitiveness Index.