The Future of Risk Management, Volume II

The possibility for individuals to lend money directly to other individuals or small companies without the intermediation of a bank is fascinating. In principle, it could also offer interesting returns for investors and lower financing costs for borrowers. Although promising, this new channel for fund transfers also raises a number of critical issues. In particular, one of these concerns the availability of sufficient information and risk management tools for both lenders and borrowers. We propose a structured methodology for evaluating P2P lending platforms in terms of risk management-related information and tools, and apply our scoring system to analyse and compare a sample of online marketplaces from different parts of the world.

The aim of this paper is to investigate the relation between crowdfunding platforms and risk management in the Italian context, in order to assess the impact for participants. This study can be divided in two main parts. The first part analyses the main characteristics and types of crowdfunding and the current regulatory state for the Italian markets. The second part focuses specifically on risk management theory and presents some specific risks in equity crowdfunding. The findings of this research highlight potential threats and risks for investors and introduce some risk management approaches in crowdfunding platforms. To the authors’ knowledge, this is one of the first study made to deeply understand crowdfunding risk assessment and how platforms can mitigate and manage related risks.

This paper focuses on fair value measurement under the IFRS 13 assumptions and the reliability of the market and transaction multiples evaluations (“Level 2” methods). We test the reliability of multiples evaluation approaches in different economic sectors, by comparing the fair value of 1678 companies estimated by multiples with the effective market capitalization over 15 years. Multiples’ fair value does not provide a reliable measure of a company’s value, with a gap that varies depending upon portfolios and time. In the case of observable Level 2 fair value indicators for a market, such as market multiples, the company’s fair value is not consistent with the real market value. Thus, whenever Level 2 indicators are not observable, the method is increasing volatility and intrinsic evaluation risk.

The study examines compliance levels of non-financial information (NFI thereafter) of 50 Italian listed companies, with a special emphasis on risk disclosure. We determine whether and to what extent companies are compliant with the Directive 2014/95/EU on NFI and risk disclosures. To achieve such objectives, the study develops a NFI disclosure score based on 165 items and analyzes the 2017 non-financial statements in accordance with the law; overall, 8250 text-units are collected. With reference to risks and opportunities, the findings suggest that companies unanimously identify potential risks but rarely disclose the potential dangers of these risks and the boundaries at which these risks may occur, which, in turn, may negatively influence business activities.

The capital market represents a significant segment of the financial system because it directs free financial resources and has a substantial impact on the development of the company, the economy on the one hand, and on the other hand it affects attracting domestic and foreign investors. The capital market in the Federation of Bosnia and Herzegovina belongs to a group of developing markets, characterized by small market capitalization and liquidity on the one hand, while on the other hand, this market is characterized by relative openness, greater political instability and less connection with developed markets. The primary goal of this research is to determine the degree of relationship and openness of the capital market in the Federation of Bosnia and Herzegovina with the capital markets of the EU countries and developed countries. The results of the Pearson correlation test showed that the most substantial connection with the capital market in the Federation of B&H was recorded with the capital markets in Austria (stock exchange index: ATX5), Hungary SE (stock exchange index: Budapest SE), France (stock exchange index: CAC40), Italy (stock exchange index: FTSEMIB), Turkey (stock exchange index: BIST All share) and USA (stock exchange index: S&P 500). The weakest correlation was recorded with the capital markets of Slovenia, Croatia, and the United Kingdom. Also in this paper will be carried out the Granger causality test with the help of the software package SPSS 16.0. The primary goal of the Granger test is to determine which prices can affect the prices of the capital market in the Federation of B&H and whether the prices on the capital market in B&H can affect prices in other markets. The survey covers the period from January 5, 2015, to December 29, 2017. Data are collected on a daily basis from the stock market of the observed markets.

This chapter investigates what type of exporters buy export finance products from banks to alleviate counterparty risk when doing business internationally. Our empirical analysis (Crédit Agricole’s export lending to 155 customers) suggests that the recourse to trade finance (TF) is appealing for small- or medium-sized firms capable of generating cash flows, moderately levered, exposed to the credit risk of importers and eligible for further bank credit. This study adds novel evidence on how TF works addressing the issue of data shortage that limits empirical efforts in this area. Our results are important to both bank managers, who may price fees and terms depending on clients’ key financial/economic and export destination characteristics, and policymakers, who may better understand the TF market to foster product demand-offer match.

A contribution to exhaustive taxonomy of patient investors highlights the differences in the level of patience according to different variables. This approach is based on the pillars of patient capital in the literature, specifically the work of Deeg and Hardie (Socio-Economic Review 14: 627–645, 2016), which provides a taxonomy on patient capital suppliers, highlighting the attitudes to be committed (loyalty and engagement). The authors propose a new taxonomy building, following behavioural aspects that influence the motivation to invest, including time preference, risk-opportunity and expected returns. Also considered is the position of State Investment Banks (SIBs) (Mertens and Thiemann in Journal of European Public Policy, 2017) which, contrary to their role in development and societal challenges for sustainable growth (Griffith-Jones and Tyson in The European Investment Bank: Lesson for developing countries, 2013) have not received scholarly attention.

The objective of our work is to assess the reliability of the machine learning techniques estimating the default probabilities. In our work, we followed an alternative nonlinear separation method known as the Support Vector Machine (SVM) for the default risk analysis. We did not need any parameter restrictions or prior assumptions in our estimates. We analysed more than 42,000 Italian companies, using the AIDA dataset spanning the years 2011 through to 2016, proposing an SVM model based on the performance measures such as ratios of leverage, liquidity and activity. The results of our work point out that using nonlinear techniques for predicting bankruptcy allows to achieve better performances than traditional statistical ones and, moreover, shows the important predictors to estimate default probabilities.

Board diversity can influence the management of different kinds of risks affecting performance. Our research analyzes the relationship between corporate efficiency and board diversity in 451 European listed manufacturing companies for the year 2015. In particular, we investigate the effects on profitability efficiency and risk management of gender inclusion (women and foreigners on boards). In order to assess the profitability efficiency, we rely on a non-oriented, slack-based model for Data Envelopment Analysis, and a logistic regression analysis to identify the effect of diversity management variables. The results demonstrate that the increased presence of women is associated with a higher probability for greater relative efficiency in countries without mandatory gender regulation. The increased presence of foreigners, however, is associated with a lower probability of above-average efficiency.

The excess liquidity exacerbated by the absence of Shariah-compliant products as well as the modus operandi in the Islamic banks has been an issue. Excess liquidity is costly since it creates bank challenges like poor asset utilization and low competitiveness as well as causes anomalies in the effective monetary policy transmission and the development of the financial market. The aim of our research is to evaluate the determining factors of the excess liquidity in the Islamic banks of Malaysia by applying fixed effect and random effect model. Findings underline that the availability of short-term Sukuk has a statistically significant negative impact on the excess liquidity. Therefore, the presence of Sukuk in the market could eradicate the inefficiency of low asset utilization for the Islamic banks.

The present paper presents an interpretive case study on the topic of risk management in SMEs. The research identifies an Italian medium-sized company, a family business established in the 1940s, which represents the integrated and holistic approach in managing risks is put into practice. This paper underlines that in a medium enterprise it is not necessary to formalize the risk management process with written procedures. However, the management should hold all the information flow and be able to manage all the events in a holistic way. This paper represents the second step of a huge research project with the aim to understand whether it is possible to validate a conceptual model that considers a risk approach focusing on decision-making, SME entrepreneurship and corporate culture.

In the latest years many authors have analyzed the coffee industry for the great changes the sector is facing. One of them, in the brief and in the long term, is the climate change that, influencing heavily the equatorial areas of the world, tightens, modifies and moves the lands of coffee cultivations. This risk concerns coffee famers, but it threatens to have a strongly negative impact on the whole industry since the quantity and the quality of the roasted coffee depends on them. This research aims to analyse the possibility to manage the climate change risk, acting on the upper level of the supply chain, the farmers, and considering the stakeholders involved in the sector as a whole.

This paper examines the business model of an Italian company (TIS) that manage the claims for non-life insurance companies with innovative solutions. When a policy-holder make a claim for a loss or damage, the insurer may decide either to repair, rebuild or replace the property or to offer a cash settlement. To provide these services, many insurance companies have started developing strategic relationships directly with building firms, repairers, specialist suppliers and project managers, in order to find reliable contractors that will repair or replace the policy holder’s property quickly, with high quality and at a low cost. Opposite to other EU Countries, in Italy many insurance companies are still providing only cash settlement, with higher costs and a higher level of fraud illegal claims risk.

Sharing economy (SE) has brought new challenges for the insurance industry, worldwide. Such challenges may turn into opportunities or threats for the insurance industry, depending on how they are managed. No matter what it is, the “shared” sector, or the country, SE requires a legal and operational shift from the past. For instance, recent activities of some SE companies in Iran are creating challenges for the Iranian insurance industry. Therefore, a case study is developed based on the activities of these companies and their impact on the insurance market. The study adopts the PESTLE analysis for the insurance industry and applies causal-loop diagrams to address the effects of SE activities. Finally, suggestions for more effective strategic management in the insurance industry are provided.

Start-ups present completely different dynamics from any other type of enterprise but the communication becomes in any case a strategic activity. The literature analysis highlights the need of new studies that show communication strategies as an integral part of the entrepreneurial strategy. We decided to engage in a research that could give a communication system overview of Italian start-ups, by extending the analyzed sample at a national level and identifying the integrated communication activities currently implemented by start-ups. The encouraging results of the study support the hypothesis of a positive effect of integrated communication on start-up’s economic performance. We think that the communication can have an extraordinary impact on the development of business and reputation, and we define a “Theoretical framework” specifically dedicated to start-ups.

The issue of Food safety has always been at the heart of international debates. The expression “Food safety” is used to designate the hygiene and safety of foodstuffs and the commitment to prevent unintentional contaminations from pathogenic agents. This paper aims at investigating consumers’ perception and behaviour on food safety topics. A survey was carried out to define the Millennials’ comprehension of different meanings of food safety. Results showed that food safety is an important feature in the purchasing process of foodstuffs. Moreover, respondents are worried as to the occurrence of harmful substances in food and the lack of hygiene and health checks, and they believe that cleanliness and hygiene of stores contribute to create a stronger perception of food safety.

The purpose of this paper is to analyse the progress of risk management and the tools that can help companies to better deal with the risks they face. The research carried out on a sample of companies from different sectors offers confirmation and new conviction. The documentation collected was examined by asking four questions. Is there a specific risk management function? With which risks does it deal in particular? Which policies? What place does risk management have in the organisation? The main conclusions reached by authors have been compared with what companies do in reality. For this purpose, a sample of companies from the automotive, pharmaceutical, electronic, air transport and mass retail sectors was chosen.