Integrated Risk Management and the Role of the Risk Manager

ABSTRACT: Although the transferring of a firm's pure risk historically has been conducted through the insurance and reinsurance markets, risk managers of large corporations are reportedly becoming more sophisticated with regard to their risk financing strategies. This increased sophistication has come in the form of greater use of techniques such as captives, finite risk insurance, financial reinsurance, and risk retention groups. The purpose of this study is to assess the characteristics and extent of integrated risk management. Using survey data, we evaluate several aspects of risk management integration, including (1) the extent to which risk managers are involved in managing both pure and financial risks facing their firms, (2) the nonoperational types of risks handled by risk managers and the techniques being used to handle a broader set of risks, and (3) the effect that factors such as the size of the firm, the firm's industry, and the background and training of the risk manager has on participation in integrated risk management activities.     

Theory and Application of Linear Supply Function Equilibrium in Electricity Markets

We consider a supply function equilibrium (SFE) model of interaction in an electricity market. We assume a linear demand function and consider a competitive fringe and several strategic players having capacity limits and affine marginal costs. The choice of SFE over Cournot equilibrium and other models and the choice of affine marginal costs is reviewed in the context of the existing literature. We assume that bid rules allow affine or piecewise affine non-decreasing supply functions by firms and extend results of Green and Rudkevitch concerning the linear SFE solution. An incentive compatibility result is proved. We also find that a piecewise affine SFE can be found easily for the case where there are non-negativity limits on generation. Upper capacity limits, however, pose problems and we propose an ad hoc approach. We apply the analysis to the England and Wales electricity market, considering the 1996 and 1999 divestitures. The piecewise affine SFE solutions generally provide better matches to the empirical data than previous analysis.     

The Buried village,New Zealand – An example of dark tourism?

In 1886, the explosion of Mount Tarawera resulted in the loss of 150 lives and the burial of the village of Te Wairoa, the base from which tourists had visited the Pink and White Terraces, a silicone-stained natural formation then advertised as one of the natural wonders of the world. Since 1931, the buried site has itself been a tourist attraction and Smith and Croy have argued that it serves as an example of “dark tourism”. This paper uses a different methodology to argue that Lennon and Foley's original definition of dark tourism is precise, that the buried village of Te Wairoa does not meet that specification, but does support the model suggested by Sharpley, that the site's characteristics are those of grey tourism supply. However, the findings derived from a sample of over 600 respondents indicate that sites are complex packages of potential experiences, and are potentially multi-faceted in terms of the experiences they offer. It is also suggested that cultural components might play a role in the experience of what is “dark” about a site.     

Appraisal, Agency and Atypicality: Evidence from Manufactured Homes

The appraisal of the "market value" of homes serving as the collateral for mortgages is a fundamental part of the underwriting process. If a loan should default, however, it is not the retail market value that the lender obtains, but rather the "recovery value." In this research, we show how recovery values differ from market values at origination and explore the reasons for the differences. Using a large sample of chattel mortgages on manufactured homes, we explore the relationship among the selling prices, the book values, and the fitted values from simple hedonic models with spatial autocorrelation. We then address the differences between selling prices at origination and recoveries from repossessed homes. We find that the spread between them varies systematically with home characteristics and especially with "atypicality," that is, with measures of how unusual a home is. Selling prices both at origination and recovery affect borrower defaults.     

Correction to: Flexible Ubers and Fixed Taxis: the Effect of Fuel Prices on Car Services

Journal of Industry, Competition and Trade - A Correction to this paper has been published: https://doi.org/10.1007/s10842-021-00359-3