Browsing by Subject "Risk management"

Now showing 1 - 6 of 6

An empirical analysis of residual value risk in automotive lease contracts
(2011) Nau, Katharina; Burghof, Hans-Peter
The work at hand concentrates on the risk structure of lease contracts and therefore aims to give insights and support to the risk management of lease firms. The focus lies on a special and highly important type of risk in such contracts named residual value risk describing the risk arising from deviations of the actual residual value at maturity stage of the contract from the estimated one fixed in the contract at its completion. My analysis deals with automobile leases covering the major share of this market. The main objective of this work is the analysis of two research question: 1.) What determines residual values? 2.) How can residual values be predicted? On the one hand, a minimum level of predictability is necessary to manage residual value risk. That is why an identification of determinants of residual values is extremely important. The possibility to link fluctuations in residual values to changes in explanatory variables allows one to trace the pattern of residual values based on the pattern of the identified risk factors. On the other hand, residual values are not known in advance but needed at the completion of the lease contract. This is why residual values have to be predicted. These questions are assessed by an empirical analysis using the ARIMAX regression methodology. The analysis uses a sample covering monthly residual values of 17 cars in the German automobile market for the observation period from June 1992 to December 2008. The determinants of the residual values describe the market environment of used cars. Those can be classified into three man categories. The first one illustrates the overall economic situation, the second one describes the situation in the new and used car market and the third one specifies a certain car model in more detail. The empirical results give evidence that the chosen factors influence the residual values of cars. Moreover, those determinants lead to very accurate predicted residual values showing a high forecast ability. Furthermore, the empirical results and considerations are used to conduct a theoretical analysis in order to derive implications for the residual value risk management. The valuation model of McConnell and Schallheim (1983) is used on the one hand to quantify the impact of fluctuations in the underlying factors on the lease rate and, on the other hand, to analyse the effects of misspecifications in an underlying market factor on the lease rate and the value of the lease contract. These theoretical considerations give insights and support to improve the risk management of residual values in lease contracts.
Genebanks at risk: Hazard assessment and risk management of national and international genebanks
(2023) Herbold, Theresa; Engels, Johannes M. M.
Genebanks are crucial for safeguarding global crop diversity but are themselves exposed to several risks. However, a scientific basis for identifying, assessing, and managing risks is still lacking. Addressing these research gaps, this study provides risk analysis for three key risk groups: natural hazards, political risks, and financial risks, carried out on a sample of 80 important national and international genebanks, comprising at least 4.78 million accessions or roughly 65% of the reported total of ex situ conserved accessions worldwide. The assessment tool of Munich Re “Natural Hazards Edition” allowed a location-specific comparison of the natural hazard exposure. Results showed that genebanks in the Asia-Pacific region are most exposed to natural hazards, while institutions in African and some Asian countries are rather vulnerable to political risks. Financing is a major problem for national genebanks in developing countries, whereas the Global Crop Diversity Trust achieved considerable financial security for international genebanks. Large differences in the risk exposure of genebanks exist, making a location- and institution-specific risk assessment indispensable. Moreover, there is significant room for improvement with respect to quality and risk management at genebanks. Transferring risks of genebanks to third parties is underdeveloped and should be used more widely.
Insurance preferences of smallholders : results from an adaptive conjoint analysis in Northern Vietnam
(2008) Buchenrieder, Gertrud; Fischer, Isabel
Livestock plays a pivotal role for smallholder production systems in mountainous Northern Vietnam. Poor rural farm households are vulnerable and their livelihood systems are often so fragile and finely-balanced that a small misfortune can destabilize the households for many years. Economic risks, especially loss of livestock, are one of the major reasons for slipping into poverty. Normally, insurance systems could step in here. In developing countries however, insurance markets are usually underdeveloped. Empirical research reveals that raising livestock and selling it in case of a livelihood emergency is a particularly popular risk management strategy. Based on the results of a computer-based Adaptive Conjoint Analysis (ACA) with 155 responding households of different ethnic minority groups in Son La and Bac Kan provinces of Northern Vietnam, this article examines insurance preferences of rural farm households. In general, smallholders are very interested in livestock insurance. The ?insured animal? is the most important attribute for all respondents and the buffalo is the highest valued animal. However, the critical issue is how to design the insurance package. It is argued that the provision of adapted livestock insurance could help decreasing household vulnerability by a forward looking risk management strategy. Insurance preferences of smallholders are presented and policy recommendations are given to improve the overall situation of vulnerable households in mountainous Northern Vietnam.
On the determinants of speculation - a case for extended disclosures in corporate risk management
(2017) Hecht, Andreas
We examine the determinants of corporate speculation and challenge the extant, conflicting evidence. Separating risk management (reducing currency-specific FX exposure) from speculation (increasing or holding currency-specific FX exposure constant), we provide unprecedented evidence that speculators are smaller, have more growth opportunities and possess lower internal resources than risk-managing firms. The refined granularity of our dataset stems from a unique regulatory environment, where a regulating authority recommends additional disclosures for FX risk management in excess of governing accounting standards. Our findings enable investors, henceforth, to identify speculation from public available sources, where our results substantiate the significance of such an extended reporting. Thus, this case of optional disclosures might serve as blueprint for further regulatory refinements in other settings.
Vulnerability and Risk Management for Sustainable Livelihoods of Farm Households in Northern Thailand-
(2007) Sricharoen, Thitiwan; Heidhues, Franz
This research attempts to explain the relationship between poverty, livelihood difficulties, risk and risk management and vulnerability to poverty of farm households in Northern Thailand. Furthermore, this study proposes a health insurance concept addressing risks and poverty of farm households. In line with the objective was to analyse risk and risk management strategies of vulnerable rural households in Northern Thailand. Firstly, the result of a principal component analysis (PCA) was utilized to determine the important factors affecting household poverty. Furthermore, a poverty index was developed. The PCA retained 16 out of 65 possible poverty determining variables. Six of the 16 variables relate to the human resource factor: (1) percentage of adults who can write, (2) percentage of adults who completed primary school, (3) percentage of adults with non-farm occupation, (4) number of children, (5) percentage of unemployed to employed, and (6) family size. There are two variables that relate to food security and which were significant: (7) crop yield and (8) value of main crop yield. Four variables relating to the dwelling show a high correlation to poverty. These are the (9) housing condition, (10) quality of latrine, (11) water system, and (12) furniture. Four variables related to assets: (13) value of transportation assets, (14) farmland owned, (15) value of assets per adult equivalent, and (16) value of agricultural assets. The explicit factors relevant for assessing poverty are the dwelling conditions, assets, human resources, and food security, respectively. The factor which can lead the poor to become even poorer is the human resource factor, where e.g. the number of dependents is comprised. Secondly, results of the PRA showed that the most pressing problem plaguing households is their debt. Households try to honor their debt repayment obligations, but it appears that the frequent occurrence of income shocks and their low risk management capacities prevent them from doing so. Land issues relate to the second most important problem area. Often, farm households lack sufficient land and have land certificate problems. Another pressing problem negatively influencing households? livelihoods are droughts, which lead to water shortages, higher fertilizer prices and middleman problems. The results of the PRA provided an overview of all livelihood problems; they concentrated on livelihood shocks related to idiosyncratic and covariate risks. One idiosyncratic risk of main importance is poor health. Thirdly, results of the risk and risk management analysis found that there are five major types of risks frequently encountered in rural areas: 1) Natural risks (fire, heavy rainfall, heavy wind, damage to house, and drought); 2) Theft risks (theft of livestock, crop and consumer goods); 3) Production risks (crop loss from weather, crop loss from insects, storage loss, low production prices, low production, higher factor price, death of chickens); 4) Life-cycle risks/human risks (birth of children, funeral costs, unemployment, sudden moving away of working family member, old age, death of working member, son is placed in jail, risks of being cheated); 5) Health risks (prolonged sickness, chronic disease, working disability, alcohol problems of head of household and other family member). Fourthly, respondents reported that the burden of health expenses became lower after they had signed up for health insurance. However, 42% of the respondents stated that the health expenses still represented a relatively high burden to their household budget. The respondents were asked about their first choice of treatment when falling ill. The first choice for medical treatment service that households selected was the local health unit because of its proximity to the villagers. The next choice was the state hospital because there were more complete medical instruments than the local health unit; households went there when they became severely ill. The third choice was purchasing medicine from the pharmacy because the price of medicine was cheaper in comparison to traveling to consult a doctor at state hospital. Fifthly, conjoint analysis on health insurance aims to provide concepts for new, alternative health insurance products to support the exiting health insurance system in Thailand, and to help the government reduce health support costs. The analysis will be particularly useful when compared to the governmental health policy that already provides 30 Baht Health Insurance Cards to the rural poor. The households were asked which types of social security services they presently have. The 30 Baht Health Insurance is the most popular, with 88% of households participating in it. Others social security services in the region are the old age health insurance card and others account for the remainder. However, the public hospital was selected most when a household member was severely sick, with 77% respondents. Some gave the reason that the hospital provides full medical treatment and is ready in the case of an emergency operation. Finally, the study examines the linkage between poverty and vulnerability to poverty by the classification of a vulnerable group of farm households, and proposes an empirical measure that allows the setting of a vulnerability to poverty by applying Thailand?s poverty line as a benchmark. The results demonstrated that while 42% of the populations in the study area were poor in 2003, the majority of these are chronically poor (11% of the population). The information further shows that almost one-third of the population is transitorily poor i.e., 30.5% of the total population. This is dominated by a low expected mean consumption (LM vulnerability- the low expected mean consumption) accounting for 31% of total vulnerability (or 13.5% of the total population) and almost one-third was accounted for by high volatility of consumption (or 30% of the total population).
Vulnerability and risk management of rural farm households in Northern Vietnam
(2010) Fischer, Isabel; Heidhues, Franz
Despite the achievements of the ?doi moi? reform process, which was launched in 1986, Vietnam is still one of the poorest countries in the world, with 28.9 per cent of the total population (85 million in 2007) living below the national poverty line (UNDP 2007). Especially the mountainous, rural areas of Northern Vietnam are underdeveloped. Poor and near-poor farm households endure manifold risks and income shocks, which threaten their existence. Normally, insurance systems would step in to assist. In developing countries however, where access to formal insurance services is hardly available, rural farm households have developed alternative risk management strategies. The Sustainable Livelihood Framework (SLF) of the Department for International Development (DFID 1999), was applied as an analytical tool to identify and assess risks and risk management strategies of vulnerable rural livelihoods in the Uplands of Northern Vietnam. The role of informal social networks was analyzed with the help of Social Network Analysis (SNA). An Adaptative Conjoint Analysis (ACA) was implemented to examine the potential demand for a formal or semi-formal microinsurance scheme in the area of livestock insurance. Furthermore, additional insights were gained from interdisciplinary research on issues of human, health and livelihood security, as well as from case studies on natural resource use in Southeast Asia. The central hypotheses of this research on livelihood strategies in general and adaptive strategies such as insurance in particular are that they (1) have the potential to reduce livelihood vulnerability and that (2) the differentiated knowledge of livelihood strategies is crucial for a better understanding of the reasoning behind the exploitation of livelihood assets, such as natural resources or physical assets in the form of livestock, despite the negative medium and long-term effects. Research results lead to the following conclusions: First of all, only a very elaborate use of existing capital assets can improve the livelihood situation of vulnerable households in Northern Vietnam. Living in remote mountainous regions with scarce natural resources and limited access to other assets, the preconditions are rather difficult for ethnic minority people, even more for women. Secondly, in order to improve the situation, all stakeholders have to be aware of the existing risk management strategies (e.g. raising livestock and selling it in case of a livelihood emergency is one of the most popular risk coping strategies in the mountainous regions of Northern Vietnam) and learn from both, advantages and disadvantages of currently applied strategies to translate them into effective policies. Concerning the access to financial services, people still face several constraints, as credits are often not available for certain activities or at a certain point in time. In addition, savings and insurance services, when available are not adapted to the needs. Furthermore, emerging expenditures for livelihood risks usually go beyond the scope of the dis-saving (in cash and in kind) ability of rural households. Taking into consideration the above stated situation of changing agricultural activities, including higher input use, and the resulting decline in the number of large ruminants, one should be very careful not to destroy the so far still functioning traditional social networks. Even though these networks are not able to fully buffer all shocks and crises, they are at least one asset (social capital asset) that is initially accessible by everybody and quite often a means to compensate to some degree the lack of other capital assets as depicted in the SLF. Research results point to a number of policy issues that need to be addressed if household?s vulnerability to poverty is to be significantly reduced among ethnic minority households in Northern Vietnam. First of all, poverty reduction strategies and programs need to consider a broader target group, not only the currently poor but also the vulnerable households. The promotion of innovative financial products, such as a combination of credit and insurance, especially for loans that are taken up to purchase livestock, is considered a successful approach to support vulnerable households. Finally, it is assumed that an efficient and accessible health care system would be an important alternative for securing livelihoods. In addition, im¬pro¬ved extension services and knowledge transfer for all people, especially women, could sup¬port a sustainable future development of ethnic minority households and therefore, in the long-run, lead to poverty alleviation.