Managing Risk and Decision Making in Times of Economic Distress, Part B: Volume 108B

Introduction: The COVID-19 crisis is a major shock to the global economy, with serious repercussions on financial markets. Most economies, especially high-income ones, have made considerable efforts, including financial ones, to stimulate aggregate demand in the face of a loss of income on the one hand and to maintain the production potential of companies on the other. This fact required the intervention through various instruments on the money market, but also the mention of the money creation capacity of the banks through the lending mechanism. Apparently, this should have affected the stability of banking systems by increasing the credit risk assumed, but this was avoided because banks are better capitalised and the regulatory framework, including the macroprudential one, was strengthened after the financial crisis of 2007–2009. Therefore, the national authorities had sufficient leeway to respond to the recession and market instability caused by the pandemic by relaxing prudential requirements.

Aim: A theoretical review of literature and good practice of developed banking systems on how macroprudential policy can supplement expansionary monetary policy in overcoming the pandemic crisis. Identifying the risks for the excessive use of relaxed macroprudentialism and formalising recommendations to combine it with monetary policy instruments to overcome stressful situations for banking systems.

Method: In order to study the subject approached in this chapter, there were applied the following research methods, such as analysis and synthesis of conceptual approaches of macroprudentiality and the tools they use, deduction and induction, in order to elucidate the influencing factors using the relaxation of macroprudentiality in the context of pandemic crisis and research on the high-income states experience in order to formulate conclusions and opinions.

Findings: The authors find that countries have responded quickly to the outbreak of the crisis by easing capital and liquidity requirements, or at least refraining from the previously planned tightening. At the same time, the authors noticed that loan-based measures and minimum reserve requirements were rarely relaxed and risk weights were not changed at all.

Originality of the Study: The correlation of different monetary and macroprudential policy instruments in the need to relax them, the analysis of possible risks and the formulation of conclusions on the usefulness of applying these methods to solve the economic effects of the COVID-19 pandemic.

Implications: Our results suggest that the macroprudential instruments can only be applied if banking systems have previously succeeded in consolidating the capitalisation of banks. A restrictive macroprudential policy can create premises for the use of excess capital in situations such as that generated by the pandemic, but it is recommended only to economies where overregulation does not affect development in periods of normal evolution.

Introduction: Tourism is one of the fastest growing industries in the world and an important source of income, taxes and jobs while being closely linked to social, economic and environmental well-being of many countries, especially of the developing countries. Sustainable tourism can be considered as an extension of the sustainability concept in the tourism sector, to meet the current needs of tourists, without compromising the possibilities of future generations to satisfy their own needs. The sustainable development of the tourism sector cannot be achieved if certain social groups will not be able to continue accessing tourism services and, at the same time, if the negative aspects of the environmental impact are neglected. The components of sustainable development actually form the core of social innovation activities. New business models, digital devices, user-generated content, big data and online commerce have positive effects on sustainable tourism. But the quality of the tourist product is influenced by the quality of the human factor. Activities that can be performed remotely will be based on new technologies, which require new skills and competencies for employees. It is necessary to reconfigure the implementation of the tourist services process, in which the human interaction is reduced and, at the same time, the client experience is stimulated. The COVID-19 crisis can be considered a catalytic moment to reconsider the growth trajectory of the tourism industry, in the sense that all activities can be reorganised so that the development of tourism is sustainable, with a less destructive impact on the social and environmental component.

Aim: The purpose of this chapter is to review the valences of sustainable tourism in the context of societal changes at the European level.

Method: An extensive literature review was carried out and then the authors discussed the critical issues affecting sustainable tourism. To achieve this, the authors incorporated findings from various researches into four categories. The result is a new perspective and a new potential framework for analysis.

Findings: The authors identified four critical factors that have the potential to influence the sustainable tourism development: social innovation, digitalisation, management of crisis situations and human capital development.

Originality of the Study: This chapter offers a new perspective on the factors that influence the sustainable tourism. These new factors offer potential for further in-depth analysis and refinement.

Purpose/Aim: Over the last quarter of a century, several voluntary frameworks and non-financial reporting standards have been developed by various initiatives and organisations. Especially after the 2008 financial crisis, which deepened into values crises, the need for evaluating social, environmental, and economic consequences and herein for non-financial disclosures accrued. This chapter aims to outline the current state in the ecosystem for non-financial reporting and its projected future developments and suggests further developments in this field. Since financial institutions played a negative role in the crises and will be important in future responsible investing, the authors also addressed some financial institutions’ specific non-financial issues.

Method: In search of an answer to our questions about whether existing non-financial reporting pronouncements meet (various) stakeholders’ expectations and whether international pronouncements are needed, we rely on triangulation. We start with the identification of phenomena of non-financial reporting. Description of phenomena is further on supplemented with a literate overview. Based on a review of prior research and study of the current framework’s pros and cons, we present a possible path of further development in non-financial reporting. Making that mixed-methodological approach is used (i.e. deductive and inductive reasoning).

Results/Findings: The authors deduce that there has been a substantial increase in demand for non-financial information, social responsibility ratings and other non-financial information services on behalf of preparers, users of such reports and the public. The authors particularly highlight the shortcomings that currently exist and outline the characteristics that future international non-financial reporting frameworks would have to meet with the awareness that such framework or standards will have their advantages and disadvantages. As seen by the authors, the main problem is how to achieve political consensus and then general acceptance by users.

Originality/Significance: The International Financial Reporting Standards (IFRS) Foundation has become active in the field of non-financial reporting and started a project to become an internationally recognised standard-setter. However, with many mandatory or voluntary initiatives being started in this field, IFRS Foundation will need to address many challenges and ambiguities to become a leading organisation in non-financial reporting. Therefore, the research question is whether a new board, comparable to the International Accounting Standards Board, with the straightforward task of setting non-financial reporting standards would be needed in the future.

Aim: This chapter aims to examine the connection between government policies and entrepreneurial dimensions present in 13 European Union member countries, over the period 2002–2019. As long as the policies represent a set of decisions and actions issued by state-run structures, bodies with political, legislative, and financial authority to act to deal with a matter of public interest, this study overviews how intervention channels and policy instruments act upon supporting entrepreneurship.

Method: The methodology employed consists of correlations, principal component analysis (PCA), and regression models, in order to emphasise the statistically significant relationships between governance indicators and several entrepreneurial dimensions (financing for entrepreneurs, taxes and bureaucracy, basic school entrepreneurial education and training), and also the robustness of the results.

Results and Discussion: After observing the correlations evidencing strong relationships between the governance indicators, the results from PCA returned two main components for the Worldwide Governance Indicators: one incorporates the direct effect of control of corruption, government effectiveness, voice and accountability, regulatory quality, and rule of law, while the second component is based on political stability and absence of violence/terrorism factor. Results proved that governance has a significant impact on the financing available for entrepreneurs, especially from the first principal component, while taxes and regulations applied to new businesses have more impact in supporting entrepreneurship in countries with lower political stability levels. The consistent regression results emphasised that entrepreneurs feel more support from an institutional environment and more financing opportunities in an economy characterised by good governance, and taxes and regulations applied to new businesses have more impact in supporting entrepreneurship in countries with lower political stability levels.

Originality/Value: This study contributes to the literature studying the role of government policies on economic growth, by bringing more insights on the governance aspects and policies which are more favourable to productive entrepreneurship.

Although risks are present in any organisation and the importance of their study is obvious, the authors find that risk analysis is an area still in its infancy, as reflected in the small number of existing publications on this topic. Human resources tend to understand risk in an elementary way. The ability of human resources to perceive risk is the ability and competence to identify a potential threat that does not always appear.

Aim: The aim of the this chapter was to provide additional knowledge on human resource competencies, in order to avoid the emergence and spread of risks at the organisational and cyber level.

Methodology: The authors used the quantitative–comparative analysis, by presenting all the details regarding the competencies of the human resource in order to manage the risks at organisational and cybernetic level.

Findings: The findings of this chapter show that the compulsory competencies of the human resource influence both the general competencies and the special competencies: information technology and communications, security ethics and economic ones. These, in turn, can improve or diminish cyber security competencies by almost 50%.

Originality of the Study: This study is highlighted by results obtained from the analysis of the capacity of human resources, to integrate theoretical knowledge and practical competencies on the perception of cyber risk. Of particular importance for this research are the analysis of data and the interpretation of results on human resources competencies. In this sense, throughout the chapter are assessed the skills of human resources, necessary for the management of cyber risks at the organisational level. In terms of future research implications, it could be important research to identify a method of assessing the competencies acquired by human resources applied from the perspective of cyber risk.

Introduction and Purpose: Sustainable development is a concept that plays an essential part in the business and industry of the twenty-first century. At present, the authors observe a wide range of models to analyse and implement sustainable development measures, which use various methodologies to address sustainability goals and monitor and assess implementation progress-wise. These models are based on a systemic vision and the complexity of the interconnected component elements. This chapter presents two fundamental concepts (systemic and related) through a comparison made between two sustainability assessment systems, the first one focussing on evaluating the sustainable development goals (SDG) implementation, and the second one focussing on environmental, social, and governance (ESG) criteria assessment.

Methodology: Then, using cluster analysis, the authors grouped European Union (EU) member states from a sustainability assessment point of view.

Findings: Results show a congruent and complementary evolution of EU member states that use both sustainability assessment systems. As an outcome of this research, the authors suggest integrating the two sustainability assessment systems to better understand the phenomenon and the evolutionary trends in the field of sustainability.

Significance and Originality of Findings: Using the comparative approach and the cluster analysis method, this chapter showed that the two systems are consistent and offer compatible and complementary views, which led at necessity of integration of the two visions into a unitary systemic concept consisting of inputs (ESG scores) and outputs (SDG index).

Introduction: Micro and small and medium-sized enterprises (SMEs) represent approximately 99.7% of enterprises in the EU, USA, Japan and about 98.7% in the Republic of Moldova. They provide two-thirds of private sector jobs and contribute more than half of the total value added created by existing businesses. Under these conditions, various action programmes are adopted to increase the competitiveness of SMEs through research and innovation and to improve access to finance. In addition, the impact of the COVID-19 pandemic has stimulated new reflections on economic recovery, reconstruction and strengthening the resilience of SMEs.

Aim: This chapter aims to give an overview of the SME development, the credit market, access to finance and leasing and to analyse the regulatory framework in terms of quantitative and qualitative criteria for SME classification and the advantages and shortcomings of credit guarantees in the Republic of Moldova. Moreover, in doing this it aims to examine the credit market trends in the SMEs sector and their impact on SMEs’ performance and development.

Method: This chapter uses quantitative data for trend analyses in order to investigate the SMEs access to the credit market, the effectiveness of SME potential funding sources in the Republic of Moldova and the impact of the pandemic on SME development.

Findings: The study found significant and positive role of the credit market in the SME sector development and positive impact on SME performance and economic development. Thus, the study concluded that in order for SMEs to remain competitive and profitable it is very important that they focus on innovation and continuously seek ways to access financial resources on the credit market. During the recent financial crisis, numerous commercial banks focussed considerable attention to SME funding via lending facilities and programmes specifically dedicated to the SME sector.

Originality of the Study: This chapter provides evidence on SME access to finance on the Moldovan credit market over the 2015–2020 period by using statistics on credit to both financial and non-financial markets and offers new insights into the topic area by emphasising the importance of the SMEs financing portfolio for the Moldova economic development.

Implications: The results of this chapter suggest that the future research would be aided by improvements in the collection of more data on the pandemic period and new financial techniques and practical products available on the credit market of SME.

Introduction: Regional economies are significantly shaped by the new developments in technology, digital transformations, as well as by the demographic processes (the ageing population and international migration), all of these being amplified by the Covid-19 pandemics and requiring tailored strategies to bridge regional welfare gaps and enhance sustainable economic development.

Aim: This research provides a review of the interplay between the regional economic welfare and digitalisation, with a keen focus on digital transformations, education, digital skills and risk management strategies in filling development gaps and enhancing regional economic growth in a sustainable development framework, with a keen focus on Romania. In this approach, the study undertakes several essential research questions and designs an advanced theoretical and empirical research to inforce the knowledge in this scientific field.

Method: The methodological framework consists of robust regression models and spatial analysis with two types of spatial models, namely spatial lag-autoregressive and spatial error. National data compiled for Romania during the 2010–2019 lapse of time were exploited.

Findings: Main results encompass that digitalisation coordinates, education and digital skills are essential for enhancing the economic development and labour market performance of various regions in Romania, with beneficial spill-overs on sustainable economic welfare and poverty reduction. These advances bring to the fore important shifts in both demand and supply sides across regional economies that affect the equilibrium and overall performance, while public discourse, regulatory authorities, policy-makers and business representatives render global the keen need to strengthen the understandings in this scientific field.

Introduction: Towards the end of 2019, it had been reported that a new kind of Corona virus, COVID-19, appeared in Wuhan, China, and since then the source of this virus is obscure. However, the new coronavirus is spreading rapidly and has become a worldwide pandemic. Countries round the world are implementing their own strategies in combating the epidemic.

Aim: In this chapter, the effects of information and communication technology on the management and control of businesses in small- and medium-sized enterprises (SMEs) operating in Kosovo during the COVID-19 pandemic are investigated. Moreover, since recently the SME’s in Kosovo have shown faster development in terms of technology, thus the dimensions –the size of amount (unit) of investment is being researched as well.

Methods: In this chapter, in an online survey method, respondents were needed to answer using a Likert 5 scale has been applied. The results of online surveys are taken from 54 businesses that were found suitable for evaluation. The data are analysed using the SPSS 23 package program, and the results of frequency analysis, averages and standard deviations were examined. It has been tried to determine whether there is a difference within the approach to information technologies of SMEs operating in Kosovo, based on the year of operation, sector, number of personnel, production system type, supply market, target market, foreign capital partnership and legal structures.

Findings: According to the results of the analysis obtained, it has been determined that enterprises in Kosovo have different approaches to information technologies consistent with their years of activity, number of personnel, supply markets and target markets. In addition, according to the results obtained, enterprises made the biggest investment in information technologies during the COVID-19 pandemic period.

Conclusion: According to the data analyses and the results obtained, disclosed that the utilisation of the Internet, e-mail, capacity increase, communication and improving working conditions, to the areas where businesses make the most use of information technologies. It has been determined that the enterprises evaluate information technologies differently according to their operating time, the sector they operate in, the production tour, the supply market and the target market situation.

Originality: Information technologies and investments in this field are a very new concept for businesses in Kosovo. The results obtained from the research will offer very important information and suggestions for businesses that are new to digitalisation.

Aim: This study aims to understand the effect of sustainable human resource management (SUHRM) practices on employee work wellbeing (WWB). By drawing on the self-determination theory and social identity theory, this study explores the sequential mediation effect of voice behaviour and trust in management in the association between SUHRM and employee WWB.

Method: The study, which is conducted in the context of the Indian information technology (IT) industry, is quantitative in nature and employs a descriptive research design. The data for the study are collected using a cross-sectional survey conducted among the managerial workforce of the top 10 IT companies in India. The study employs IBM SPSS 22 along with the Hayes’ PROCESS module to investigate the mediation effects.

Findings: The core findings support the theoretical claims that SUHRM positively influences employee WWB. The study also reveals that trust in management and voice behaviour acts as sequential mediators in the relationship between SUHRM and employee WWB.

Originality: This is one of the first studies to validate the individual consequences of SUHRM empirically. Besides, studying the effect of SUHRM on employees’ WWB contributes to the literature on wellbeing.

Implications: By explaining the relationship between SUHRM, trust in management, voice behaviour, and workplace wellbeing, the current study contributes to the literature on HRM, organisational behaviour, and environmental management. SUHRM can improve the employee workplace wellbeing, which might mitigate the turnover rate, a major problem daunting the IT industries. Thus, the study emphasises the importance of SUHRM in affecting employee behaviours and has important implications for HR practitioners and scholars.

Introduction: A few months after the observation of the first COVID-19 case in Wuhan in the Hubei province of China on 17 November 2019, the World Health Organization declared a global pandemic on 11 March 2020. With the emergence of the pandemic, it has still been uncertain how long the negative economic effects of the pandemic will last around the world. The introduction of full or partial curfews in many countries has led the COVID-19 pandemic to significantly change consumer behaviour and reshape many industries.

Purpose: Recently, the whole world has faced the COVID-19 pandemic, and during the pandemic, consumers’ needs, activities, consumption behaviours have begun to change. In this study, it is aimed to investigate changes in consumer behaviour with the spread of COVID-19 all over the world and the rise of digital transformations with these changes. Thus, ideas about social trends can be obtained by gathering detailed information about changing consumer behaviours. Additionally, advice is given to businesses on how to turn difficult conditions brought about by the pandemic into an advantage thanks to the opportunities offered by the digital age.

Methodology: In this review study, first of all, national and international studies on changing consumer behaviours during the pandemic process were examined, and changes in the pandemic process were discussed. Additionally, the results of studies that have measured the effects of the COVID-19 outbreak on consumer behaviour and studies including developments in terms of digital transformation were also examined within the scope of the review.

Findings: Uncertainty, risk and fear, created by COVID-19 and the present measures of the New Normal have led to some changes in both consumer behaviour and many industries. Based on this, within the scope of this study, the changing behaviour of consumers in the COVID-19 pandemic process and its aftermath and the rise of digital transformation were examined, and predictions for the future were determined.

Introduction: The Great Financial Crisis of 2008 highlighted the importance of financial cycle fluctuations. While the regulatory response was to mandate higher bank capital requirements during the financial cycle upswing, academic research focussed on identifying the best performing early warning indicators to forecast financial cycle fluctuations that have proven to be often unrelated to business cycle changes. To safeguard the global financial system against the financial cycle fluctuations, Basel Committee of Banking Supervisors, based on first strands of empirical evidence, proposed the credit-to-GDP gap as the headline indicator tied to the countercyclical capital buffer. However, later research on this indicator identified certain concerns, among them subpar performance for economies with short available data series.

Aim of the Study: To this end this study aims to analyse various financial cycle indicators from a unique perspective of their potential viability under limited historical data availability.

Methods: For this purpose, a meta-study of existing research is carried out as well as an empirical study to compare performance of certain indicators for the sample of six countries in the Central, Eastern and South-Eastern European region, where long data series are not available.

Main Findings: It was found that certain approaches, among them calculation of raw credit growth rate and application of Hamilton filter, can supplement or possibly even outperform the Basel credit-to-GDP gap indicator under limited data availability.

Conclusion: Author concludes that for limited time series Basel credit-to-GDP gap can be potentially outperformed by other indicators and further research in this currently under-studied field is warranted.

Originality of the Paper: By using various financial cycle indicators that already proven their early warning prediction powers from previous research, this study focusses on their potential viability under limited historical data availability. Respective findings might be appreciated for supplementing policy-makers’ toolkits as complementary indicators in cases where there is no available long time series for financial cycle estimation, for example, such as countries that entered market economies relatively late.

Introduction: Studies on the insurance sector/companies have, in recent years, taken their place in literature at an increasing rate. Especially after the 2008 global financial crisis, the need for people to ensure their assets has structurally changed both the transaction volume and the yield structure of insurance sector. The increase in demand for insurance has also increased the appetite of investors to make an investment on this sector. The transaction volume of the insurance sector has increased year by year coupled with the number of insurance companies traded on the stock exchanges has started to increase in the same direction.

Aim: This chapter aims to determine the return structure of the Borsa Istanbul Insurance Index (XSGRT) based on daily closing values.

Method: Markedly with similar studies in the literature review, the authors determined that the Markov Regime Switching (MRS) model is the best-suited model for the current research. It was applied for the data set of XSGRT Index from 1997 to 2020.

Results: The result shows that XSGRT has three regimes named as expansion regime, normal regime and recession regime. Subsequently, it has been determined that the index generally attends to transition from the recession regime to the expansion regime and normal regime. This outcome is statistically significant at a 5% significance level and confirmed by backtesting results. Likewise, the duration of the recession regime is longer than the normal and expansion regime.

Conclusion: Despite the fact that the XSGRT has not yet completed its development compared to other main and sectoral indices, it is one of the indices that offer attractive earnings for investors. To put it differently, the desire of insurance companies to stay longer totally in the normal and expansion period and their immediate exit from the recession period provides them with a significant competitive advantage in contrast to other indices.

Originality/Value: This research contributes to the literature by providing additional evidence for existing studies using the longer duration of data set and applying the MRS model for Insurance Index. Best of our knowledge, it is the first study that examines the return structure of XSGRT based on its daily closing values from 1997 to 2020. In essence, investors can use the result of this study and compare it with other stock indices to make the accurate investment decision to maximise their welfare and return on their equity investments. The authors suggest that not only the return but also the regime structures of the invested shares (indices) should be taken into account for investment decisions.

Purpose: In addition to the liberalisation policy, big data has revolutionised the level of awareness among customers about the quality and prices of insurance products. The rationale behind this study is to underline the issues in managing product portfolios in a disruptive environment, where a sudden and unexpected situation like COVID-19 pandemic is going to challenge the traditional models and insurance covers of organisations as well as individuals.

Methodology: The study is based on secondary data. The scope of the study will only be confined to the top two general insurance companies in India based on year of registration and market share to compare their product portfolios during pre- and post-liberalisation periods ranging from 1985–1986 to 2000–2001 and 2001–2002 to 2018–2019, respectively.

Findings: There is a lack of a balanced product portfolio for fulfilling the varying needs of customers. The insurance companies needed to set up different portfolios and should provide separate covers for natural catastrophes such as floods, earthquakes, landslides, tsunami, and the occurrence of new pandemics like COVID-19.

Significance: The study highlights that the outbreak of COVID-19 and similar pandemics or global emergencies need special preparation from the insurance sector.