Insurance and Risk Management for Disruptions in Social, Economic and Environmental Systems: Decision and Control Allocations within New Domains of Risk

Undeniably, plastic usage is predominant in our daily lives, featuring in an endless list of items such as bottles, disposables, packaging and fabric. At prima facie, plastic disposal causes irreversible damage to the natural environment, especially oceans. However, it also impacts human health and wellbeing, especially since its toxins or microplastics find themselves in the food chain. Since plastic causes a myriad of negative effects on the natural environment and human health, the urgency to ban it has been addressed by international organizations and the European Union (EU). Being the smallest member state within the EU, Malta presents an insightful case study of how different levels of governance and a plethora of state and non-state actors engage in a game-like interaction. To this effect, this chapter sheds light on the implications of plastic pollution vis-á-vis sustainability and wellbeing, addressed through multi-level governance. The research core revolves around an investigation on the institutional intricacies in addressing the wicked problem of single-use plastic by mapping out the different layers of policy-making mechanisms that are involved, ranging from local to European and international governance, and from governmental to civil society centric strategies. A positivist ontology is activated to underpin the exploratory nature of this study. Through the application of content analysis of selected documentation, the extent of coordination and synergies among the different policy actors across a multi-layered governance platform is put under scrutiny. Quantitative findings are utilized to validate or contradict the original set of hypotheses and to propose a number of policy and governance recommendations that are useful to researchers and practitioners in the fields of public policy, politics, environmental science, public health and wellbeing, as well as insurance and risk management.

Purpose: Pandemics lead to a sudden decline in the level of economic activities. Lending institutions reduce credit supply to businesses due to fears of rising bad debts during a pandemic. This chapter highlights some approach to financial regulation and bank supervision during a pandemic such as the SARS and COVID-19 pandemic.

Methodology: This chapter uses discourse analysis based on the literature on banking regulation and supervision.

Findings: The author shows that financial regulation during a pandemic can be enhanced by diversifying the financial system, maintaining adequate liquidity in the financial system, stimulating financial institutions to provide more credit, delaying the recognition of significant increase in credit risk, lowering the reference interest rate to encourage more lending, and providing stimulus packages to financial institutions in the economy. The author also suggest measures to improve bank supervision during a pandemic which include adopting a flexible supervisory framework, modifying bank supervisory examinations, using ad hoc stress tests, releasing the countercyclical capital buffer to banks, and increase the use of regulatory forbearance.

Implications: The implication of these approaches to coping with a pandemic is that these measures can help to ensure the survival of small and large businesses and financial institutions. It can also help to preserve jobs and help to reduce the long-term damage to the economy caused by the pandemic.

Originality: Prior studies have not examined the effect of COVID-19 pandemic on bank supervision and financial regulation.

Insurance in Malta has been very largely influenced by English practice and law. The influence of the English market insurance practice and law not only shaped the Maltese market but practically that of all common law jurisdictions in former members of the British empire. Since the London insurance market continues to be a very dominant force globally until today, the connection has undoubtedly served Malta well.

The origins of UK insurance principles of utmost good faith and insurable interest under contract law, date back to times which were very different from today and the need to revise the laws has now been felt in the UK as well as in other jurisdictions which were influenced by its law and practice. In Malta, minimal legislative intervention and the Maltese courts were and continue to be mostly guided by English case law, some of which has now been superseded by the updated statute law which was recently introduced in the UK by virtue of the Consumer Insurance (Disclosure and Representations) Act (2012) and Insurance Act (2015).

We herein lay out a case study of the development of utmost good faith and insurable interest in insurance contracts within the Maltese legal context, based on empirical literature findings and semi-structured interviews together with several legal experts who are specialized in the field and experienced insurance professionals.

Introduction: Lately, various tendencies to approach personalized medicine (PM) have developed. However, their result is a mutual application of technology without considering the essence of this field. The comprehensive approach to the concept of PM reveals some aspects that need to be dealt with for a successful implementation.

Aim: Identifying possible ways of implementing PM through person-centered care, with an overall positive economic impact, improved medical services, and customer satisfaction.

Methods: The research carried out represents a retrospective descriptive cross-sectional study. Qualitative and quantitative methods were used.

Findings: PM plays an increasingly important role in the political agenda of different countries, to approve an effective method of prevention, diagnosis, and treatment of various diseases. The postponement of its implementation by the authorities and the lack of public policies lead to the unjustified expenditure of public money and contribute to halting the development of the medical system through managerial inefficiency.

The originality of the study: Different approaches to PM and its implementations are analyzed in the context of the challenges of the contemporary economy.

Implications: The research is carried out in the Academy of Economic Studies of Moldova within the state research programs.

Purpose: Investors and portfolio managers can earn profitably when they correctly predict when stock prices will go up or down. For this reason, it is crucial to know the effect levels of the factors that affect stock prices. In addition to macroeconomic factors, the psychological behavior of investors also affects stock prices. Therefore, the study aims to reveal the different sensitivity levels of the stock index against macroeconomic and psychological factors.

Design/Methodology/Approach: In this study, dollar rate (USD), euro rate (EURO), time deposit interest rate (IR), gold price (GOLD), industrial production index (IPI), and consumer price index (CPI) (inflation (INF)) were used as macroeconomic factors, while Consumer Confidence Index (CCI) and VIX Fear Index (VIX) were used as psychological factors. In addition, the BIST-100 index, which is listed in Borsa Istanbul, was used as the stock index. The sensitivity of the stock index to macroeconomic and psychological factors was investigated using the Multivariate Adaptive Regression Spline (MARS) method using data from January 2012 to October 2020.

Findings: In the analyses performed using the MARS method, the coefficients of INF, USD, EURO, IR, CCI, and VIX Index were found to be statistically significant and effective on the stock index. Among these variables, INF has the highest effect on stocks. It is followed by USD, IR, EURO, CCI, and VIX. GOLD and IPI variables did not show statistical significance in the model. The most important difference of the MARS model from other regressions is that each factor’s effect on the stock index is analyzed by separating it according to the value of the factor. According to the results obtained from the MARS model: (1) it has been determined that USD, EURO, IR, and CPI have both positive and negative effects on the stock market index and (2) CCI and VIX have been found to have negative effects on stocks. These results provide essential information about how investors who plan to invest in the stock index should take into consideration different macroeconomic and psychological values.

Originality/value: This study contributes to the literature as it is one of the first studies to examine the effects of factors affecting the stock index by decomposing it according to the values it takes. Also, this study provides additional information by listing the factors affecting the stock index in order of importance. These results will help investors, portfolio managers, company executives, and policy-makers understand the stock markets.

Introduction: Enterprise risk management (ERM) is a process that identifies how firms manage risks. In recent years, a growing number of companies in emerging economies have begun to implement a holistic framework for risk management for sustainable development.

Aim: The aim of this chapter is to assess the sustainability risk management based approach to economic, social and governance performance. Analysis will be performed on a sample of Romanian listed companies to assessment the significant risks identified by them. Current study undertakes these important issues and configures ambitious theoretical and empirical research to strengthen the knowledge in this scientific field.

Method: The data used for the companies in the sample included companies listed on the Bucharest Stock Exchange in Romania and was taken from the annual reports published by these companies available for the years 2018 and 2019. The sustainability activities were analyzed and an index was calculated for all activities identified in order to assess the risk management.

Findings: Especially the aggregation of risk and the quality of derivation of risk exposure is highly questionable. The number and proportion of risks reported have also changed, although some risks have always been reported frequently. Our results provide support for the recent pressure generated by the COVID-19 pandemics, on firms to adopt more integrated and comprehensive risk management systems.

Introduction: Financial failure is a concept that may arise from many internal and external factors such as operational, financial, and economic items and may incur serious losses. Over-indebtedness arising from managerial misjudgments may cause high financial distress, insufficiency, and bankruptcy. In this regard, determination of effects of capital structure decisions on financial failure risk is crucial.

Aim: The main purpose of this study is to explore the relationship between capital structure decisions and financial failure risk. For this purpose, data from Borsa İstanbul (BIST) for listed food and beverage companies for the period from 2004 to 2019 is used. Another purpose of this study is to compare the financial failure models considering capital structure theories.

Method: In the study, capital structure decisions are associated with five different financial ratios; while the financial failure risk is proxied by financial failure scores of Altman (1968), Springate (1978), Ohlson (1980), Taffler (1983), and Zmijewski (1984). Therefore, five different panel data models are used for testing these hypotheses.

Findings: The results of panel data analysis reveal that capital structure decisions have statistically significant effects on financial failure risk for all models; however, those effects vary from one financial failure model to another. Also, the results show that in the models in which financial failure risk is proxied by the Altman (1968) and Taffler (1983) scores, the aggressive financial policies increase the financial failure risk. However, regarding the models in which financial failure risk is proxied by the Springate (1978), Ohlson (1980), and Zmijewski (1984) scores, aggressive financial policies decrease the financial failure risk.

Originality of the Study: To the best of our knowledge, this chapter is original and important in terms of revealing the effects of capital structure decisions on the financial failure risk and comparing the financial failure models.

Implications: The results revealed that the risk of financial failure models represented by Altman (1968) and Taffler (1983) scores are found to be statistically stronger and more successful in meeting theoretical expectations compared to other models. Therefore, it would be more appropriate to refer Altman’s (1968) and Taffler’s (1983) financial failure models in financial failure risk measurements.

Introduction − Covid-19, which first emerged in Wuhan, People’s Republic of China, in January 2020, with an unknown source, spread to all countries of the world very quickly and caused the death of over two million people world-wide. This ever-increasing global need for health care has created a radical transformation in terms of not only in health care, but also in all public services. Transportation services for the transfer of patients to health institutions, education services due to the dangers of face-to-face training, justice services due to the postponement of non-urgent court proceedings, security services in terms of restriction sanctions and all public services in general due to the disruption of access to public services due to flexible working hours applied to public personnel has entered into an unplanned provision.

Purpose: The aim of this chapter is to identify the problems that arise in the provision of public goods and services due to the global epidemic of Covid-19, and to bring a new interpretation to the theoretical discussions about the optimal delivery level of public services when there is a situation of communicable disease.

Methodology: The principles of public goods and service provision of G20 countries, Covid-19 mortality rates, indicators of the well-being of healthcare delivery such as the number of bed and personnel, the type and number of devices used to diagnose the Covid disease, and the public service restrictions taken to eliminate Covid-19, have been evaluated by employing descriptive analysis. In order to prevent income and advanced levels from becoming distinctive features, G20 countries with similar income and development levels were selected for this research.

Findings: Due to the Covid-19 pandemic, there has been a distortion in the preference of provision of almost all public goods, and it has been observed that the delivery level of public services affects each other since all are linked like a chain. Failure to achieve what is expected from international organizations, which should be in a regulatory position in this regard, has increased concerns about the optimal presentation level of all public goods, especially health, in the future. As long as there is a global pandemic and countries do not take effective measures, a bad second best position that is far from optimal results but provides that instant solutions.

In recent years, growing concerns about the environment and climate change, poverty problems, growing inequality among societies, and tensions brought about by social injustice have increased the popularity of sustainability, which is considered a multidimensional concept, among scientists, decision-makers, academics, and companies. The perception of these different groups of sustainability issues and the tools they suggest/use for corporate sustainability implementations differ from each other. It can be difficult to look for and understand sustainability tools that are handled with different perspectives in many sources. In this chapter, the tools used in sustainability implementation are discussed with certain classifications – environmental management tools, sustainability reporting, and corporate social performance – and their relations with each other. In short, this study aims to present a holistic perspective to the sustainability (or of corporate sustainability) implementations carried out by companies trying to survive in a dynamic and complex economic environment. Accordingly, the literature was reviewed, and the concept of sustainability was explained, the reasons that push companies to sustainability implementations were evaluated, and sustainability implementations were detailed under environmental management tools, sustainability reporting, and corporate social performance.

Introduction: Looking at the risks faced by enterprises in recent years, we see that the risks have shifted radically from traditional economic and financial risks to those posed by environmental and social factors. Developments in the field of activity of enterprises (climate change, the increasing relationship between the society and enterprises through shareholders and partners) have led to an increase in the number and diversity of risks faced by enterprises. It is only possible for enterprises to cope with these increasing risks by adopting a proactive and contemporary management approach. One of these contemporary management approaches that businesses should adopt is sustainability. Many researches have shown that the integration of sustainability into risk management has proved successful in risk management.

Purpose: Looking at previous literature, this study sets forth what financial (economic), environmental and social risks businesses may face today, explains with a few examples what measures companies can implement to eliminate these risks, and a future perspective is presented to companies. In addition, this study makes recommendations on how to successfully manage the risks that companies may face and emphasizes what the positive results of sustainable risk management can be (increasing the business value, ensuring sustainability and increasing the shareholder value). Mention was made about the fact that the ability of enterprises to successfully manage sustainability risks depends on their ability to prevent, identify, mitigate and manage risks, and it was emphasized that the environmental, social and governance risks must, to a large extent, be taken into account by many circles (regulators and customers), mainly investors. In addition, this study aims to identify and evaluate the current and possible future risks and to serve as a guide for actions to be taken to minimize risks or keep them at an optimum level.

Methodology: In this section, a compilation study on sustainability risk management (SRM) was done in the light of information obtained from various reports, scientific articles and books. In other words, in this section, information from various scientific sources on SRM was systematically collected, analyzed, interpreted and evaluated, and effort was made to present an up-to-date, extensive conceptual framework related to SRM. In addition, the scientific literature – especially in the historical development process of the last decade – on the debate of SRM was examined in this study, and the highest point reached in this debate today is revealed. Thus, the positioning of different views on the sustainability issue and the latest developments in the literature were also evaluated properly.

Findings: As a result of the examination of the scientific literature on SRM in the last decade, it has been determined that SRM has led to many other favorable outcomes, from the sustainability of the enterprise to gaining competitive advantage, increasing its goodwill, reputation and efficiency.

Purpose: This chapter focuses on the enterprise’s ethics and social responsibility, which are interdependently resulting in an enterprise’s credibility and better performance. The authors provide a comprehensive tool that can help enterprises and humankind to find a better way toward new economic and social conditions, thus society’s transformation, beginning with the enterprise-level innovation of decisions that originate from the (key) stakeholders’ personal level innovation of decisions. The purpose is to show a possible path toward requisitely holistic enterprises’ governance, management and practice.

Method: The authors use a qualitative methodological approach, based on three relations (the law of requisite holism, the law of hierarchy of succession and interdependence, and the law of entropy) and three elements (10 guidelines defining the subjective starting points and objectives, and 10 guidelines on assuring the agreed policy to survive in latter steps of working process) of Dialectical systems theory. This chapter methodologically also follows the ethics of interdependence. Based on the research, the authors propose to use the supplemented credibility strategy as a possible methodological way of introducing enterprise ethics into practice.

Findings: The authors introduce a supplemented model of the strategy of an enterprise’s credibility. The authors propose using this new model to develop an enterprise’s social responsibility and ethics in a broader sense. The authors focus is on financial institutions’ governance and credibility. The main finding of this chapter is that strong regulation of the financial sector contributes positively to all four dimensions in the strategy of an enterprise’s credibility – if it is requisitely holistic rather than one-sided and short-term.

Originality and Significance of Findings: The strategy of an enterprise’s credibility could be used as a practical implementation tool for (key) stakeholders. They can use the strategy of an enterprise’s credibility to innovate its behavior toward appropriate holistic behavior and sustainable development stimulating. This new tool can lead enterprises toward (more) social responsibility, enterprise ethics and credibility. In applying this theory to financial institutions, the authors find that such financial regulation (and supervision) significantly strengthens multiple dimensions of enterprise credibility. In this regard, the authors find it favorable and encourage such regulation in all enterprises engaged in financial services, including non-bank institutions. Besides, to add to more comprehensive social benefits, the authors find it favorable to encourage similar development in other economic sectors, not the opposite, deregulation.

We can speak of CSR 4.0 only when the companies that are part of the field of Industry 4.0, exceed the economic expectations (the company expects a company to produce goods and services to sell and make a profit), legal expectations (the company expects a company to respect the law), ethical expectations (types of behaviors and ethical norms that the society expects to be observed) and voluntary activities such as philanthropic contributions. To properly understand the concept of Industry 4.0, we should compare this specific industrial revolution with previous technological breakthroughs. The purpose of this study is to analyze the way in which managers in Romania perceive the system of corporate social responsibility of companies (CSR 4.0) in accordance with the new concept of Industry 4.0. We resorted to the approach of a statistical-mathematical analysis of quantitative type for data collection, using the questionnaire as a research tool. In the stage of processing and analyzing the collected data, we used the special statistical research software SPSS. The main findings obtained from the research study highlighted the fact that there is a causal correlation between the manifestation dimensions of CSR 4.0 and the advantages of Industry 4.0. The originality and significance of the findings consist in identifying the following correlations: economic dimension (CSR 4.0), cost dimension (Industry 4.0), moral dimension (CSR 4.0), time dimension (Industry 4.0), sociological dimension (CSR 4.0), flexibility dimension (Industry 4.0), political dimension (CSR 4.0) and the integration advantage (Industry 4.0).

Purpose: The connection between insurance and the degree of economic development of countries has been long studied in the literature, being argued that they are potentiating each other. Against this background, the objective of this chapter is to appraise the way in which the insurance activity, overall, and, distinctively, considering only the life insurance field, is interconnected with the economic development of the European Union (EU) Member States.

Method: In order to assess the insurance development, we considered the insurance density and penetration degree indicators (total and life insurance), and, for the wellbeing dimension, we applied the Human Development Index (HDI), associated with other economic indicators. The research methodology consists of an advanced econometric procedure, namely macroeconometric models – robust regression, for the period 2007–2019.

Findings: The results obtained highlight significant positive associations between insurance development and wellbeing at the level of EU countries.

Originality and Significance of Findings: This research considers an integrative indicator that measures the wellbeing dimension, including the human factor (HDI), in addition to the economic development degree, that has not been addressed so far in the literature, which reveals the originality of this study. Thereby, adjusted policies and strategies developed to sustain the main components of HDI (education, life expectancy and living standards) became paramount keystones in order to promote insurance development.