How to Reconcile Pandemic Business Interruption Risk With Insurance Coverage

In the face of major risks, the financial capacities of private (re)insurers are rapidly reached. For major risks such as natural catastrophes, a risk transfer can be operated to the financial markets through securitization. A pandemic is a cat. Unfortunately a nat cat securitization strategy cannot be replicated for a pandemic cat. In this paper, we consider the economic losses that firms are bearing during a pandemic like the COVID-19. We focus on their most important issues: Risk correlation, impact of administrative decisions, moral hazard, and financial liquidity. Then we propose a coverage strategy of the pandemic business interruption risk that combines self-insurance, standard – capped – (re)insurance and new double triggered pandemic business interruption bonds. Lastly, we provide a simple illustration with French data related to the losses borne by the catering sector. © 2023 Editions Dalloz Sirey. All rights reserved.

Do free-floated shares and board characteristics influence corporate risk disclosure? An empirical analysis on conventional banks in a developing country

PurposeThis study aims to explore the status and drivers (including free-floated shares, board size, rule duality and board independence) of corporate risk disclosure (CRD) for the conventional listed banks in the Egyptian stock market from 2010 to 2021, which include the country's major political upheavals and the COVID-19 pandemic. Design/methodology/approachThis study based on a sample of 117 annual reports of sampled banks from 2010 to 2021. RD index of Al-Maghzom (2016) was developed and adopted to quantify CRD using an unweighted scoring system. The multiple linear regression model was used to validate the hypotheses. FindingsThe analysis shows that the COVID-19 pandemic increased insignificantly disclosure of all risks except for segment risks. In addition, findings reveal that all sampled banks adhere highly to the requirements of mandatory RD, with a low level of adherence to voluntary RD. Moreover, the analysis concluded that the board size and free-floating shares positively affect the disclosure of financial, operational, general information. Research limitations/implicationsThe study's limitations include the content analysis methodology, reliance on annual reports, emphasis on financial and non-financial risks, focus on listed conventional banks in Egypt. Practical implicationsCurrent study's findings are more likely to be useful for many parties. It informs investors about the characteristics of the boards' directors of Egyptian listed banks that disclosed risk information. Banks should disclose more comprehensive risk information. For academics, the current study's limitations can be considered in their future research. Originality/valueThis work fills a new research area in which there is relatively little research in emerging financial markets that adds new evidence to the relationship between RD and both free-floating shares and board characteristics, particularly in Egypt.

Corporate governance and risk management: a systematic review and synthesis for future research

Purpose: The world economy has experienced several economic downturns, and each phase emphasised that no industry is immune to inappropriate risk-management practices. Against the backdrop of the recent COVID-19 pandemic, which had far more effects than a financial crisis, the existing paper reviewed the state of current research in the realm of corporate governance and risk-management practices. Design/methodology/approach: This study rigorously followed a systematic approach in identifying, selecting and critically synthesising the existing literature on corporate governance and risk management. The review was carried out on the Web of Science and Scopus database until December 31, 2022. In total, 72 research works were examined and reviewed. Findings: This systematic literature review showed that companies with strong governance mechanisms are less exposed to corporate risks. Several attributes, such as higher institutional ownership stakes, concentrated family ownership structures, lower CEO compensation and duality, higher presence of females in the management, better board dynamics in terms of independent boards and gender diversity are all strong mechanisms for mitigating risk. Additionally, socially responsible companies are better positioned to mitigate corporate risks. Furthermore, several themes emphasising the governance risk link have been identified to understand this domain further. Originality/value: By analysing and synthesising existing corporate governance and risk-management themes, this study ascertained various research gaps that can be addressed in future studies. Furthermore, drawing on this paper's essential cues, researchers can significantly differentiate their work from existing ones in the field. © 2023, Emerald Publishing Limited.

A pandemic business interruption insurance.

We analyze how pandemic business interruption coverage can be put in place by building on capitalization mechanisms and a portfolio management strategy. As evidenced with COVID-19, pandemics affect economic sectors in differentiated ways: some are very severely affected because their activity is heavily impacted by travel bans and constraints on work organization, while others are more resistant. This opens the door to risk-coverage mechanisms based on a portfolio of financial securities, including long-short positions and options in stock markets. We show that such a strategy allows insurers to offer business interruption coverage in pandemic states, while simultaneously hedging the risks associated with alternating bullish and bearish non-pandemic states. These conclusions contrast sharply with the idea of governments being the only solution to the pandemic insurability problem. They are derived from a theoretical model of corporate risk management, and their practical relevance is illustrated by numerical simulations, using data from the French stock exchange.

How is risk different in family and non-family businesses? A comparative statistical analysis during the COVID-19 pandemic

Purpose>Risk is part of corporate activity and a consequence of the businesses' demands, the market and the changes in companies and their surroundings. The way that risk is managed is different between family and non-family businesses. The paper aims to compare the different risk types experienced in the context of the coronavirus disease (COVID-19) pandemic among family and non-family businesses and to analyze whether operational, legal, strategic and image risks influence financial risks.Design/methodology/approach>The nature of the study is quantitative and based on a questionnaire survey that analyses the perception of risks by 1,090 family businesses and 557 non-family businesses.Findings>The results show the existence of statistically significant differences in the perception of financial and legal risks between family and non-family businesses, where the former being the businesses that give more importance to these risks. The perception of operational, legal, strategic and image risks have a positive influence on the perception of financial risk in family and non-family businesses.Originality/value>The results obtained in the study are important because they allow an understanding about the differences in risk management between family and non-family businesses, which can lead to greater corporate sustainability and increased financial performance.