2006 Fiscal Year Final Research Report Summary
Methods for managing business risks and their practical applications
| Project/Area Number |
16530139
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| Research Category |
Grant-in-Aid for Scientific Research (C)
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| Allocation Type | Single-year Grants |
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| Section | 一般 |
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| Research Field |
Economic statistics
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| Research Institution | Meiji University |
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Principal Investigator |
KARIYA Takeaki Meiji University, Graduate School of Global Business, Professor, グローバル・ビジネス研究科, 教授 (70092624)
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| Project Period (FY) |
2004 – 2006
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| Keywords | business risk management / enterprise risk management / combinations of subjective distributions with expert weights / model for risk-return analysis in recycle business / recycling biomass in beer industry / model for risk-return analysis in bank management / weather risk swap / 銀行経営最適貸出ポートフ |
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| Research Abstract |
For an effective decision making in management, it is important to identify and analyze business risks or equivalently uncertainties that include strategic risks, operational risks, financial risks and hazard risks, and will affect profit cash flows. This research aims to provide some quantitative methods for such business risk management in view of risk-return framework. It is noted that the net present value (NPV) of future cash flows of a project or a business is a function of future uncertainties, which are random variables, and hence it is expressed as a distribution representing the whole risk-return structure of the NPV. The uncertainties consists of event type uncertainties such as a change of regulation or an occurrence of earthquake with magnitude of a certain level and continuous type uncertainties. We treat the both.
However, those who make an organizational decision making as a team express different distributions of the uncertainties affecting future cash flows even after
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a well-planned discussion with sufficient information and analysis. This research first treat the problem of formulating a method for combining different views expressed by subjective distributions given common information. In the combination or summarizing procedure we take into account weights concerning the expertized areas or levels and the responsibilities of the decision makers to get an organizational distribution.
Second, we discuss on a historical evolution that the Japanese socio-economic society is in a stage to accept and make a good use of the framework of thoughts in which random, uncertain or indefinite phenomena are, as they should be, understood in a probabilistic manner and modeled in a statistical approach, and then an effective decision is drawn from the analysis. This trend is discussed and overviewed by taking the theme of the Enterprise Risk Management.
Third, we give an effective formulation for analyzing risk-return structure in recycling business and apply it to a simulation analysis on the business of biomass in beer industry. The risks involved in the business are identified and the variations of demand for beer and share of beer companies are treated in modeling and the distribution of the NPV of cash flows is derived.
Fourth, the problem of valuing lease for commercial properties with tenant replacement is considered, and an optimal rent mix of variable and fixed and an optimal tenant replacement rule are derived, where rent and sales of each tenant are random variables.
Fifth, a management problem of making loans in banking is formulated as an enterprise-wide optimization problem for risk-return where loan rates and credit rates of borrowers are linked. We provide a model for optimizing the loan positions in the branches and headquarter simultaneously or gradually.
Sixth, winter-temperature risk swap made between a gas company and an insurance company is evaluated for fairness. Less
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Research Products
(2 results)
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[Journal Article] A Real Options Approach2005
Author(s)
Kariya, T., Katou, T., Uchiyama, T., Suwabe, T, Tenant Management, Lease Valuation for Retail Properties
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Journal Title
International Real Estate Review Vo1.8
Pages: 44-82
Description
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