Consumer finance: challenges for operational research

Consumer finance has become one of the most important areas of banking, both because of the amount of money being lent and the impact of such credit on global economy and the realisation that the credit crunch of 2008 was partly due to incorrect modelling of the risks in such lending. This paper reviews the development of credit scoring—the way of assessing risk in consumer finance—and what is meant by a credit score. It then outlines 10 challenges for Operational Research to support modelling in consumer finance. Some of these involve developing more robust risk assessment systems, whereas others are to expand the use of such modelling to deal with the current objectives of lenders and the new decisions they have to make in consumer finance. <br/

Operations research in consumer finance: challenges for operational research

Consumer finance has become one of the most important areas of banking both because of the amount of money being lent and the impact of such credit on the global economy and the realisation that the credit crunch of 2008 was partly due to incorrect modelling of the risks in such lending. This paper reviews the development of credit scoring,-the way of assessing risk in consumer finance- and what is meant by a credit score. It then outlines ten challenges for Operational Research to support modelling in consumer finance. Some of these are to developing more robust risk assessment systems while others are to expand the use of such modelling to deal with the current objectives of lenders and the new decisions they have to make in consumer financ

Microfinance institutions and efficiency

Microfinance Institutions (MFIs) are special financial institutions. They have both a social nature and a for-profit nature. Their performance has been traditionally measured by means of financial ratios. The paper uses a Data Envelopment Analysis (DEA) approach to efficiency to show that ratio analysis does not capture DEA efficiency.Special care is taken in the specification of the DEA model. We take a methodological approach based on multivariate analysis. We rank DEA efficiencies under different models and specifications; e.g., particular sets of inputs and outputs. This serves to explore what is behind a DEA score. The results show that we can explain MFIs efficiency by means of four principal components of efficiency, and this way we are able to understand differences between DEA scores. It is shown that there are country effects on efficiency; and effects that depend on Non-governmental Organization (NGO)/non-NGO status of the MFI

Development and selection of operational management strategies to achieve policy objectives

Since the reform of the EU Common Fisheries Policy in 2002, effort has been devoted to addressing the governance, scientific, social and economic issues required to introduce an ecosystem approach to fisheries management (EAFM) in Europe. Fisheries management needs to support the three pillars of sustainability (ecological, social and economic) and Fisheries Ecosystem Plans (FEPs) have been developed as a tool to assist managers considering the ecological, social and economic implications of their decision. Building upon previous studies (e.g. the FP5-funded European Fisheries Ecosystem Plan project), the core concept of the Making the European Fisheries Ecosystem Plan Operational (MEFEPO) project is to deliver operational frameworks (FEPs) for three regional seas. The project focus is on how best to make current institutional frameworks responsive to an EAFM at regional and pan-European levels in accordance with the principles of good governance. The regional seas selected for the project are the North Sea (NS), North Western Waters (NWW) and South Western Waters (SWW) RAC regions. The aim of this work package (WP5) was to develop operational objectives to achieve the ecological objectives identified for the 3 regional seas in WP2. This report describes the development and implementation of a transparent and formal process that should lead to identification of the “best” operational management strategies for an EAFM, based on sound scientific information and stakeholder involvement (e.g. regional industry groups, citizen groups, managers and other interest groups)

Performance and strategy:simultaneous equations analysis of long-lived firms

A simultaneous equations model of performance, strategy and size is tested using fieldwork evidence on long-lived firms in Scotland. Estimation is by I3SLS, with correction for sample selection bias. The contributions of this paper are that it: (a) grounds estimation on fieldwork evidence; (b) calibrates performance and competitive strategy; (c) tests and models endogeneity; and (d) computes robust trade-off elasticities between firm size and performance. It shows how this trade-off provides the entrepreneur with two strong incentives: (i) to seek greater efficiency typically by an increase in the human capital of the ‘core’ workforce; (ii) to achieve higher levels of performance by adopting more diverse competitive strategies

How HRM affects corporate financial performance. Evidence from Belgian SMEs. Paper.

Employment; Expected; Managers; Studies; Management; Performance;

Exploiting Qualitative Information for Decision Support in Scenario Analysis

The development of scenario analysis (SA) to assist decision makers and stakeholders has been growing over the last few years through mainly exploiting qualitative information provided by experts. In this study, we present SA based on the use of qualitative data for strategy planning. We discuss the potential of SA as a decision-support tool, and provide a structured approach for the interpretation of SA data, and an empirical validation of expert evaluations that can help to measure the consistency of the analysis. An application to a specific case study is provided, with reference to the European organic farming business