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Engineering Risk and Finance pp 375–435Cite as

Strategic Risk Control and Regulation

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Part of the book series: International Series in Operations Research & Management Science ((ISOR,volume 188))

Abstract

The purpose of this chapter is to outline elements of risk and strategic control. These include detection and inspection programs, tracking (through control charts) as well as their uses in risk management and financial regulation. The statistical sampling and control literature pertaining to these problems is immense and we therefore refer at the end of the chapter to standard references on such topics as well as to specific research papers relating to strategic controls and regulation. Strategic risk control is increasingly important but has received relatively little attention. For this reason, I chose to focus greater attention on such problems that are far more appropriate. Examples are used to highlight the approaches that this chapter outlines. A number of industrial control cases are outlined applicable as well in the financial sector.

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Authors and Affiliations

  1. Department of Finance and Risk Engineering, Polytechnic Institute of New York University, Brooklyn, NY, USA

    Charles S. Tapiero

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Additional Reading and References

Additional Reading and References

Control, statistical, strategic and other types of controls are broadly applied. There are numerous books and papers on statistical and quality control as well as experimental design. Some references consulted include Cochran and Cox (1957), Coleman and Montgomery (1993), Crosby (1984), Daudin and Tapiero (1996), Godfrey and Kenett (2007), Grant and Leavenworth (1988), Juran (1974, 1980), Kenett and Zacks (2004), Page (1954), Phadke (1986), Shewart (1931); Taguchi and Clausing (1990) as well as my book Tapiero (1996).

This chapter has been particularly concerned with inspection games or strategic controls. These problems have been studied by Maschler (1966), Reyniers and Tapiero (1995a, b), Ruckle (1992), Rothenstein and Zamir (2002), Von Stengel (1991) (on military, time), Avenhaus and Kilgour (2004), Avenhaus (1994), Avenhaus et al. (1996), Avenhaus et al. (1996), Avenhaus et al. (1995), Baston and Bostock (1991), Bird and Kortanek (1974), Canty et al. (2001), Cariou et al. (2008), Rothenstein and Zamir (2002) as well as others. Some applications include inspection games for industrial products, contracts compliance and quality controls (Reyniers and Tapiero 1995a, b; Tapiero 1995a,b Ruckle 1992; Tapiero 1996, 2005a, b, c).

While strategic enforcement and monitoring applications include Russel (1990), Canty et al. (2001), Gawande and Bohara (2005), Innes (1999), Antelman and Savage (1965), Benveniste et al. (1987), Chow et al. (1971a, b), Moustakides (1986), Pierskalla and Voelker (1976), Tolley et al. (1989) (monitoring insurance), Willsky (1976, 1986), Willsky and Jones (1976), Gawande and Bohara (2005).

Inspection and control of queues has essentially been developed initially by my own and Hsu research in her doctoral dissertation. These have included Hsu and Tapiero (1987a, b, 1994, 1988a, b, 1992, 1993, 1994, 2000a), Posner and Tapiero (1988), Tapiero (1990).

For a theoretical and applied studies of queues and in particular network of queues, we refer to Jackson (1957, 1963), Gordon and Newell (1967), Buzacott and Yao (1986), Ho and Cao (1983), Whitt (1983), Solberg (1977) and Goyal (2007) on economics of networks.

Environmental control is both important and is the subject of continuous research. Some references in clude both my own (Tapiero 1995a, b, 1996; Tapiero 2005a) as well Avenhaus (1994), Bird and Kortanek (1974), Florens and Foucher (1999), Harford (1987), Florens and Foucher (1999), Grau-Viladrich (2003), Harford (1987), Innes (1996, 1999), Malik (1993), Xepapadeas (1992, 1994, 1995).

Other applications include: On control food, food, we refer to Antle (1996, 2000), while for the control of web we have refer to Bay and Pazzani (1999) as well some of my own papers (Tapiero 1997). Lee and Tapiero (1986, 1989) have applied quality control in marketing while Reisman et al. (1987a, b) have used control on services (see also Tapiero 1994a on economic quality)

For the control of ports, we refer to Knapp and Franses (2007), Li and Zheng (2008), Cariou et al. (2008), Grau-Viladrich (2003), Hamada et al. (2002), Hare (1997), IMO (2002), Hamada et al. (2002) on ship inspections, Hare (1997), Knapp and Franses (2007), Li and Cullinane (2003).

Control in finance has essentially focused on the VaR (Basel Committee 2004, 2008, Cumperayot et al. 2001) which was considered and referred to in previous chapters

Finally, there is currently and intensive set of studies to apply control in regulation (for example, Innes 1996, 1999 on automobiles). This chapter has provided a number of original problems and has raised some outstanding issues to confront in strategic regulation.

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Tapiero, C.S. (2013). Strategic Risk Control and Regulation. In: Engineering Risk and Finance. International Series in Operations Research & Management Science, vol 188. Springer, Boston, MA. https://doi.org/10.1007/978-1-4614-6234-7_11

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