Bridging the Risk Management Gap: Adopting the Factor Endogenous Behaviour Aggregation (FEBA) Approach Beyond Banking

Sokolov, Yuri I. (2024): Bridging the Risk Management Gap: Adopting the Factor Endogenous Behaviour Aggregation (FEBA) Approach Beyond Banking.

Abstract

While the banking sector has long been at the forefront of risk management practices, other service industries often lag behind. This disparity is particularly evident in sectors where value-oriented management is crucial for maintaining competitiveness. This article focuses on the development and application of the Factor Endogenous Behaviour Aggregation (FEBA) approach in service industries such as healthcare and health resorts.

In these sectors, risk management is typically handled on an ad hoc basis due to the absence of stringent regulatory requirements. Understanding and managing customer loyalty is crucial for sustained profitability and growth. In this context, the SOL (Satisfaction Outcome Loyalty) Solution, proposed by Sokolov (2015), emerges as a pivotal tool for quantifying various risks within the Service Profit Chain.

The SOL Solution provides a structured approach to quantify risks associated with employee performance, customer satisfaction, and loyalty. By assigning numerical values to these risks, companies can better understand their impact on profitability. This quantification allows businesses to prioritize actions that will have the most significant positive impact on customer loyalty and profitability. The tool also enables predictive analysis, helping businesses foresee potential risks and opportunities by analyzing trends and patterns.

*The approach was set up in “Interaction between market and credit risk: Focus on the endogeneity of aggregate risk” and mentioned in Roubini Global Economic Digest as “Advance in Credit Risk Management”.

• Item Type: MPRA Paper
• Language: English
• Keywords: SOL Solution, Service Profit Chain, FEBA approach, competitiveness, healthcare, health resorts, satisfaction, loyalty, risk management
• Subjects: G - Financial Economics > G3 - Corporate Finance and Governance > G32 - Financing Policy ; Financial Risk and Risk Management ; Capital and Ownership Structure ; Value of Firms ; Goodwill; I - Health, Education, and Welfare > I1 - Health > I11 - Analysis of Health Care Markets; L - Industrial Organization > L8 - Industry Studies: Services > L80 - General; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M3 - Marketing and Advertising > M31 - Marketing

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