Volume 4, Issue 1, PP: 08-15, 2024 | Cite this article as | XML | | Html PDF
Abedallah Z. Abualkishik 1 * , Rasha Almajed 2
The complexity of the business environment, which is shaped by dynamic economic, environmental, and social factors, makes it more important for companies to develop sustainable risk management practices. This research proposes a novel approach that combines traditional methods with modern machine learning techniques in response to the complex challenges faced by contemporary businesses in balancing risk and sustainability. Our study uses a public bank loan default dataset as a case study to address missing data systematically through robust imputation mechanisms and transform categorical variables using feature encoding. Spearman correlation analysis helps us understand complex variable relationships and guides subsequent feature selection. The decision tree classifier, a powerful machine learning algorithm known for its interpretability, is applied to identify key factors contributing to risk assessment. The hierarchical structure of the decision tree not only reveals important variables but also provides an explicit representation of the decision-making process. ROC curve analysis shows how well our predictive model can differentiate potential loan defaults.
Sustainability, Modern business , Risk mitigation , corporate sustainability, Economic sustainability , Long-term risk planning , Risk management
[1] Spedding, Linda S, and Adam Rose. 2007. Business Risk Management Handbook: A Sustainable Approach. elsevier.
[2] Manab, N, and NAAL Aziz. 2019. “Integrating Knowledge Management in Sustainability Risk Management Practices for Company Survival.” Management Science Letters 9 (4): 585–94.
[3] Settembre-Blundo, Davide, Roc\’\io González-Sánchez, Sonia Medina-Salgado, and Fernando E Garc\’\ia-Muiña. 2021. “Flexibility and Resilience in Corporate Decision Making: A New Sustainability-Based Risk Management System in Uncertain Times.” Global Journal of Flexible Systems Management 22 (Suppl 2): 107–32.
[4] Shad, Muhammad Kashif, Fong-Woon Lai, Chuah Lai Fatt, Ji\vr\’\i Jarom\’\ir Klemeš, and Awais Bokhari. 2019. “Integrating Sustainability Reporting into Enterprise Risk Management and Its Relationship with Business Performance: A Conceptual Framework.” Journal of Cleaner Production 208: 415–25.
[5] Županović, Ivo. 2014. “Sustainable Risk Management in the Banking Sector.” Journal of Central Banking Theory and Practice 3 (1): 81–100.
[6] Tohãnean, Drago\cs, Alexandru Ilie Buzatu, Cristina-Andrada Baba, and Bogdan Georgescu. 2020. “Business Model Innovation through the Use of Digital Technologies: Managing Risks and Creating Sustainability.” Amfiteatru Economic 22 (55): 758–74.
[7] Bezzina, Frank, Simon Grima, and Josephine Mamo. 2014. “Risk Management Practices Adopted by Financial Firms in Malta.” Managerial Finance 40 (6): 587–612.
[8] Berzon, Nikolai I, Maksim M Novikov, Elena L Pozharskaya, and Yulia I Bakhturina. 2022. “Monitoring the Modern Experience of Financial Risk Management in Russia Based on Corporate Social Responsibility for Sustainable Development.” Risks 10 (5): 92.
[9] Flouris, Triant G, and Ayse Kucuk Yilmaz. 2016. Risk Management and Corporate Sustainability in Aviation. Routledge.
[10] Breiki, Mariam Al, and Haitham Nobanee. 2019. “The Role of Financial Management in Promoting Sustainable Business Practices and Development.” Available at SSRN 3472404.
[11] Krysiak, Frank C. 2009. “Risk Management as a Tool for Sustainability.” Journal of Business Ethics 85: 483–92.
[12] Cucuzzella, Carmela. 2016. “Creativity, Sustainable Design and Risk Management.” Journal of Cleaner Production 135: 1548–58.
[13] Muthuswamy, M. and M. Ali, A. (2023) “Sustainable Supply Chain Management in the Age of Machine Intelligence: Addressing Challenges, Capitalizing on Opportunities, and Shaping the Future Landscape”, Sustainable Machine Intelligence Journal, 3. doi: 10.61185/SMIJ.2023.33103.
[14] Stan-Maduka, Edna. 2010. “The Impact of Risk Management Practice on the Development of African Businesses.” World Journal of Entrepreneurship, Management and Sustainable Development 6 (3): 213–19.
[15] Singh, Hardeep, and Bikram Pal Singh. 2011. “Risk Management: A Step towards Sustainable Development.” International Journal of Computational Engineering \& Management 13: 13321.
[16] Brillinger, Anne-Sophie, Christian Els, Björn Schäfer, and Beate Bender. 2020. “Business Model Risk and Uncertainty Factors: Toward Building and Maintaining Profitable and Sustainable Business Models.” Business Horizons 63 (1): 121–30.
[17] Alhadhrami, Ahmed, and Haitham Nobanee. 2019. “Sustainability Practices and Sustainable Financial Growth.” Available at SSRN 3472413.
[18] Faedfar, Sara, Mustafa Özye\csil, Mustafa Ç\ikr\ikç\i, and Esin Benhür Aktürk. 2022. “Effective Risk Management and Sustainable Corporate Performance Integrating Innovation and Intellectual Capital: An Application on Istanbul Exchange Market.” Sustainability 14 (18): 11532.
Langenhan, Melissa K, Stavroula Leka, and Aditya Jain. 2013. “Psychosocial Risks: Is Risk Management Strategic Enough in Business and Policy Making?” Safety and Health at Work
