Financial Institutions of Emerging Economies: Contribution to Risk Assessment

Yelena Popova (), Olegs Cernisevs (), Sergejs Popovs and Almas Kalimoldayev
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Yelena Popova: Transport and Telecommunication Institute, Faculty of Management and Logistics, LV-1019 Riga, Latvia
Olegs Cernisevs: SIA StarBridge, LV-1050 Riga, Latvia
Sergejs Popovs: Institute of Life Sciences and Technologies, Daugavpils University, LV-5401 Daugavpils, Latvia
Almas Kalimoldayev: Higher School of Economics and Business, Al-Farabi Kazakh National University, Almaty 050051, Kazakhstan

Risks, 2025, vol. 13, issue 9, 1-18

Abstract: Conventional risk assessment frameworks usually define risk as a function of vulnerabilities and threats, but they frequently lack a single quantitative model that incorporates the unique features of each element. In order to close this gap, this paper creates a flexible, open, and theoretically sound risk assessment formula that is still reliable even in the absence of complete vulnerability data. This is particularly important for financial institutions operating in emerging markets, where regulators rarely provide centralized vulnerability assessments and where Basel-type frameworks are only partially implemented. The contribution of the paper is a practically verified Bayesian network model that integrates threat likelihoods, vulnerability likelihoods, and their impacts within a probabilistic structure. Using 500 stratified Monte Carlo scenarios calibrated to real fintech and banking institutions operating under EU and national supervision, we demonstrate that excluding vulnerability impact from the model does not significantly reduce the predictive performance. These findings advance the theory of risk assessment, simplify practical implementation, and enhance the scalability of risk modeling for both traditional banks and fintech institutions in emerging economies.

Keywords: risk assessment methods; emerging economies; Bayesian networks; threat modeling; vulnerability and threat impacts; probabilistic modeling (search for similar items in EconPapers)
JEL-codes: C G0 G1 G2 G3 K2 M2 M4 (search for similar items in EconPapers)
Date: 2025
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