Understanding Financial Risk Contagion Among Manufacturing Enterprises

 The interconnected nature of manufacturing enterprises has made financial stability a critical focus, particularly as risks spread across industries like infectious diseases. A recent study in IgMin Research examines these risks using the SEIRS (Susceptible-Exposed-Infectious-Recovered-Susceptible) model, drawing parallels to epidemiological patterns.

Key Insights

  1. Risk Transmission Mechanism: Financial risks, like infectious diseases, propagate through supply chains and mutual loans. A single failure can cascade through related enterprises, leading to systemic crises.
  2. SEIRS Model Application:
    • Susceptible Enterprises (S): Financially stable but vulnerable.
    • Exposed Enterprises (E): Facing early signs of financial stress.
    • Infectious Enterprises (I): Actively in crisis, influencing others.
    • Recovered Enterprises (R): Stabilized but still susceptible to future risks.
  3. Factors Influencing Risk Spread:
    • Transmission Rate (β): Determines how quickly risks propagate.
    • Recovery Rate (γ): Indicates the likelihood of enterprises recovering with support.
    • Incubation Period (σ): Time before financial stress becomes a crisis.

Recommendations

  • Government Intervention: Policies to improve risk immunity, stabilize enterprises, and extend recovery periods are crucial.
  • Proactive Monitoring: Establishing financial risk early-warning systems can prevent contagion and ensure timely interventions.
  • Market Supervision: A combination of macro- and micro-regulations is essential to safeguard enterprise ecosystems and mitigate cascading failures.

Conclusion

This study highlights the critical need for robust financial systems and regulatory frameworks to contain risk contagion among manufacturing enterprises. By understanding and addressing the factors driving risk propagation, industries can strengthen resilience and foster sustainable growth.


DOI: https://dx.doi.org/10.61927/igmin244

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