Fuzzy Multi-Criteria Decision-Making for Sustainable Risk Management

Abstract

Economic, environmental, and social sustainability challenges are critical to managing sovereign credit risk in the MENA region. This paper proposes a framework for selecting comprehensive strategies using a Fuzzy Multi-Criteria Decision-Making (MCDM) approach. A hybrid Best-Worst Method (BWM) and Fuzzy TOPSIS model are applied to rank sustainability strategies related to sovereign credit risk, addressing the vagueness and uncertainty in stakeholder data. Ten strategies are evaluated across three sustainability dimensions: economic, environmental, and social. The findings highlight that Developing Human Capital and Regional Cooperation and Trade Integration are top priorities for economic sustainability, emphasizing skill development and trade relations. Public-private partnerships and renewable energy investments are most viable for environmental sustainability, leveraging private capital for large-scale projects. Social sustainability is best achieved through public-private partnerships and renewable energy investments, which create jobs and improve energy access, promoting socio-economic stability. Political stability and governance reforms are identified as enabling factors for sustainability initiatives. This research contributes to the systematic body of knowledge on sovereign risk management in developing economies, offering a consistent framework for decision-makers in the MENA region to prioritize sustainable growth and creditworthiness amid uncertainty.