RISK MANAGEMENT IN SUPPLIER NETWORKS

Risk management in supplier networks

Abstract

This paper deals with risk management in supplier networks. The primary aim is to illustrate challenges that network co-operation brings to risk management. The paper outlines the general structure of the risk management process and presents methods for risk management in a complex network environment. The results indicate that risk management is an important development target in the studied supplier networks. When the dependency between companies increases, they become more exposed to the risks of other companies. The presented processes facilitate understanding and managing of uncertainties and risks in supplier networks. Empirical evidence is offered on the basis of case studies.

Table of Content

Table of Content3

1. Introduction4

1.1. Background4

1.2. Objectives4

1.3. Outline of the study5

2. Business networks5

2.1. What is it all about?5

2.2. Transaction cost-based explanation on the emergence of business networks6

2.3. Views to the risks of networks6

3. Types of risks in studied networks7

4. Risk management process7

4.1. Risk identification8

4.2. Risk assessment8

4.3. Risk management actions9

4.4. Risk monitoring10

4.5. Risk management process in the network environment10

5. Deepening of the approach11

6. Discussion and conclusions12

References14

Risk management in supplier networks

1. Introduction

1.1. Background

In many business environments, networking is almost an inevitable solution to help companies respond fast to market changes. In network collaboration companies deepen their relationship with partners and thus become more dependent on each other. The key success factors in networking and the motives for entering into a partnership or alliance form the basis for the development of network arrangements. In the years 1999-2001 a large study has been conducted with several industrial and academic partners. This paper has partially resulted from that research project (Helices et al (2001) and Helices et al (2002)).

1.2. Objectives

The purpose of this paper is to contribute and provide a more complete understanding of risk management in supplier networks. The paper seeks to express the risk management process approach in order to provide a more holistic view on the subject. We have formulated the following two general research questions for the study:

(1) What kinds of risks arise from network collaboration?

(2) How do the risk management processes operate in network collaboration?

Additional research objectives include answering the question of how risks can be identified and assessed, and what kind of options there are for controlling and managing risks. Furthermore, we will discuss special features that networking brings to business risk management. We will use these objectives and research questions to develop the outline of the study.

1.3. Outline of the study

The paper outlines the general structure of the risk management process and presents methods for managing risk in the network environment. After the theoretical background, we present the general characteristics of the studied networks. The nature of the risk management process is explained from the point of view of business networks. The phases and special characteristics of the risk management process are presented. After outlining the risk management process, we deepen our approach and demonstrate some special features of risk management in terms of dynamics and feedback. Finally we discuss the main findings, draw a conclusion of the ...