A comprehensive, one-stop reference for cutting-edge research in integrated risk management, modern applications, and best practices In the field of business, the ever-growing dependency on global supply chains has created new challenges that traditional risk management must be equipped to handle. Handbook of Integrated Risk Management in Global Supply Chains uses a multi-disciplinary approach to present an effective way to manage complex, diverse, and interconnected global supply chain risks. Contributions from leading academics and researchers provide an action-based framework that captures real issues, implementation challenges, and concepts emerging from industry studies.The handbook is divided into five parts: *Foundations and Overview introduces risk management and discusses the impact of supply chain disruptions on corporate performance*Integrated Risk Management: Operations and Finance Interface explores the joint use of operational and financial hedging of commodity price uncertainties*Supply Chain Finance discusses financing alternatives and the role of financial services in procurement contracts; inventory management and capital structure; and bank financing of inventories*Operational Risk Management Strategies outlines supply risks and challenges in decentralized supply chains, such as competition and misalignment of incentives between buyers and suppliers*Industrial Applications presents examples and case studies that showcase the discussed methodologies Each topic's presentation includes an introduction, key theories, formulas, and applications. Discussions conclude with a summary of the main concepts, a real-world example, and professional insights into common challenges and best practices. Handbook of Integrated Risk Management in Global Supply Chains is an essential reference for academics and practitioners in the areas of supply chain management, global logistics, management science, and industrial engineering who gather, analyze, and draw results from data. The handbook is also a suitable supplement for operations research, risk management, and financial engineering courses at the upper-undergraduate and graduate levels.
Foreword xiii Preface xv Acknowledgments xxiii Contributors xxv Part ONE Foundations and Overview 1 Integrated Risk Management: A Conceptual Framework with Research Overview and Applications in Practice 3 1.1 Introduction, 3 1.2 An Action-Based Framework for Supply Chain Risk Management, 4 1.3 Risk Mitigation Strategies, 8 1.4 Research Opportunities, 10 Reference, 12 2 Risk Management and Operational Hedging: An Overview 13 2.1 Introduction, 13 2.2 Risk Management: Concept and Process, 14 2.3 Identification of Operational Hazards, 18 2.4 Risk Assessment and Valuation, 22 2.5 Tactical Risk Decisions and Crisis Management, 28 2.6 Strategic Risk Mitigation, 30 2.7 Four Operational Hedging Strategies, 33 2.8 Financial Hedging of Operational Risk, 36 2.9 Tailored Operational Hedging, 42 2.10 Guidelines for Operational Risk Management, 47 References, 48 3 The Effect of Supply Chain Disruptions on Corporate Performance 51 3.1 Introduction, 51 3.2 Sample, Performance Metrics, and Methodology, 53 3.3 The Effect of Supply Chain Disruptions on Corporate Performance, 55 3.4 Drivers of Supply Chain Disruptions, 63 3.5 What Can Firms Do To Mitigate the Chances of Disruptions?, 64 3.6 Summary, 72 A. Methodology Used To Estimate Stock Price Performance, 73 B. Methodology Used To Estimate Changes in Share Price Volatility, 75 C. Methodology Used To Estimate Changes in Profitability, 76 References, 76 4 Operational Strategies for Managing Supply Chain Disruption Risk 79 4.1 Introduction, 79 4.2 Stockpile Inventory, 82 4.3 Diversify Supply, 86 4.4 Backup Supply, 89 4.5 Manage Demand, 92 4.6 Strengthen Supply Chain, 96 4.7 Conclusions, 98 References, 100 5 Beyond Risk: Ambiguity in Supply Chains 103 5.1 Introduction to Risk and Ambiguity, 103 5.2 Ambiguity in a Single Period Newsvendor Setting, 109 5.3 Ambiguity in a Supply Chain Inventory Positioning Setting, 113 5.4 Conclusions, 120 References, 122 Part TWO Integrated Risk Management: Operations and Finance Interface 6 Managing Storable Commodity Risks: Role of Inventories and Financial Hedges 127 6.1 Introduction, 127 6.2 Literature Review, 132 6.3 Problem Description, 133 6.4 Optimal Policy for Single Contract Financial Hedging, 137 6.5 Optimal Policy for a Portfolio of Financial Hedges, 142 6.6 Role of the Operational and Financial Hedges, 143 6.7 Example of Model Application and Results, 150 6.8 Managerial Insights and Conclusions, 153 References, 154 7 Integrated Production and Risk Hedging with Financial Instruments 157 7.1 Introduction, 158 7.2 Single Period Models, 159 7.3 Multiperiod Models, 177 7.4 Conclusion, 192 References, 193 8 Capacity Expansion As A Contingent Claim: Flexibility And Real Options In Operations 197 8.1 Introduction, 198 8.2 A Financial Option Pricing Model: Black Scholes (1973) and Merton (1973) Model, 201 8.3 Real Options Valuation (ROV) in Operations, 205 8.4 Conclusion, 214 References, 215 9 Financial Valuation of Supply Chain Contracts 219 9.1 Introduction, 220 9.2 Review of Financial Markets, Arbitrage, and Martingales, 223 9.3 A Model for Financial Valuation of Supply Chain Contracts, 226 9.4 Dual Formulation, 231 9.5 Experimental Study, 234 9.6 Conclusion, 243 References, 243 Part THREE Supply Chain Finance 10 Supply Chain Finance 249 10.1 Introduction, 250 10.2 TheModel Setting, Common Notation and Assumptions, 253 10.3 Bankrupt-Prone Supply Chains under Wholesale Price Contracts, 255 10.4 Financing the Bankrupt-Prone Newsvendor with Trade Credit Contracts, 272 10.5 Conclusions and Future Research, 285 References, 286 11 The Role of Financial Services in Procurement Contracts 289 11.1 Introduction, 290 11.2 Model Description, 294 11.3 Wholesale Contract with a Budget Constraint (wT,QT), 298 11.4 Equilibrium Under a Credit Contract (QI,wI, ?I), 299 11.5 Equilibrium with External Financing (QE,wE), 307 11.6 Computational Experiments, 310 11.7 Concluding Remarks and Extensions, 315 References, 324 12 Production/Inventory Management and Capital Structure 327 1
