The Model for Risk Management and Mastering Them in Supply Chain

Abstract

Every organization aims for successful and continued operations, therefore efficient supply chain management is essential as risks in supply chain represent one of the major issues in today’s businesses. In this chapter, on the one hand, a new risk management model is proposed in such a way that it takes into account different segments of the public and time-varying internal and external parameters from the observed system environment. On the other hand, a freely accessible catalog of risks in supply chains is described, which is based on the described new model. This model complies with the general risk management (ISO 31000) and supply chain security (ISO 28000) standards, while it also covers and includes recent findings from the risk management sphere of influence. The central concept of the model is an individual public exposed to individual risks. In the model, we determine what kind of a relationship a specific public has to some specific risk. Different publics have a different attitude to a specific risk—different publics have different exposures and different subjective uncertainties about a certain risk, even though objective uncertainty is the same for all public. In our model, we are assuming that risk is ultimately a characteristic of human beings and not of things or concepts as is the case with most of the existing risk management models. Human is not an object, but a self-aware subject with their own will, a power to do things and with his own exposure and risk acceptance. In addition, the model introduces functions which calculate new values of parameters and output on the basis of the given input and the accumulated history of the past processes’ life cycles. Later on, the model resolves if calculated tolerance levels for risks, impacts and process parameters are adequate for every determined segment of the public. Calculated results are based on the provided tolerance levels, while the parameters, functions and levels are assumed to be non-deterministic (i.e. parameters, functions and levels may change in time). Contemporarily to the model, a freely accessible experimental risk catalog was formed and published online based on practical research in authentic organizations. Here, risks that have been identified thus far are presented and described, while the catalog also enables joining and cooperation of the experts from the field into a community. Hence, the catalog is considered as an ever growing list of hypothetical risks that enables an insight into the model, its value and practice while it can also be used as a listing and/or starting point for establishing supply chain risk management in organizations.