Data Envelopment Analysis in Enterprise Risk Management

Abstract

Data envelopment analysis (DEA) was developed for efficiency analysis of Decision-making Units (DMU). DEA can be used for modeling operational processes, and its empirical orientation and absence of a priori assumptions have resulted in its use in a number of studies involving efficient frontier estimation in both nonprofit and in private sectors. DEA has become a leading approach for efficiency analysis in many fields, such as supply chain management, business research and development, petroleum distribution system design, military logistics, and government services. DEA and multicriteria decision making models have been compared and extended. When the data is presented with uncertainty, stochastic DEA provides a good tool to perform efficiency analysis by handling both inefficiency and stochastic error.