Predicting and Managing Supply Chain Risks

Risk is defined as uncertainty based on a well grounded (quantitative) probability. Formally, 

Risk = (the probability that some event will occur) x (the consequences if it does occur) 

Genuine uncertainty, on the other hand, cannot be assigned such a (well grounded) probability. Furthermore, genuine uncertainty can often not be teduced significantly by attempting to gain more information about the phenomena in question and their causes (LOvkvist-Andersen et al. 2004). 

Deloach (2000) has defined business risk as the level of exposure to uncertainties that the enterprise must understand and effectively manage as it executes its strategies to achieve its business objectives and create value. According to the Royal Society (1992, p. 4) risk is the chance, in quantitative terms, of a defined hazard occurring . Norrman and Jansson (2004) have expressed risk as. Risk = Probabihty (of the event) x Business Impact (severity). They mention that while risks can be calculated, uncertainties are genuinely unknowa 

Holton (2004) has attempted to define risk from an operational point of view. He snggests that risk has two components exposure and uncertainty. Holton (2004) also suggests that when operationally defining exposure, uncertainty and risk it is only a personal perception that we have of the situation. Chiles and McMackin (1996) observe that a manager s perspectives of risk are associated with the notion of economic loss. Spekman and Davis (2004) suggest that, generally due to the downside effect of the outcome, risk tends to have negative cormotations. Hence, what exactly is risk, and, is it possible to quantify the risks that can only be perceived One of the ways to define some aspects of perceived risks may be the development of appropriate risk metrics. The next section will explore the more specific aspects of snpply chain risks. 

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Chapter 4 Predicting and Managing Supply Chain Risks 55... 

The large number of industrial chemicals and their applications, the global nature of supply chains as well as the fundamentally limited knowledge about the direct and indirect effects of industrial chemicals on ecosystems and the human organism, all call for pragmatic restrictions for risk assessment and risk management. The risks of chemical products in each of their applications can neither be predicted exactly nor can they be reduced to zero in real-life situations. 

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